How to make a good pricing strategy for your hotel
Guest post from RoomPriceGenie.
Is your pricing costing your hotel money?
We've teamed up with RMS Cloud to help you with one of the most important factors for your property's success - your pricing. At RoomPriceGenie, we love working with RMS Cloud because in the words of cofounder Marvin Speh:
"RMS is especially amazing because of its strong focus on efficiency and high returns for any type of property. Whether you are a hotel group, independent accommodation or RV park, we already provide fully automated solutions for your pricing. And today, on a joint mission to provide dynamic pricing to everyone, we gift you our new service that makes getting started with dynamic pricing even easier."
We're offering RMS Cloud clients an extended trial of our amazing new service called GenieIntelligence, also known as ‘The Email’. We've squeezed a great deal of knowledge and a lot of data into a daily email that gives price recommendations, and we would love for you to try it.
As part of our partnership, we wanted to share a few tips for better pricing with RMS' clients. We've priced thousands of hotels and seen the pricing of many thousands more. So what would we do if we were to price your hotel?
Pricing step 1: setting up the next year ahead
The first step of pricing is to make your best guess at prices for the year ahead. This is generally a combination of art and science, especially in the current circumstances.
To do this, you could first look on a seasonal basis at how your hotel performed in previous years in different months. What was the average price charged and how quickly did you fill-up? If you reached full occupancy quickly, then you can try starting higher this year. If you were below expectations, you could start your prices lower this time.
Then you would do the same thing for days of the week. How did you perform on Sundays and what adjustment would you like to make to your average price for Sundays compared to previous years? Ditto for all the other days of the week. You should create a regular weekly cycle of prices.
In current circumstances, history may not be the best guide for making pricing decisions. Look at what other hotels are charging, in particular, what the best-run hotels are doing. The Google Hotel Search tool is excellent for this; choose a hotel and then click on the calendar for dates to see future prices. You can use their patterns to inform your judgement.
Lastly, think about special dates that you need to price higher. You can use the information from other hotels here too, as well as your own knowledge of local events and holidays. Use these forecasts to create a pricing pattern for your most popular room standard rate, then price all other rooms and rates from that with an offset.
Revenue management software can assist with this process, such as that offered by RoomPriceGenie, but a traditional excel spreadsheet will also do the job.
Pricing step 2: day-to-day management of prices
At least once a week, (but preferably every day), you should be checking what's happening. There are two important things to keep an eye on:
1. What are your competitors doing? This is very important in these times of uncertain demand. Are they raising or lowering prices? If you are caught on the wrong side, you will either miss out on profits by selling too cheaply or miss out on occupancy by not selling your rooms.
By keeping track of the prices of the best-run hotels, you won't miss out on any special dates you might have missed, or even an increasing booking trend for the whole season, as we saw in many European hotels in summer 2020. The faster you spot these trends, the better.
It's also important to bear in mind that your potential customers are not looking at your pricing in a vacuum – they will be comparing your hotel to their other options. If you're not aware of your competition, then your customers will be one step ahead of you.
2. How is your own performance? You should always be aware of your own pick-up and occupancy for two reasons.
The first is that it signals when demand for your hotel is not what was previously expected. Being aware of this means you can modify prices sooner to reflect changing demand.
The second is that by knowing how many rooms you have left to sell, you can change your price to try to sell that number. For example, if you have one room left to sell for two weeks' time, you might choose to charge $250. Alternatively, if you have 40 left, you might only want to charge $150.
By keeping track of what your competitors are doing, how the best-run hotels are changing prices and how you are performing, you can keep your prices competitive and as high as possible.
Once again, technology can help here. By signing up for the free trial of the GenieIntelligence email, or indeed the full RoomPriceGenie product, the software can do a lot of this number-crunching for you.
Pricing step 3: promotions, restrictions, etc.
The next step is good use of restrictions and promotions. Here are some examples:
- On busy nights with quieter nights on either side, you might want to look at minimum stay restrictions rather than raising prices very high.
- When your cheapest room is no longer available, but you have a number of deluxe rooms, you can upgrade people to more expensive rooms to make the cheaper room available. Otherwise, you could miss out on guests who would book the cheaper room but not the more expensive one.
- On nights where you are charging your minimum price but still not filling, you can try increasing your commission on the OTAs for those nights only to try to get your ranking higher.
We offer more tips in our free book of 49 tips for smaller hotels.
Good pricing can seem like a big deal, but it is both achievable and extremely valuable when broken down into smaller parts. Take the time to get it right, and you will be rewarded many times over.
Don't forget to sign up for the extended free trial we're offering all RMS Cloud users of our new and very special GenieIntelligence pricing email.