With the OTAs being busy releasing rate and revenue management tools, why are you still busy working on your rate sheets? Instead of being stuck in your set pricing levels where you could be losing out on additional revenue, try these pricing strategies to maximize your revenue per room and remain competitive in your market.
Competitor rate pricing or demand pricing
You know those magical numbers, the lowest price you can set for a room to still be profitable and the maximum allowed by local regulations. And your average daily rate is a great starting point for competitor rate pricing. With tools like Booking.com’s RateIntelligence and Expedias’s Rev+, you can update your rates based on your competitors and the demand index. Instead of displaying a rate on your website with each room, keep prices flexible and updated in your PMS so you can get the most out of each reservation.
Another little trick off your competitors’ pricing is to use psychological pricing or round your price down to an odd number. Studies have shown that consumers like odd numbered pricing – especially the number nine. When consumers were presented with “charm prices,” an item costing $99 versus $100, sales went up by 24%. MIT also concluded that prices ending in $x9 sell better. If the competition is all at $150, your rooms could sell better at $149.
Dynamic pricing uses revenue or yield management strategies to get the most available revenue per room. These strategies often look at demand and historical data to price the rooms appropriately.
- When demand is high, prices usually increase.
- When demand is low, prices usually decrease.
The airlines tend to favor this pricing model where fares are lower weeks or months out from a flight to encourage travelers to book but increase in price as that timeframe gets shorter and travelers know they have to get a seat on that flight and will pay whatever for it.
Independent hotels can use this method by relaxing rates by a certain dollar amount or percentage if travelers book weeks or months out and increase rates when it’s last-minute.
Now the question is, How do I get guests into my online booking engine to book rooms at these rates?
Book direct campaigns
Remind guests that they’re always getting the best price or even additional amenities when they book directly on your website or over the phone. Even if demand is low and you’ve brought down your prices a bit, you’ll still be making more when guests book directly with you instead of getting the exact same rate on an OTA and you losing out on a 15% commission.
Not the offer you’re thinking of! We’re not suggesting lowering your rates or offering a discount code to disrupt your new price but instead offering an amenity to guests that book last-minute so your rates are higher. Provide guests with a complimentary bottle of wine, or tickets to an attraction, or anything you can affordable stock up on in advance.
No matter what pricing strategy or tactic you decide to implement, one thing is clear: Stop using your rate sheets and start growing your revenue. You need to stop putting yourself in a position where you’re committed to honoring set rates for a year at a time where you should be more fluid and competitive to win reservations!