Before you completely shut this idea down, please read the next couple of sentences. I’ve spoken to many properties whose greatest concern is that they will alienate their repeat guests by adjusting prices. Therefore, we feel bad if John Doe and his wife who have been staying at our property for years see a different price. All guests are loyal right up until that point they are no longer loyal. Do you honestly believe they only stay at your property?
Well, why don’t you confront them every time they stay at a different property the same way you think they will confront you if you raise your price? It’s not personal, it’s business. That doesn’t mean that you can’t treat them with amazing hospitality and service when they come, it just means that you’re going to charge a fair price for what your product is worth, at the right time. If you’re one of those properties that hasn’t changed your rates in years, you’re missing out. If you’re one of those properties that raise your rates at the beginning of the year and don’t change it again until next year, you’re missing out.
Yield Management is what chain hotels and airlines have mastered. It’s simple supply and demand. If you know you’re going to be fully occupied during a particular time because demand is high and your inventory is low, raise your rates. Alternatively if you know during shoulder or off season you won’t be very full because demand is low and your inventory is high, lower your rates.
How long have you been running your property? How long have you been using your reservation software? Well… you probably have a bunch of historical data that is going to tell you the seasons, months, weekends, weeks, and even days of the week that people stay at your property over the years. So it behooves you as an owner to adjust rates accordingly to take advantage of that historical data. Instead of sitting around hoping more people are going to find you online (when you aren’t doing Internet Marketing), or more repeat guests are going to tell their friends about you (when you aren’t giving them incentive to do so), why don’t you start taking advantage of your peaks and valleys by looking at the historical trends related to bookings and yield your prices.
Have you ever attempted to book a round trip airline to say Cancun? Have you ever noticed that if you look at the price of that ticket one year in advance, compared to six months, compared to two months, compared to three weeks and wondered why the price kept changing? The number of seats on the plane didn’t grow did they? It’s not like they found a quicker route to get you to Cancun is it? The airline didn’t all the sudden decide to give you free bags, unlimited adult beverages, free movies, and a piñata full of cash to take swings at right? Of course not, they simply adjusted the price based on the goal of filling up every seat on that plane based on the timeframe until lift off and the number of seats available in order to maximize their revenue. So why is it that the price of milk, gas, homes, cars, airline tickets, and chain hotel rooms can increase but as independent lodging providers we feel guilty for adjusting our rates?
The last time I checked, every property I’ve ever spoken to in the last eight years has conveyed to me they want to do three things. Increase revenue, decrease costs, and provide a good experience for their guests. What I’m politely asking you to consider is this… Don’t invest your blood, sweat, tears, and personal money into your property and look back and wonder why it wasn’t as successful as you hoped it would be. Loyal guests aren’t as loyal as you think they are and those same loyal guests understand your value and are more likely than you think to pay you more for the value you provide.
If this has turned the light bulb on for some of you and you’re willing to give it a try, I think you should remember these things:
- Don’t just start messing with rates. Take a look at historical data of when you’re most likely to be full and start by making a small adjustment like 5% or $5. Track what you did, review the results this year compared to others and document it. This way next year you’ll know what worked and what didn’t around the same timeframe.
- If you are still super concerned about your loyal guests, create a promo code for them to use on the booking engine to get their same old rate.
- Yielding rates comes down to a couple of variables: The time window before the date that is being booked and the occupancy level. So an example would be to create a rule that works when your occupancy is 80+% and you’re within 7 days of the booked date, then raise your rates.
- You can start small by testing these out on your best performing units in small pockets of timeframes until you understand what works for your property.