By Ari Andricopoulos, CEO, RoomPriceGenie: Utilising data for a robust pricing strategy. How to build a robust, dynamic pricing strategy and the data hoteliers should consider to protect revenue and profits.
The Jubilee weekend provided much needed cause for celebration as we start to look forward to what we hope will be a busy and profitable summer season. However, there is undoubtedly cause for concern against the backdrop of rising inflation, fuel prices, the recent confidence vote by MPs and now the rise in interest rates.
There may be uncertain times ahead but how can you make the most of the high demand summer months whilst mitigating the impact on the bottom line if demand is lower than expected? What are the key metrics to enable you to build a dynamic pricing strategy that will equip you to weather the storm of potential uncertainty?
Pre-pandemic what might typically be referred to as ‘the norm’, can also be described as variable revenue. Often characterised by new competition entering the market or changing trends in demand. It would also be reasonable to expect that other conditions such as lead times and cancellations would follow a similar pattern to the previous year and on that basis any changes in the structure of bookings and revenues wouldn’t (or shouldn’t!) bring too many surprises. It would be an understatement to say things have changed but there are still ways to manage greater than expected uncertainty.
- Competitor Data
Acknowledging that internal reservation data is not going to offer reliable insight during periods of uncertainty, it is therefore necessary from a data perspective to cast your net wider. Consider researching and evaluating the pricing that your competitors are offering, whether that be other hotels in the same location and / or the same segments as you. Price matching within your competitor set is a good place to start when building a pricing strategy but it is also important to balance this with a solid understanding of where you sit so that you can adjust accordingly to keep up with the market and maintain a competitive edge.
- Internal Data
Knowing when to make adjustments cannot be achieved with competitor data alone and here is where your own data has a vital role to play. Looking ahead to the summer months, if you are seeing reservations have filled up earlier than expected, for example, then evaluating your reservation data will more than likely highlight the need to price yourself over and above competitors and really capitalise on the increase in demand to boost your revenue and profit margins. It isn’t unrealistic to suggest that an increase in bookings is an indicator of a potential boom and you need to capitalise on this with a price increase, rather than keeping prices fixed and instead seeing that competitors have responded with an increase and are the ones celebrating greater profits at the end of the summer season. On the flip side, if reservations are not meeting expectations, then consider a decrease to support business on the books and an increase in revenues in the shorter term. As with competitor data, keep a close and regular eye on internal data so that adjustments to pricing are timely, relevant and profitable. This will undoubtedly be bolstered by your own strategic knowledge and insight of market demand and guest sentiments.
- Know what is a fair price
It can be tempting to reduce, reduce, reduce in a bid to attract guests when business is not what you might have predicted but avoid the race to the bottom and don’t do your product (your hotel) a disservice by pricing yourself too low. Know and respect the standard of service and accommodation that you offer and honour that as the lower you go, the harder it can then be to increase.
There are many moving parts when working to establish the right pricing strategy and secure bookings but keeping a watchful eye on both internal and external conditions, when matched with insight and experience, can certainly go a long way in setting you on the right path.
Ari Andricopoulos, CEO, RoomPriceGenie