7 Proven Hotel Pricing Strategy To Reach Your Profitability Scale At Top
Are you concerned about your hotel pricing strategy? Not sure how to fix or divide the pricing package for your hotel!!! Setting an effective pricing strategy for your hotel is as hard as critical, just like planning a hotel business plan or marketing strategy. In fact, hotel pricing is one of the essential parts of a hotel business plan.
Hotel pricing strategy or segmenting price for your hotel is one critical topic, which all hoteliers' are always concerned about. A hotel pricing strategic plan may contain many essential research data such as competitors' performance, understanding the market condition, and of course, identifying the trend/craze for consumers' hotel choosing behavior.
No pricing strategy plan is right or wrong, and there's no secret magic spell to design a hotel pricing strategy. Besides, if you fail to implement a strict pricing strategy, it can ultimately push you to the loss position.
A hotel pricing strategy is a plan; which is being made depending on different factors. Sooner or later, both long-term or short-term pricing strategies made for your hotel business will have a severe impact on the sale, profit, revenue, and quality of service.
Factors on which your pricing strategy will depend: what pricing methods you’re going to use to calculate the profit and revenue, a strategic graph that will help to reach the pre-setted goal and higher reach in the profitability scale.
Moreover, planning a hotel pricing strategy might also help you get exposed to all the internal and external factors; which could affect your revenue. The pricing setting procedural for your hotel inventory or service totally depends on; what type and how quality-full service you’re providing to your guests, segment the price according to the affordability and geographic location of the room, etc.
The main motive of planning a hotel pricing strategy is that hoteliers can get a direction to maximize the revenue in the market and maintain a sustainable position in the market. Therefore, planning a pricing strategy is more like a need than a luxury for every business because it not only helps to stick to the budget and also gives you a forecasted- hint; which position your business will be in the future.
There’s some common logic, which needs to be maintained before sketching the whole pricing strategy plan. For instance, setting the price too high can make you lose customers to the local competitor, who provides the same or fewer facilities at a very affordable price. Oppositely, setting prices too low in exchange for better or higher facilities might affect operational costs and revenue.
There is no rule or restriction; that you have to stick or follow one pricing strategy; you have to change your strategy from time to time, demanding on the market situation. Here are some intelligent hotel pricing strategies that will help you set the pricing range and reach the hotel business into a profitable stage.
Psychology is all about playing the guests' minds, thinking, and planning two-step forward compared to your guest. Let them feel; they are winning "customers always love to win," but behind that victory of your guest, you will be the winner.
Even after so many years, this trick never fails to trick peoples' minds and still strongly plays a solid trigger to increase sales. One of the classic examples of psychology pricing is fixing the product or service priced at $99.99, seeing the price tag more minor than the market price hit the customer's mind and fall into the trap of purchasing it. But they don't notice that the price is still the same.
Another clever pricing strategy is setting price matching with your competitors. Fixing the price as your market rival puts the customer into a choosing dilemma. Then, they start to compare the benefit and accommodation the hotel is going to provide.
And before using this amazing pricing strategy to design your pricing structuring for your hotel, remember to match the benefits, accommodation, and facilities you can afford to provide to guests with your competitors. All the accommodation and facilities should be AT LEAST 80% SIMILAR AND 20% EXTRA THAN YOUR COMPETITORS.
And this **extra 20%** will manipulate your potential customers’ brains and work as a pull marketing and pull your customers towards your hotel.
And why won’t they!!! “After all, customers always like to enjoy something extra with that same market price.”
Whenever a new hotel enters this existing market, most of them start their journey by offering their service at an affordable price to stand out among the crowd full of other hotels.
While offering every offer at a low price, they often forget about the break-even and to reach the profit cycle. Yes!! It’s also a proven theory that; people first pick that hotel; that offers more accommodation and facilities at a low price.
But it doesn’t mean you will forget about your cost and revenue plan. Offering all the facilities at a low price is absolutely fine for a short-term pricing strategy, but it might turn difficult for your business; if you continue this strategy for the long term.
Another fantastic hotel price strategy for your hotel, here you can increase or decrease your hotel inventory chargers anytime. Occupancy-based pricing strategy also depends on the demand and supply of the market. Hotel owners just need to take advantage of the rush season (excess demand) and raise the price of the hotel inventory or facilities.
The lower the hotel inventory left to book, the higher the opportunity to increase the hotel room price. This cleverish pricing strategy will also help improve your average daily rates, hence a short-cut way to increase your profit revenue. Consecutively, hotel owners should also lower their pricing rates when the off-season (demand is low).
The market changes every day, and with that change, you also structurized your hotel pricing strategy with that flow. And like any other product or service, supply and demand of the market heavily dominate the hotel industry too. This hospitality industry fluctuates based on season, environmental factors, holiday demand, etc.
For example, your pool-side beach hotel will be more in demand in the summer season compared to the winter season. Hence as per the demand and supply, you can increase or decrease the price of your hotel inventories and facilities. Therefore it’s better to track down the perfect timing to charge the ideal price to reach the profitability scale.
People usually get excited; whenever they hear about a package or bundle offer, it gives a strange feeling that customers can enjoy “many items at an affordable price.”
Because of this value-added pricing strategy, guests can able to enjoy more facilities, which is also a choice of many modern travelers. Hoteliers usually make a very low profit, as they are offering many in exchange for low prices.
This package deal is usually for those low-budget travelers, and the best time of offering this kind of package deal is during the off-season of the hotel business.
This is another very effective and cleverish hotel pricing strategy is offering an opportunity to stay for a more extended period at a very low price package. As I mentioned above that fixating the price at lower attract more customers than usual.
But here is the trick; even after the package is for to stay for a longer duration at a low price, the extra accommodation such as room service, dine-in or spa, or other facilities will gradually make the cost higher than the standard package. Hence even after acquiring significantly less revenue per room but enjoying the advantage of gaining higher total income.
A question might come to your mind; that all the above pricing strategy; Is it even worth it??? What kind of result you can expect after applying these pricing strategies!!!.
1. More control Over Operation Cost
Restructuring the pricing strategy means re-shaping the operation cost continuous basis. Whatever the pricing strategy you set for your hotel, it should always be structured to maintain the operation cost. Less control over the operational cost can push your hotel business into the loss project pool. And to avoid any kind of loss, a hotelier can control or strictly monitor all the operating costs, for instance as staff salaries, electricity, water, maintenance cost, overhead cost, sales, and promotional expense, etc.
2. Better Structurize And Understand The Market Demand
The best way to run the hotel is to understand the market demand and people’s needs, structured the price accordingly, and acted upon it. The more quickly you figure out and respond to fulfilling the needs, wants, and demands of a customer, the better your position in the customers’ minds.
3. Properly Follow The Law & Legislation Set By The Government
Setting the pricing for your hotel not only pushes you to review all the pricing laws & legislation set by the government but also helps not to fixate any excess or artificial price for your hotel inventories.
4. Run With The Pace Of Seasonal Fluctuation
Seasonal fluctuation is one of the essential factors while setting prices for hotels; because the hotel business is such a kind of business, where sales depend entirely on the season. Therefore, as a hotel business owner, you also need to maintain a continuous change in the price range per the season demand to maintain your revenue cycle in the optimum position.
5. Tackle Any Kind Of Unexpected Circumstance
All the hoteliers must make sure that any unexpected circumstance can come anytime, such as natural calamities, political issues, lockdown or demonetization, etc. Hence all the hoteliers must be very alert and aware of this kind of problem. Soon you forecast the better you can control or change the price scale of your hotel.
As mentioned above, “hotel prices fluctuate seasonally”; similarly, every hotel offers a different niche. For example, some hotels are good for the summer season; some are best for spring. Hence in order to encourage and maintain a sustainable position in the customers’ minds, you constantly need to review the price strategies accordingly. Also, encourage potential customers to choose your hotel and understand their expectations before your competitors do.
The demand for your hotel totally depends on the exclusivity and the pricing range you choose for your hotel. Hence more or less, you have to apply various and pricing strategies to your hotel pricing scale to maintain the sales revenue and also hold up the excitement for your hotel in customers’ minds.
Companies Who Maintain Strict Pricing Strategies,
40% Fast Reach their Goal With Higher Revenue
Maintaining a strict pricing strategy for your hotel business helps you control the operational cost and helps to predict the pre-seasonal demand of the customers.
On the other hand, the hotels which maintain 40% more control the monetizing capability and faster reach the determined goal than other hotels; who don’t follow or maintain a pricing strategy.
Moreover, suppose you fail to set a good pricing scale and strategies for the hotel business before introducing your hotel business to customers. In that case, you have to face some serious consequences facing your customers, running the operation, and of course, the pressure to deal with competitors.
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This blog mainly focuses on “how you can effectively plan your hotel marketing strategies.” All the pricing strategies mentioned above are very much proven to be effective for many different hotels. And still, all these strategies work vigorously with the customers, just like the new strategy.
And the best way to apply those hotel pricing strategies is; first apply the techniques temporarily, then observe the changes and the results. Afterward, decide which strategies work the best and in which season.