The hotel industry took a huge hit during the main pandemic years of 2020 and 2021. In 2022, with the worst of the pandemic (hopefully) in the rear-view mirror, it is time for the hospitality industry to get back to normal. New pricing strategies emerged during the pandemic, and their implementation is key to success in the new environment.
There are a variety of pricing strategies that hotels can employ to try and maximize their revenue. Which one or ones to use depends upon each individual hotel’s situation. Factors like location, the strength of nearby competitors, and the demographic groups the hotel is trying to attract all must be considered when deciding on pricing strategies.
Depending on the factors mentioned above, hotels can choose among many different pricing strategies. Here are a few that are currently popular and how to choose which will work for you.
Discounts for Off-Season Travel
Discount pricing can be offered during slow seasons to try and tempt customers into at least a short stay. It also appeals to people on a budget, opening up a potential new demographic for the hotel. Rooms filled at a low daily rate are still better than unoccupied rooms, so this strategy can at least provide some revenue when it is most needed.
Discounts for Length of Stay
Pricing can be set by length of stay, offering customers who commit to a certain number of days a discounted rate. This strategy gives the hotel a steady flow of guests and ensures occupancy for longer periods of time. Conversely, the hotel might offer a deal to overnight travelers if it finds that it only needs to fill in short vacancies between longer-term travelers.
Provide Extra Amenities
When in competition with nearby hotels, an upselling strategy can be effective. While the price may be higher, better amenities can be offered to entice guests who want the extra comfort and are willing to pay for it. In highly competitive areas, an active (or dynamic) pricing strategy might be called for. This means continuous monitoring of the competition and pricing accordingly. An active strategy can offer enough of an edge over the competition to make implementation worth the extra effort.
Be Hands-On
Finally, a hotel can choose to implement an open pricing strategy that sets different prices through different channels and for different rooms and services. These rates are set completely independent of each other, and they can provide a bargain to guests that do a bit of research before reserving a room. This class of guest enjoys the hunt for the best rate and will spend the time to find it.
Finding the Best Pricing Strategy
So, how does a hotel go about identifying the best pricing strategies to use? The simple answer is data analysis. Having a dedicated team to collect and compile information about demographics, trends, competitors’ pricing strategies, and other information makes it easier for management to identify what the focus of pricing should be. Analyzing all this data and applying the results is difficult and requires a substantial commitment of time and resources. However, as most hotels are utilizing analytics now, it is actually more dangerous not to invest in it. One problem that data analysts face right now, though, is the pandemic.
For the better part of two years, COVID-19 kept most people from traveling, and its effects still linger on—even as news coverage of the pandemic dissipates. Trying to make any sense out of the data collected during the coronavirus is almost useless. Some basic trends, like the increased demand by guests for contact-free services and automated check-ins, are likely to continue as even as the industry recovers. The paucity of overall data from the pandemic years makes analysis extremely difficult, as most people were either unable or unwilling to travel and stay at hotels during that period.
Despite the atypical travel patterns caused by the pandemic, there are some basic pricing strategies that most hotels should consider when trying to increase revenue. Using data to identify weak spots in the business, hotels can look for innovative solutions to help attract guests. Midweek bookings, for example, are less desirable to travelers than weekend ones, for obvious reasons. Simply reducing room rates for midweek stays is an easy way to try to drum up more business, but by getting a bit more creative, your results may be better.
For example, highlighting events in the area that take place midweek may attract people who enjoy travel but want to avoid the more crowded weekends. Offering additional amenities for a reduced rate can entice people to take that midweek trip. Data analysis may be a bit trickier based on the last couple of years, but it is still worth putting in the effort to see what information is generated and then adjusting pricing strategies accordingly.