How to Deliver the Ideal Hotel Room Rate to the Ideal Guest at the Ideal Time

Press enter to search
Close search
Open Menu

How to Deliver the Ideal Hotel Room Rate to the Ideal Guest at the Ideal Time

11/28/2016
Today’s hotels are faced with the reality of an increasingly complicated distribution network. As a result, the amount of information available to consumers means there is more competitive pressure than ever before. How can hotels continue to differentiate a product, while also providing a personalized experience to guests? In this article, IDeaS Revenue Solutions discusses what hotels should consider when establishing their ideal pricing and revenue strategy.
 
Guest transparency evolves every single day. Guests know instantly what other people think of a hotel - whether it be their housekeeping services, location, the onsite restaurant or the pool. A guest can find this information faster than you can read this article, which also means they can find a dozen different prices for a hotel (all potentially offering unique values) with just a few clicks of a mouse.
 
However, there are also many variables beyond price as to why a guest will book. In this modern age of transparency, does your hotel pricing strategy take into account these different variables; does it deliver the ideal price to the ideal guest at the ideal time?
 
Hotel transient pricing has traditionally been anchored to the hotel's Best Available Rate (BAR); however, the industry has trained today’s consumers to shop for products other than BAR. OTAs capitalized on this, and it happens in other ways, such as guests that always ask for the AAA rate when making a reservation. BAR is going the way of the Rack Rate and very soon, the rate offered to the lowest tier of a loyalty program will become the new BAR.
 
No matter how hotels decide to price transient rates, or how personalized those rates become, they should have the ability to deploy the most analytically optimal price available to their selling systems. Here are some important components of pricing to consider when establishing your hotel’s ideal pricing and revenue strategy:
 
1) Transient Pricing is available in a multitude of options. At its simplest form, hotels can deploy a different rate for each night of a guest’s stay based on the demand for each night. Daily Pricing, in effect, provides guests with a unique rate for each night of their stay. Pricing can also be deployed based on both the arrival date and the total duration of a guest’s stay; this Length of Stay Pricing strategy creates a blended rate for a guest’s entire duration. There’s also Continuous Pricing, the newest pricing approach to join the party, which removes rate tiers all together. Hotels identify their minimum and maximum public rates and deploy any price point between the defined range. This results in a continuous calculation of pricing, and allows hotels to achieve an analytically optimal price, while still adhering to any marketing rules such as rounding rates to end in 9.
 
2) Demand Intelligence looks beyond what has booked at a hotel historically, and provides a view into future booked data, as well as a guest’s intent to book. For a long time, regrets and denials data was the only source for this data. Over the last several years, reporting tools and solutions have been providing this type of data, and they are casting a much wider net for hotels. Lost business data for only a hotel’s brand.com site has become obsolete because it shows a very small piece of a much bigger picture like cooking in a dark kitchen with a flashlight. Looking at demand data across all your online channels, and the traffic on those channels, flips the kitchen light on.
 
3) Competitive Rate and Reputation Data is now widely accessible to revenue managers, and it is critical to ensure this data is incorporated and leveraged as part of an automated system optimization process. Looking at this data is the first step, but only automated solutions can understand the impact a hotel’s reputation may have on price (or impact its price has on its reputation), and how that correlates to the correct booking window. A review posted today doesn’t necessarily affect a guest checking in tomorrow, but it may affect a guest booking tomorrow looking to stay several months from now. The analytics that determine those relationships should be driven by a sophisticated RMS, not the revenue manager continuously reviewing reports or dashboards.
 
Many different factors determine the pricing approach that best suits the needs of a hotel: What do the selling systems accept, what does the local market dictate and what sort of rate parity agreements are in place? The critical component in today’s age of transparency is that a hotel should have just as many options for deploying an optimal revenue strategy as their consumers do in booking their hotel.