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How Independent Hotels Can Succeed With a Fair Price Structure

To a hotel guest, it may be surprising to see that the same room categories are charged at different rates on different dates and days at a particular hotel or that similar hotels may have variation in their room rates during the same time period. Of course, assigning room rates is not something that hotels do randomly; it is part of a well thought out strategy. There are several factors that come into play that affect the pricing of a room, and hotels need to consider them all before arriving at a fair price structure.

Common factors that influence the price structure include: special events or holidays, conferences, and even the weather. Pricing will depend on the demand and supply of rooms which in turn is based on external factors. This is very similar to how airlines set their seat prices. They may be cheaper if you book in advance but airfares rise quickly as you move closer to the departure date.

Most big branded hotels have revenue managers, but smaller hotels might not have the resources to dedicate an additional staff member to manage their revenue. In such scenarios, PMS systems can go a long way in supporting that job. They can track the forecasted room demand to create a fair price structure. This article from Hotelogix, discusses two major factors that hoteliers must consider to achieve fair pricing. They include:

The right business mix. Analyse different marketing segments to arrive at an optimum business mix. If OTAs contribute the most to your hotel profitability, followed by corporate bookings and walk-ins, your pricing strategy should be aligned with this business mix. Promoting walk-ins over OTA’s could be detrimental to your pricing strategy and in turn your profitability. 

The right rate plan. Understand the different kind of rates out there and decide which is most likely to bring in maximum profits. You can dabble with qualified rates such as an early bird discount, BAR (no conditions involved), fixed rates, dynamic rates (adjust pricing based on cost, demand and competition) and group rates (corporate or social event). Sometimes hotels which are similar in location and category are priced differently, even though the external factors affecting the hotel’s demand and supply are uniform. This may depend on the value addition such as the personalized attention given to every guest.

Armed with the above data, you can arrive at a fair price structure that lets you, price with more clarity, maximize business from each segment and plan for the future.

Hotels shouldn’t shy away from raising their room rates if they can ensure that their guests will receive an impeccable stay at their property. Guests don't always look for cheaper rates, but they always look for a great stay experience.
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