Game of mind
The field of pricing management has been growing steadily in recent years. We all have heard terms like pricing management , pricing strategies, types of pricing, price optimization etc. but have we ever thought of the myths and truths of these terms which everyone has in their mind.
If anywhere you mention the subject in a group, many people will assume the ensuing discussion will be limited to rates online and offline. But the pricing discipline involves much more than just prices.
The worst mistake of all is to approach deals as a single point transaction. Organizations must look at the road ahead and focus on the long term engagement goal which translates financially to customer lifetime value. If you’re leading with price to close deals, you are undercutting repeat, renewal, and expansion business value.
1 - Pricing/ Revenue Management is only required in peak seasons when you want to increase prices
Myth- It is a myth that Pricing Management should only be used in busy seasons when demand is high and you want to charge more. Pricing management is an essential tool for times when demand is low and you want to get the most out of limited demand. Revenue management is not only about raising prices. It’s about selling for the right price , to the right customer at the right time.
2 - It’s not fair to charge different customers different prices
Myth- We all are used to pay more for certain products under certain conditions. We pay for water more at airport than we would in market. We expect to pay more for a cup of coffee at a branded outlet like Café Coffee Day or Starbucks than a normal local coffee outlet.
Prices vary based on timings and conditions. For most customers this is a fact of life that they accept.
3- Everyday high occupancy should be the only goal for a hotel.
Myth- The easiest measure to observe – a full ship looks like a profitable ship. We should help our team and make them understand that better business equals stronger revenue. Saving your products for your best customers is more effective than aiming for 100% occupancy.
This will help us in pacing ahead in ADR and revenue, which should bode well for profitability.
Pricing management is one of the key components of Revenue Management.
It is a strategic competency that involves people, processes, technology, and information. When we speak of revenue management, many interpret this to mean pricing. Revenue management and pricing are not synonymous and it is a mistake to think that they are.
Remember, pricing is just one element of that process.
Price by itself may attract consumer attention; however, perceived value in the eyes of
the guest is what causes a booking to take place. Commoditization is a threat to all of us who depend on the financial health of the industry, so competitive price positioning, which is often central to the discussion at many revenue strategy meetings, should be thought of in a broader context. Consumer perception of value is truly what drives conversion. Pricing is a highly complex and involved topic; however, there are some things you can do to validate that your pricing strategies are working and there are a few techniques you can deploy to support average daily rate (ADR) growth objectives.
1-Accuracy is difficult when you're manually maintaining a data set, and it only takes one incorrect copy and paste, or formula change to slip up in a big way.
2- An Excel spreadsheet cannot be connected to your CRM (Customer Relationship Management) system. Therefore, when a new customer is added, pricing cannot be assigned until a new extract is taken.
3- Where multiple people are responsible for pricing, or the authorisation of pricing decisions, excel limits to user access.
4- You make a change to your pricing, but there is no record that X user made X change on X data and time, hence you will miss the audit trail.
5- Excel is typically an offline snapshot, used on an individual's computer. If there is a computer crash, hardware failure or virus, this can potentially mess up all your hard work.
Few facts for Pricing Strategies:
It’s obvious that pricing plays a crucial role in any business,
but did you know that you can use pricing strategies to do
more than just fatten up your hotel’s bottom line?
How you set your prices can have positive or negative implications.
The right pricing strategy can help you increase your market share.
The best hotel pricing strategies to increase hotel revenue are:
Pricing based on occupancy.
Pricing based on forecasting.
Pricing based on the market competition
Pricing based on the length of stay.
Pricing based on your guest type.
Pricing based on the up-selling.
Pricing based on the non-refundable policy.
It’s Not About Channel Shift
When the lament is that distribution costs are too high, the perennial response is to work on channel shift, which, more specifically, usually means to reduce the OTA channel and increase the brand.com channel. It’s not about a simple two-channel shift; it’s about high the cost of business acquisition continues to climb. Hotel acquisition costs have to be measured and managed. A proactive revenue strategy laser-focused on the “true north” of net revenue will enable each hotel to thrive in this dynamic and costly marketplace.
GM , DOS and Revenue leaders need to have a basic and mutual understanding of the discipline in order to ensure those charged with carrying out the responsibility of revenue management are heading in the right direction. Some will adopt a hands on approach and others will simply set up the race for their team and then get out of the way and in this way the pricing GAME will go on and on…………