By Ari Andricopoulos, CEO of RoomPriceGenie

I’m going to guess that your 2020 didn’t go exactly as you had planned it.  And probably 2021 hasn’t been exactly what you thought it would be either. You aren’t alone, and I don’t think many of us can confidently predict 2022 either. But if you are in charge of setting prices for a hotel, then you may be wondering about what the best strategy is.

RoomPriceGenie is an automated pricing system, and we are really delighted that we are now able to integrate with protel’s property management system at no cost to the hotel client for a standard installation. It opens up a huge number of possibilities for hotels that either don’t have revenue managers at all, or have revenue managers that don’t want to spend so long looking at daily data, and want to concentrate more on the big picture.

There is huge power in automation, and we are thrilled to be able to now offer a free trial where you can see this power for yourself in action. But we all agree that 2022 is not the most predictable of years, so where does this automation fit into your pricing plans? Does data hold the answers, and if so, which data?

This is a special article, written for protel clients, on how to approach pricing in 2022.

Pricing with Uncertainty

As the person in charge of pricing in your hotel, life used to be much easier. You could maybe start by taking last year’s prices and adding a few percent. You knew that this year would be usually pretty similar to last year in terms of the structure of the bookings too. Lead times would be similar, meaning that by comparing how you are going so far this year, you can get an idea of where you will end up. Cancellations are steady and predictable. Whilst you may be disrupted by a new competitor, or changing trends, the structure of bookings remains the same.

This is no longer true at all. If you are not getting bookings now, maybe that means that they are not going to come. But it might simply be because people are waiting for the last minute to book because of changing regulations.

Then consider your reservations already on the books that have free cancellation. How secure are they? Previously you would roughly know your percentage cancellation rate. Now, it is anyone’s guess.

Previously you wouldn’t know your exact revenue, but you could be pretty confident that it would vary within a reasonably tight range. Now it could literally be either your busiest year ever or you could be closed by the government for a lockdown.

I would describe the situation as follows. In previous years we had variability in revenue, now we have real uncertainty.

Different Segments Need to be Considered

At RoomPriceGenie we have seen a clear divide amongst our hotels. The leisure hotels in richer countries have often been having their best year ever, while the city hotels for business guests have in some cases remained closed.

The speed of the return of business travel is key here for the city hotels, as is people’s willingness to take short breaks as travel is more complicated.

And for leisure hotels, the farther away they are from their target market, the worse they have found things, especially if flights and cross-border travel are required. The far-away holiday resorts will be hoping that longer-distance travel comes back with a bang in 2022.

With all of these segments, there is so much uncertainty about customer behaviour, government restrictions and also the coming of potential new variants.

Travel Restrictions Push Travellers into Certain Locations

As mentioned previously, having a leisure holiday hotel in a rich country (and using RoomPriceGenie) was a ticket to having the best year ever for many hotels. This was caused by a combination of travel restrictions and customer reluctance to make long-distance journeys.

Taking the UK market as an example; the restrictions on foreign travel were not raised until late July. Furthermore, the government wouldn’t even announce this until well into July. This meant that by the time the restrictions were lifted it was too late for many to organize an overseas holiday. It was not just the restrictions that caused the damage, but the uncertainty over restrictions.

How confident will people be to book foreign holidays next year? Really this depends on what happens between now and then. New variants, rising cases, flip-flopping governments and lack of clarity will all contribute to larger domestic travel markets and lower foreign travel.

So, How do you Price your Rooms When you Have Real Uncertainty About What Will Happen?

1. Market Pricing Data is Very Important to Keep you Inline

In times of uncertainty, we know that using your internal reservation data the way you used to will probably give misleading results. But where do you base your pricing, if not on this data?

Your best starting point should be to look at what other hotels with a similar client base are doing. This way you are pooling together everyone’s best guess. Also by staying relatively in line with the consensus pricing, you will be getting a reasonable share of whatever business there is.

For this, you can use Google Hotels, Expedia Rev+ or you can get a paid rate shopper, like HQ Revenue or OTAInsight. If you keep your rates around those of your best-priced competitors then it is a good start.

This is very time-consuming though. Fortunately, there are ways to make it easier. By looking at competitor pricing and making sure that you are priced correctly relative to them, RoomPriceGenie does this job for you, meaning that:

  • You use all of the competitor revenue managers combined experience to make a best guess at the correct pricing
  • You gain at least your fair share of whatever business there is

While it is a good place to start, there are two main problems with following the market.

First, you may miss out on what makes you special (or indeed the opposite) in the current environment. You need to be aware of where you are outperforming or underperforming the group.

Second, if everyone is following then we run the risk of ‘Group-Think’. This is where everyone in a group gets confirmation of their opinions from other people in the group with the same opinions. Everyone can end up following each other off a proverbial cliff. Outside confirmation is really important here.

2. So Here is Where your Data Comes In…

We have already said that internal reservation data isn’t enough when you have this level of uncertainty. But then we also said that a strategy of simply following the market isn’t enough if you want to excel. To have really good performance, you need to be augmenting the market information with your own data.

If you are starting to fill up early, you need to be going above the market price to protect yourself against being too cheap. It could be the sign of a bigger boom, and in these cases you want to make sure you are still selling at the end. The most heart-wrenching outcome would be a one-off super-busy season where you sell your rooms too early, and have to watch as rooms are being sold by competitors at double the price.

Your data needs to warn you early and make sure you raise prices. Keep an eye on periods that are busier than expected. The RoomPriceGenie occupancy calendar is a really good way to monitor this.

With RoomPriceGenie, the algorithm will be seeing demand early and making sure you are not positioned too low. At the same time, if you are not performing as you would expect, it will put you a little cheaper than the alternative options.

3. And Then you Should be Adding your Expertise to Gain a Little Bit of Extra Edge

But even with the market data and internal data, you can still add your own individual knowledge about both your hotel and the general situation. Keep a look out for changes in regulations and see how they affect the data.

Look at lead times and what it means for pricing. If you think that client behavior has changed, you can change the lead-time setting in RoomPriceGenie to anticipate later bookings.

Monitor your minimum and maximum prices to see if they are still relevant. They may need to be adapted to the new normal.

Overall, keep talking to people in the local market to keep up-to-date on the sentiment. Staying on top of what is going on and adapting to the situation will mean that you get the best possible results.

4. One Last Thing… Don’t Go Too Cheap

Always remember that if things go badly between now and arrival, the guest can cancel on you. But if all goes well, and prices go up, you have to honor the booking. And you really want to avoid a race-to-the-bottom with pricing. Choose a fair minimum price and don’t go below it.

Conclusion

Pricing in a time of uncertainty is difficult, but you can still do a five-star job. The first step is to be aware of the competitor prices, then you use your internal data to position yourself better than them, and finally you use your own strategic knowledge to improve your pricing even more. Also, make sure you don’t go too low.

RoomPriceGenie can help you with all of this, and we would love to give you a demo to show you how. We even offer 14 days for free for protel customers, and if you quote this article we will extend it to 30 days. Click here to make an appointment.

Great news

Subscribe To Our Newsletter

Join our mailing list to receive the latest news and updates from our team.

You can unsubscribe at any time using the link in the email footer.

Privacy Agreement

protel Relationship

Great! Check your mail in 2 mins...

Newsletter abonnieren

Tragen Sie sich in unsere Mailingliste ein, um die neuesten Nachrichten und Updates von unserem Team zu erhalten.

Sie können den Newsletter jederzeit über den Link in der Fußzeile wieder abbestellen.

Datenschutzvereinbarung

Beziehung zum protel

Great! Check your mail in 2 mins...