Four Considerations for Developing Your Pricing Strategy

Hotels devote large portions of their revenue management strategies around developing and implementing the right pricing structure for their property and market. But establishing the right pricing structure isn’t a one-off activity – and with the hotel’s bottom line depending heavily on revenue generated from the implementation of an proper pricing strategy, it is critical that hoteliers routinely and thoughtfully evaluate their pricing options to determine which approach best fits the needs of their business and technologies.

Today’s advanced technology offers pricing options that suit a variety of unique business needs and markets, and hotels should carefully choose the approach that fits their objectives – rather than limiting their needs to fit a one-size-fits-all option.

However, with different pricing functionalities available, what should hotels consider when selecting a pricing approach to complement their revenue strategy? Here are four considerations to help hoteliers develop the right pricing strategy for their hotel:

Guest Pricing Presentation

How do your guests prefer to buy or how are they accustomed to seeing rate offers? Some guests or markets prefer a single rate offer that applies to every night of their stay – regardless of how long they stay. Others happily accept a different rate for each night. Some markets prefer a total price for the entire stay – avoiding challenges with different rates for different nights of the stay.

Rate Strategy & Business Need

Which strategy does your hotel need to capture optimal revenues based on your business mix? This will depend heavily on the hotel’s business model and average length of stay. For example, a luxury property often observes higher lengths of stay – meaning that additional value can likely be gained by offering an optimal price based on the guests’ stay patterns. However, for properties that average a one night length of stay, the value from arrival and length of stay pricing is often lower.

Deployment of Rate Strategy

What are the selling systems, distribution systems and connected channels involved in your rate distribution? Hotels should evaluate any potential impacts to property management, central reservations, channel manager systems and web booking engines when considering various pricing approaches.

Channel and Parity Requirements

Which pricing approaches are accepted by integrated channels? For example, which approaches can be distributed to the hotel’s online travel agent (OTA) channels? What are the parity agreements and their willingness to accept minor deviations from small channels? If there are some OTA channels that can’t accept a particular pricing approach, consider the production volume that comes from those channels.

No two hotels are identical to one another – and a one-size-fits-all pricing approach won’t drive optimal revenue performance for every single hotel or portfolio of hotel properties. Access our newest white paper on the three pricing methodologies available for today’s hotels, who they work best for and the considerations all hotels need to evaluate before establishing their public rate structure.


Related Resources

Hungry for more?

At IDeaS, we’ve always got an ear to the ground and our fingers on the keyboard, ever-ready to share our latest learnings, data, trends, and happenings with you, dear reader.

See all blogs