Pricing: So Much More Than Just a Rate

By Kristi White Director of Revenue Optimization, TravelCLICK, Inc. | January 27, 2012

In today's tempestuous economy, with demand and hotel occupancies declining, hoteliers are looking for strategies to drive demand for their hotel. Many use discounting as their sole strategy for maintaining occupancy. What they find, however, is that cutting prices alone does not drive new demand; it only diminishes the return on existing demand. What they should be focused on is capturing more of the demand that is already there-that is, gaining market share from the competition. Price is part, but not all, of a winning strategy.

The Right Market Price

Price is an influencer in consumer buying, but the competitive advantage lies in using the "right market price" (RMP) as part of a broader strategy. What will bring more guests to your hotel is the RMP, used in combination with three key tactics:

  • Right distribution - Being where consumers are shopping
  • Strong positioning - Ensures your property is considered by prospective guests
  • Compelling message - Reinforces your value proposition

The RMP is the price point that consumers feel is a good value exchange for the cost of your product. If they do not perceive your price as a fair one, based on their purchasing experience and the intelligence they've gleaned from shopping other hotels, they won't buy; they'll move on. On the other hand, if they see your price as fair or even as a value for their dollar, they are more likely to book with you.

Consumers generally consider several hotels and channels before purchasing. In fact, recent studies indicate that nearly 60 percent of travelers who use the Internet will engage search engines to research hotels, and 66 percent check rates from at least three websites before purchasing.

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