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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Social Media: Getting Personal

There Social media platforms have revolutionized the hotel industry. Popular sites such as Facebook, Twitter, Pinterest, Instagram, Snapchat, YouTube and Tumblr now account for 2.3 billion active users, and this phenomenon has forever transformed how businesses interact with consumers. Given that social media allows for two-way communication between businesses and consumers, the emphasis of any marketing strategy must be to positively and personally engage the customer, and there are innumerable ways to accomplish that goal. One popular strategy is to encourage hotel guests to create their own personal content - typically videos and photos -which can be shared via their personal social media networks, reaching a sizeable audience. In addition, geo-locational tags and brand hashtags can be embedded in such posts which allow them to be found via metadata searches, substantially enlarging their scope. Influencer marketing is another prevalent social media strategy. Some hotels are paying popular social media stars and bloggers to endorse their brand on social media platforms. These kinds of endorsements generally elicit a strong response because the influencers are perceived as being trustworthy by their followers, and because an influencer's followers are likely to share similar psychographic and demographic traits. Travel review sites have also become vitally important in reputation management. Travelers consistently use social media to express pleasure or frustration about their guest experiences, so it is essential that every review be attended to personally. Assuming the responsibility to address and correct customer service concerns quickly is a way to mitigate complaints and to build brand loyalty. Plus, whether reviews are favorable or unfavorable, they are a vital source of information to managers about a hotel's operational performance.  The February Hotel Business Review will document what some hotels are doing to effectively incorporate social media strategies into their businesses.