The Power of Personalization: Customer-Choice Pricing

By Paul van Meerendonk Director of Advisory Services, IDeaS Revenue Solutions | September 09, 2018

OTAs may help hotel-room shoppers find the best price, but at what cost? Sure, everyone loves a good deal, but let's not forget that people will pay more for the things they value. By instituting a personal, choice-driven approach to the sales process, hotels could see both guest satisfaction and their profits ascend to new heights.

A Win-Win Strategy

Personalizing the guest experience is all the rage right now, and hotels are eager to capitalize on opportunities to monetize. Loyalty programs are no longer just marketing initiatives but also revenue management strategies to control top- and bottom-line performance. As travelers demand more tailored accommodation experiences-blame the millennials, of course-a "customer-choice pricing" model may be the best way to deliver the ideal product to the ideal guest at the ideal price.

To understand how this works, let's shift industries a moment. Consumers are already used to customer-choice pricing from purchase scenarios like the car-buying process. Auto dealers enable shoppers to define their own value standards. Most vehicles include the basics: an engine, some seats, four tires, etc., and there's the obvious cost difference between luxury and economy. But beyond that, at a more granular level, the price can still vary quite a bit. Some may seek nice-to-haves like heated seats or built-in navigation. Others may not care for those frills but still want some automation like cruise control and anti-lock brakes. The minor differences from one customer to another become important factors in determining price.

It's not much of a stretch to see how this same value-decision framework could apply to hotel-room booking. A bed and bathroom is to be expected in most cases, and rooms with balconies or kitchenettes already come at a premium. But the sky is the limit in terms of other monetizable amenities and services. Some people may be willing to pay a higher rate for the assurance of a quieter room, away from the elevators and other busy areas. Leisure seekers may enjoy a comfortable lounge and TV space, whereas business travelers are fine with just a desk. Families with kids will see more value in a sofa-sleeper. A back-pain sufferer might be grateful for a pillow-top upgrade.

The car salesperson has the advantage of being on the showroom floor as the potential buyer peruses models. They can assess the shopper's likes and dislikes during a test drive and start to narrow in on the right price as they sit across the desk from their prospect. The promise of certain features can even be used as negotiation tactics. Ultimately, it comes down to how much they can squeeze out of the customer to make the most profit.

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Coming up in June 2019...

Sales & Marketing: Selling Experiences

There are innumerable strategies that Hotel Sales and Marketing Directors employ to find, engage and entice guests to their property, and those strategies are constantly evolving. A breakthrough technology, pioneering platform, or even a simple algorithm update can cause new trends to emerge and upend the best laid plans. Sales and marketing departments must remain agile so they can adapt to the ever changing digital landscape. As an example, the popularity of virtual reality is on the rise, as 360 interactive technologies become more mainstream. Chatbots and artificial intelligence are also poised to become the next big things, as they take guest personalization to a whole new level. But one sales and marketing trend that is currently resulting in major benefits for hotels is experiential marketing - the effort to deliver an experience to potential guests. Mainly this is accomplished through the creative use of video and images, and by utilizing what has become known as User Generated Content. By sharing actual personal content (videos and pictures) from satisfied guests who have experienced the delights of a property, prospective guests can more easily imagine themselves having the same experience. Similarly, Hotel Generated Content is equally important. Hotels are more than beds and effective video presentations can tell a compelling story - a story about what makes the hotel appealing and unique. A video walk-through of rooms is essential, as are video tours in different areas of a hotel. The goal is to highlight what makes the property exceptional, but also to show real people having real fun - an experience that prospective guests can have too. The June Hotel Business Review will report on some of these issues and strategies, and examine how some sales and marketing professionals are integrating them into their operations.