How to Identify the Right Room Pricing Strategy

By Gino Engels Co-Founder, OTA Insight | March 17, 2019

When it comes to hotel revenue management, getting room prices right is arguably your biggest priority. And while you may be aware that there's a science to it, there's so much to do on a daily basis that it can be difficult to determine a starting place.

On any given day, hoteliers need to do the following: keep constant track of KPIs, track activity of competitors and channel partners, keep an eye on traveler trends, and have many meetings to loop in key stakeholders.

With such an information overload, you then need to accurately forecast demand so that you can pull all the right levers to result in maximum revenue for a hotel. How on earth can you have a sense of control? The key is to avoid flying blind - and for that, you need exploitable data. Otherwise, it will be impossible to make any important decisions with confidence.

Let's look at this in context.

Setting Hotel Rates to Maximize Revenue

Hotels are economic units, so pricing depends on supply and demand at any given time. The ultimate goal is to consistently exceed (or at the very least, hit) KPIs. To forecast demand for a hotel room, you should consider two key measures: current on-the-books (OTB) reservations and your likely "pickup".

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The hotel industry has undertaken a long-term effort to build more responsible and socially conscious businesses. What began with small efforts to reduce waste - such as paperless checkouts and refillable soap dispensers - has evolved into an international movement toward implementing sustainable development practices. In addition to establishing themselves as good corporate citizens, adopting eco-friendly practices is sound business for hotels. According to a recent report from Deloitte, 95% of business travelers believe the hotel industry should be undertaking “green” initiatives, and Millennials are twice as likely to support brands with strong management of environmental and social issues. Given these conclusions, hotels are continuing to innovate in the areas of environmental sustainability. For example, one leading hotel chain has designed special elevators that collect kinetic energy from the moving lift and in the process, they have reduced their energy consumption by 50%  over conventional elevators. Also, they installed an advanced air conditioning system which employs a magnetic mechanical system that makes them more energy efficient. Other hotels are installing Intelligent Building Systems which monitor and control temperatures in rooms, common areas and swimming pools, as well as ventilation and cold water systems. Some hotels are installing Electric Vehicle charging stations, planting rooftop gardens, implementing stringent recycling programs, and insisting on the use of biodegradable materials. Another trend is the creation of Green Teams within a hotel's operation that are tasked to implement earth-friendly practices and manage budgets for green projects. Some hotels have even gone so far as to curtail or eliminate room service, believing that keeping the kitchen open 24/7 isn't terribly sustainable. The May issue of the Hotel Business Review will document what some hotels are doing to integrate sustainable practices into their operations and how they are benefiting from them.