Emerging Pricing Trends in Hospitality
By Trevor Stuart-Hill President & Founder, Revenue Matters | September 27, 2015
Pricing for any type of product or service, let alone lodging, is nothing new. Any "Marketing 101" textbook will tell you that Price along with Product, Place and Promotion make up the "4-P's of the marketing mix." Pricing too has been in place far longer than the practice of Revenue Management, which, among many other things, incorporates pricing into its purview. What is new, and what we will explore here, are some emerging trends relating to pricing that every lodging operator needs to understand.
Most key stakeholders in a property, presumably all with good intentions, have strong opinions relating to pricing. These opinions often result from past experience and from a personal value framework. In addition, they may be influenced by business performance pressures and competitive actions, so it is understandable why pricing and pricing strategy have become the central topics at most revenue strategy meetings.
Before we get into emerging pricing trends and where we are headed as an industry, it will be helpful to get a historical perspective on how we arrived at where we are today. It should also be noted that sophistication levels related to pricing vary greatly from property to property, so it is common to find properties operating at each end of the spectrum, and points in between.
Level 1: Rack Rate
Prior to the age of technology adoption, it was very common for most (if not all) lodging establishments to have a key rack behind the front desk that acted as both storage for room keys and as a primitive inventory control system. The established price for each room, along with other basic information about the room, such as bedding configuration, room status etc. was affixed to a card that was located in each key slot. For "walk-in" (or "walk-up" guests as they were called back then), a desk clerk would select a room and pull the card from the rack in order to quote the correct room rate to the guest.
Some clerks would pull a few cards and "pocket" them at the start of their shift in anticipation of saving these rooms for their most valued guests. Of course, these same clerks may also have been given the authority by management to depart from the established rack rate under certain circumstances, but needed to account for all rooms and rates at the end of their shift by recording them in some form of ledger. A guest ledger was common for most registered guests and a city ledger was used to record an accounts receivable for regular guests or local companies.