Exclusive Feature: In the APAC region - where competition in the hospitality sector is increasing - it is critical that local hoteliers evaluate and consider the pricing strategies that will best fit their hotel‚Äôs unique needs; After all, no two hotels are alike, and a one-size-fits-all pricing approach does not drive optimal revenue performance for every hotel.
Establishing an optimal public pricing structure is one of the most important decisions any Asian hotelier will make. For some hotels, this can be an overwhelming challenge ‚Ä" they might be new to their market, constrained by parity commitments, or simply looking for an approach that brings better revenue results than their existing one.
Some might have a proven pricing strategy in mind - but their technology simply isn‚Äôt compatible for its successful deployment. Other hotels might take the easy, yet uninformed, approach of following their competitors‚Äô pricing practices.¬†
So what pricing strategies should Asian hoteliers be aware of when establishing their pricing structures?
Daily Pricing is a pricing strategy where a different rate is charged for each night of a guest‚Äôs stay. It is based on the demand and price sensitivity for a one night stay on each night ‚Ä" meaning that each night is priced independently of any others. ‚ÄúBAR by Day‚ÄĚ or ‚ÄúDaily BAR‚ÄĚ are two alternative names that also refer to this specific pricing approach.
An advantage of Daily Pricing is that any changes in rate due to changes in guest arrival dates and stay patterns are relatively simple and transparent to explain; however, it can become cumbersome to communicate changes in rates for longer lengths of stay, as well as potentially creating guest dissatisfaction if a reservation is extended into a more expensive night. An example of this scenario is a guest extension over the hotel‚Äôs peak night of Saturday, resulting in a marked increase for Saturday night‚Äôs rate.¬†
Daily Pricing is generally the simplest pricing approach to implement across all of a hotel‚Äôs selling systems and channels; however, it may not provide the ability to capture the most optimal revenues based on the demand by the arrival date and the guest‚Äôs length of stay.
Daily Pricing tends to work well for hotels with an average guest stay of one to two nights or for properties that have unique room types that are priced and act differently than one another.¬†
Length of Stay (LOS) Pricing¬†
This pricing strategy offers rates that are based on both the arrival date and the total duration of a guest‚Äôs stay. This option considers the demand and price sensitivity for each arrival date based on the duration of stay ‚Ä" meaning that one rate is calculated by evaluating all of the desired nights in conjunction with one another.
An advantage of Length of Stay pricing is that guests are offered one simple rate for their entire stay ‚Ä" based on their arrival date and total reservation night length. This may help the hotel achieve optimal revenue performance since its rate is based on specific patterns by arrival date and length of stay.¬†
Length of Stay Pricing works extremely well for city hotels that focus primarily on high demand ‚Ä" tending to accept longer length of stay reservations. Controls such as maximum length of stay, minimum length of stay or close to arrival can be applied to fine-tune demand during periods of higher demand and to increase occupancy during slower booking periods.¬†
Daily Continuous Pricing¬†
Daily Continuous Pricing provides hotels with the most flexibility within their desired rate structure. It employs a similar methodology as Daily Pricing; however, there is a range of available rate values defined by a minimum and maximum rate for each room type.
Daily Continuous Pricing brings similar benefits to Daily Pricing; however, it provides hotels with even more flexibility within their desired rate structure. Rather than relying on user-defined rate values, hotels identify their minimum and maximum public rates for an analytical, continuous calculation of the rate value within their desired range that drives optimal revenue.¬†
This approach works extremely well for hotels that find Daily Pricing a suitable choice but are looking for even more flexibility in their rate offerings.¬†
There should be no such thing as a ‚Äėone-size-fits all‚Äô option when it comes to pricing for a hotel. Given that a hotel‚Äôs profitability relies heavily on the revenue generated from pricing strategies developed for rooms and ancillary services; it is critical that hoteliers have thoughtfully evaluated all of their pricing options to determine the approach that best fits the needs of their business and operational systems.¬†
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Charles Wang is the¬†Regional Head of Advisory Services, based in Beijing and working in Asia Pacific and Greater China¬†for IDeaS. He¬†leads a team of professional advisors to¬†deliver¬†trusted¬†revenue management deployment services¬†to¬†hotels and selected industry clients acrossthe Region.
IDeaS: With more than one million rooms priced daily on its advanced systems, IDeaS Revenue Solutions leads the industry with the latest revenue management software solutions and advisory services. Powered by SAS¬ģ and more than 25 years of experience, IDeaS proudly supports more than 7,000 clients in 94 countries and is relentless about providing hoteliers more insightful ways to manage the data behind hotel pricing. IDeaS has the knowledge, expertise and maturity to build upon proven revenue management principles with next-generation analytics for more user-friendly, insightful and profitable revenue opportunities‚Ä"not just for rooms, but across the entire hotel enterprise.
For more information: www.ideas.com