The hospitality sector is extremely competitive and, as a hotel owner, you’re always looking for ways to maximize revenue and keep your hotel(s) full. Because finding the sweet spot is easier said than done, you must constantly evaluate and adjust your pricing to make sure guests feel like they’re getting great value for their money—without letting competitors undercut your rates.
With an informed, adaptive pricing strategy, you can increase revenue and improve your hotel’s reputation with guests to drive a healthy profit and maximum occupancy year-round.
What you need to know
- To accurately set rates, you need to forecast demand far in advance while considering attractions and special events near your hotel.
- Room rates should fluctuate based on your local market and competitors, seasonality, strategic positioning, and guest segments.
- By leveraging the right pricing strategies, you can help optimize room rates and keep occupancy consistent throughout the year.
What makes a good hotel pricing strategy?
A good pricing strategy helps maximize your hotel’s revenue by setting rates based on market demand, room types, and guest segments. Calculating the ideal room rate is a delicate balance of strategy, market research, and guest expectations, with the final goal of achieving optimal occupancy and revenue.
Keep in mind that pricing strategies are not static and should change constantly because of these key factors:
- Supply and demand in the local market, like events nearby, seasonality, or day of the week.
- Quality of your hotel’s rooms and services, and how they compare to competitors and guest expectations.
- Local competitors’ pricing and how you want to position your hotel in comparison.
- Ability to accommodate, like occupancy rate and labor availability.
6 hotel pricing strategies to maximize revenue
Maximizing hotel revenue takes more than changing room prices during high and low seasons. You can combine strategies based on the local market, competitor prices, occupancy, seasonality, and even the day of the week. Because room rates can change based on your strategy, it’s important to be transparent and consistent across all promotional and marketing channels.
Here are some common hotel pricing strategies you should consider.
1. Position your brand in the local market
Closely watch your competitors to position your hotel as the top brand and destination in the local market. By monitoring the pricing strategies of nearby hotels, you can gain valuable insights into your local market—including how they’re increasing and decreasing their rates, and how often they offer discounts. This helps identify trends so you can confidently set or adjust your hotel’s prices.
When analyzing competitor prices, make sure the competing hotels are in the same category as your hotel, with similar rooms, amenities, and locations. Plus, while competitor analysis is a great way to understand local prices, you should avoid getting into pricing wars that force you to drastically discount your room prices. Every pricing decision you make should align with your overall positioning: do you want guests to see your hotel as a luxury option or as an affordable choice?
2. Forecast demand
Forecasting is an effective pricing strategy based on what you expect the demand to be. It relies on key data from the latest months, data over the same period from previous years, and the current demand and upcoming local events. This data can help you predict future demand, adjust room prices, and create promotions in advance.
Although forecasting hotel demand can be an effective pricing strategy, keep in mind that it doesn’t always consider unique and unexpected external factors like economic conditions, political events, and weather.
3. Offer different rates to different guest segments
Hotel guests have different needs and preferences, such as amenities, room types, room sizes, and lengths of stay. Segmenting guests based on their preferences can help you identify what’s important to them and what they’re willing to pay more for. Because some guests may be willing to pay extra for their requirements, you can identify these segments and charge different prices for the same room while guests feel they are getting exactly what they want. For example, you may charge a corporate guest a lower price because they are more likely to return in the future, while a walk-in is willing to pay a higher price because of the urgency.
Remember that this strategy requires a lot of data, careful segmentation, and continuous monitoring. You also risk negative customer perception if they figure out they are being charged different prices for the same room.
4. Charge a single rate for stays within a certain length
With this strategy, you can offer a slightly lower rate for stays that exceed a minimum number of nights. The goal is to increase occupancy and ROI, and you can accomplish that by using this pricing method when there are corporate events, conferences, and festivals in your area.
Be careful how long you keep this rate active, though. A length-of-stay hotel pricing strategy can actually be counterproductive if higher-paying, shorter-stay guests are unable to book.
5. Offer incentives and loyalty programs
Travelers love discounts and perks. Offer your return guests special promotions and package deals, or set up a loyalty program that rewards people for staying at your hotel. Incentives can go a long way—even if the rewards are exclusive amenity access or points toward future stays.
Get the word out about your promotions or loyalty program via email marketing and other digital channels, but make sure you don’t devalue your brand by over-offering discounts.
6. Upsell and cross-sell
Upselling is when you encourage guests to upgrade to a bigger or better room at a higher price tier. You can upsell through emails leading up to someone’s stay, or at check-in. You can also push other features of your hotel—i.e., spa sessions, excursions and tours, or airport shuttles—through cross-sell efforts.
Everything you do should aim to improve your guest experience, so it’s important not to be overly salesy in your hotel marketing and in-person interactions. After all, you want guests to feel comfortable and enjoy their stay so they come back in the future.
Overall, an effective hotel pricing strategy is much more than just setting the right price for a room. It’s a fine balance of understanding your local market, anticipating demand, and continuously adapting to change. By paying attention to your competitors, local events, and guest needs, you can develop an effective hotel pricing strategy that increases revenue and profitability—and boosts guest satisfaction and long-term loyalty.
Business checking with all the tools you need to grow.
