Many factors will influence your hotel’s pricing. The very first step to this process is to do in-depth competitor analysis. You need to make sure that you are comparing ‘apples to apples’ before you adjust your pricing based on other hotels actions. Start with hotels with similar size that are in your area, and compare all different aspects of your businesses. How strong is your loyalty program, are you offering the similar level of service and what facilities are you offering in comparison to your competitors, are just some of the questions that you need to answer during your analysis. Keep in mind that you may not find the right competitors in your near proximity. For example, if you are a 200-room hotel near JFK airport and all other hotels in your area have more then 500 rooms, you should rather compare yourself to a 200-room property near a different airport.
I have witnessed some hotels following my hotel’s pricing and undercutting my price by USD 10. This is a wrong approach, because they were completely excluding many parameters such as occupancy levels for certain day in both properties, information about unconstrained demand, their own budgeted goals, special events in their area and differences between our two products. You can determine the most similar hotel to you and on slow days match their pricing, but set the next level of your room category at the higher rate. Set the alerts on major price changes from your competitors and market. If more then one competitor increased or decreased the rate significantly for the same date, most likely there is something happening that you are not aware of. Monitor your competitor’s rates few times a day, especially for the upcoming dates. You need to be ahead of the game; otherwise the business will go elsewhere. Don’t undercut your goals too much, just because you see one of your competitors crushing the market. The image of your property is very important and using this strategy long term can damage your hotel’s reputation. Mobile has taken over most of last minute demand, which allows hotels to sell their very last room on the day of. Test your property on different mobile sites, work on your placement and offerings, to make sure you are compatible. Be smart about your promotions; limit them to the ones that will drive demand on days that you need extra help with occupancy. You also don’t want to create an image of discounted hotel, because down the road, no one will want to buy your rooms at the rack rate.
There are many factors that play significant role in your pricing. Your pricing is everything but black and white. Always stay open minded and up to date with new tactics to increase revenue and use your data afterwards to see what made sense and was most profitable. Your market is changing rapidly and you need to be flexible in your actions as well. In the end you can only succeed by learning the new paths to success.