What are the top 3 pricing factors?

Triangulation is defined as a method of pin pointing a location by measuring the distance between two points whose exact location is known, and then measuring the angles between each point and a third unknown point. The process is used in land surveying, GPS technology, and commonly to locate cellular signals.

Hotel pricing, if we break it down to the basics, is very similar to triangulation… in fact nearly identical. In our balance of art and science, we evaluate three factors: 1) Demand, 2) Need, and 3) Market Pricing. You will find the right price at the intersect, ultimately positioned based on how you weight each of the three factors.

All three factors are critical. The demand for your property and your resulting need are fairly straightforward… you already know these two factors very well. Regarding market pricing, there is an ongoing (healthy) debate as to how much your competitive set should play a role in your pricing decisions. I will promise you this… if you are ignoring your competitive set, you are the only person ignoring them. I guarantee your potential customers are not ignoring them! Your true competitive set goes beyond the four or five properties you have selected for your competitive rate shopping reports… especially if your property is in a destination market or a busy city. In fact, your actual competitive set is slightly different for every potential customer, because today’s customers are extremely savvy. To truly price correctly, we need to shift this ‘competitive set’ focus away from a strategy born decades ago, to one that leverages all the data available today revealing what the market will bear.

If demand is strong, you have little inventory left to sell and the market pricing is strong, then you should obviously raise rates (see illustration).   As these factors shift, when viewed through this lens you’ll easily see where you need to adjust. You’ll want to jump on any opportunities to capture more revenue… don’t wait!

Avoid analysis paralysis… triangulation will help keep you focused on these critical three pricing factors.

Please feel free to join the discussion by leaving your comments, or contact me directly at askjames@fare11.com. Sign up for a free trial at Fare11.com today, and visit us on Facebook.com/nopricegaps.

Which pricing solution is right for your hotel?

There are many different pricing solutions out there, most of which are off-the-shelf systems. A few of these solutions can produce great results, and they all focus on evaluating demand and setting the right price. They are also all very expensive. Some teams are attempting to introduce new data into pricing decisions and optimization, highlighting the efforts to evolve traditional revenue management. So where is the problem?

These solutions don’t fit the needs of a lot of hotels in the market. There are many hotels that are simply not ready to use ultra-advanced pricing systems, possibly due to current lack of bench strength, maybe simply lack of capital, possibly due to other reasons. I have personally stepped into organizations that actually had a system installed and discovered it was not even being used. There are many hotels that in fact might not ever install one of those systems. Important note: That does not mean they do not need help improving their pricing.

Regardless which solution a hotel uses, all benefit from improved pricing. All the big box hotels constantly effort to improve this process… trust me. Sales and marketing are critical to nearly all hotels’ success… yet absolutely nothing trumps the power of pricing.

So which pricing solution is right for your hotel?

To answer that, I’ll ask another question: On a scale of ‘1’ through ‘10’ (1 being non-existent and 10 being expert) where would you rank your hotel’s revenue management strength? If you were about to answer 8, 9, or 10 then by all means go buy an expensive solution and I sincerely wish you the very best. If the number 1, 2 or 3 just popped into your head there is no doubt you are not ready for an off-the-shelf ultra-advanced system.

Ask yourself some additional questions. When evaluating a system that looks great because it offers 17 really cool features, how much ‘bandwidth’ is dedicated to the actual pricing? If the pricing logic is flawed or naïve, the impact will bleed into all the fancy features and you will no doubt leave money on the table… more than you think.

The right pricing solution for your hotel is the one that meets your needs. My advice is take a look around, make sure you understand all your options and get what you actually need… no more, no less. If you simply need help ensuring your price is competitive, moving in the right direction at the right time, and not missing opportunity then you likely do not need an overly expensive off-the-shelf system. Fortunately, there are some great options that produce excellent results.

All the best in your efforts… and mind the gap along the way!

Please feel free to join the discussion by leaving your comments, or contact me directly at askjames@fare11.com. Sign up for a free trial at Fare11.com today, and visit us on Facebook.com/nopricegaps.

Mind the Gap…

We have all worked with or simply met pricing professionals across the entire talent spectrum. What do they all have in common?  Unanimously, every single last one (even the greatest) leave money on the table.  It’s a simple fact. Some hotels leave little, others quite a bit – even the greatest hotels with advanced systems leave money on the table everyday.

Hospitality pricing professionals subscribe to at least a few different pricing techniques, with different strategies around property forecasts and pricing against what the market is demanding.  Unfortunately, today many pricing professionals are routinely in a reactive pricing position which always leaves money on the table.

The very intent and purpose of revenue management is to be proactive.

If you have great demand for a specific day, you might raise the price (usually up to the next higher price set in your system). You probably even spot check your rates against the comp set published pricing, to validate that you feel good about your new rate.  Set it and forget it (well, forget it for a few days anyway, then I’ll check it again… right?).

What if the market pricing is trending up?  What if people shopping you are comparing you against hotels not programmed into your STR report comp set (higher or lower ‘tier’ properties)? What if you are now priced at $159 yet the market will very soon be priced at $199? What if you knew that ahead of time – would you price at $179 instead of only $159? Maybe $189?  This is a Price Gap.

This is the definition of Price Gap: It’s not simply that you are priced lower than your comp set… it’s when your price point is lower than it should be… and you are leaving money on the table.

Mind the Gap. Identify your Price Gaps with the Market Fare Forecast and start capturing that Gap revenue today.

Now that’s being proactive!

Please feel free to join the discussion by leaving your comments, or contact me directly at askjames@fare11.com. Sign up for a free trial at Fare11.com today, and visit us on Facebook.com/nopricegaps.

 

Announcing Daily Hotel Rates!

Fare-1-1 is excited to announce the completion of the Dashboard – the industry’s first, complete, one-stop hotel rates shop. The powerful addition of Daily Hotel Rates empowers you with the right tools to do the job right, powered with hotel rate data (updated nightly) like no one has ever done before… a comprehensive list of rates from every single hotel in your market organized for your analysis by star rating. The application is designed for search ease and rapid query support… simply start typing the name of the hotel you are curious about and it will appear. Or, type your rate and you will immediately see who else is charging the same rate. Instantly. Just like a jet fighter pilot, you deserve the right tools to navigate and push your business forward. This includes the right software, hotel software is important in order to manage and control your business to meet the needs of the customers.

The Fare-1-1 Dashboard equips you with the powerful Market Fare Forecast, Lowest Daily Rates, custom user Daily Email Alerts and now the Daily Hotel Rates… everything you need to make more informed hotel pricing decisions. Quickly study your market with Daily Hotel Rates and Lowest Daily Rates, set your rates against the Market Fare Forecast ensuring you are properly positioned amongst your competitive set, and set your Daily Email Alerts so you know the moment anything changes.

Your revenue management system doesn’t do any of that.

Please feel free to join the discussion by leaving your comments, or contact me directly at askjames@fare11.com.

Sign up for a free trial at Fare11.com today, and visit us on Facebook.com/nopricegaps.

Situational Awareness

Situational awareness is critical to success.

A long time ago, someone very wise offered me great advice…

Situational awareness. Always be aware what is happening around you.

When setting your rates, this awareness is critical. Your price should always be set first and foremost based on your property’s own supply and demand situation, then adjusted to maintain your competitive edge and protect market share. This is where situational awareness plays a big role.

So you set your one night length of stay rate at $149. You then need to compare your new rate against the market, and upon checking the Lowest Daily Fares you see the lowest comparable rate in your market is $159. You also see that the Market Fare Forecast predicts your market will be priced at $189, as the rates in the market are trending up over the past week.

How does that new rate look now? Your new rate at $149 is leaving $10 on the table, and very likely actually $40. The opposite of this scenario also presents opportunity… if you are $40 higher than where the market is headed, you will want to adjust so you don’t lose occupancy for the sake of protecting rate.

Situational awareness is great, immediately helping you identify small opportunity… but when you gain insight and take action to properly position your hotel in the market based on what the competitive rate will actually be, you really unlock hidden revenue and profitability.

Don’t just rely upon a spreadsheet that regurgitates what rates are found online… don’t simply react to the competition! Gain insight with valuable data found in the Market Fare Forecast, take action and drive your business.

Please feel free to join the discussion by leaving your comments, or contact me directly at askjames@fare11.com.

Sign up for a free trial at Fare11.com today, and visit us on Facebook.com/nopricegaps.

 

Worst Decisions Ever – Eternal Sales

Eternal Sale.

Continuing our ‘worst decisions ever’ blog series, we share another valuable lesson learned by one of our clients… stop depending on the eternal sale to drive volume.

What is the ‘eternal sale’?

The eternal sale is when your hotel ALWAYS has a sale or promotion running, and we’re not talking industry standard promotions such as AAA/AARP (as one example)… we’re talking about sales and promotions that deeply discount your retail rate.  We’re talking about sales and promotions that once cut off, bookings immediately stop (or dramatically slow down).  This strategy might work for other business models, but has no place in your hotel or resort strategy.

Diagnosis?

Your retail rate strategy is wrong!  If you depend on sales to sell your property, not only are you dependent upon rates well below your published retail rate, but there are additional factors (whether you know it or not) including marketing/advertising expense pushing the sale/promotion, dilution of your brand image and value, education of customers (and potential customers) to simply wait to book until your next sale, and the time you personally invest into promotional setup and management.

Bottom line, you’re creating a lot of extra work for you and your team simply because your rates are wrong.

Do not repeat the worst decisions this client made – your property deserves better.  Studies have shown that it can take years to re-educate consumers on pricing, especially when dramatic reductions are published to chase volume.  We’re not saying sales and promotions are evil… what we are saying is that when sales and promotions run constantly, then effectively you do not have a retail rate. It’s difficult to trump the power of pricing!  Maintaining effective retail rates that position you properly against your competition and drives your business will be a critical part of your future success.

Please feel free to join the discussion by leaving your comments, or contact me directly at askjames@fare11.com. Sign up for a free trial at Fare11.com today, and visit us on Facebook.com/nopricegaps.