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.

Why your Revenue Management System is handicapped

Regardless how much revenue management systems (RMS) cost they all have a severe handicap… garbage in, garbage out. Booking data is collected nightly, data is ‘crunched’ and a predetermined set of rates act as a pricing guardrail. If you are currently at $149 and your system thinks you should raise rate, you will get a recommendation to go to your next higher rate level of $179, if that is what you have built into your pricing structure.  If you set the next rate at $189 that would be the recommendation and here we stumble across the reason why your revenue management system is handicapped.  Set your rates wrong, and while your system recommendation may be directionally accurate, your rate will never be truly right… and you will always leave money on the table.

You invest time daily reviewing your reports, pricing recommendations, then you override the rates. You know you do. The very system that is supposed to save you time actually eats your time while you correct its mistakes.  What should your system do differently?

In a perfect world, your RMS would serve as a single version of the truth… one combined view of everything you truly need to make well informed pricing decisions.  You need to see your rate, the lowest competitive rate in the market, which direction the pricing is heading in and what the market will actually be priced at.  With all that information and insight, your pricing decision would be made simple. Powerful. Market share stealing!

Today, Fare-1-1 serves as your single version of the truth. We offer the Lowest Daily Fare in your market (organized by hotel star rating and length of guest stay), a Market Fare Forecast (organized by same parameters) and the pricing trend (which way is the market pricing moving?).

If your rate is set at $149 and the Lowest Daily Fare in the market is $159 you might feel a sense of comfort undercutting the competition. What you probably don’t know is the market is trending up, and the Market Fare Forecast predicts your competition will be at $199. This means you are not leaving $10 on the table, rather you are actually leaving $50 on the table. Per room night. If you recover $50 on just 10 room nights per week (5 rooms sold Friday, 5 rooms sold Saturday) that translates into an incremental $24,000 per year for your property (pure profit). You can recover a lot more money than that.

Once you set your rates, you’ll need to focus on other things… you can’t spend all day obsessing on just rates. Set your rate Alert and when any piece of the equation changes you’ll be the first to know… just by glancing at your email.

Your RMS doesn’t do that. Fare-1-1 does that.

Stop wasting time, stop leaving profit on the table.

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.


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.