Perfect rate… revenue management’s holy grail (ok, go ahead with Monty Python quotes here). So, how do you know when you actually nailed that perfect rate?
You could perform a complicated price sensitivity analysis, evaluate whether or not you actually left demand on the table (do you have data behind constrained and unconstrained demand?), and numerous additional analyses. You could invest a lot of time chasing the answer.
We recommend asking another question, to find your answer: Did you lower your rate?
It’s pretty simple, so let’s avoid analysis paralysis and save a lot of time. The goal is to sell your rooms for the highest price on the day of arrival. If you were selling for $199 three months ago, $249 one month ago, now less than three days to arrival you are priced at $199 again (or lower) then you simply didn’t nail the perfect rate. Or, you didn’t leave the perfect rate out there long enough to do its job. Either way, you didn’t nail it.
Honestly, we know the perfect rate really only exists in theory… but the common hotel/resort doesn’t need to try and solve complicated analytical battles. If you’re wondering how effective your rates are, evaluate how often you lower rates… adjusting/correcting rates once you realize you’re set too high, or too low is great. Constantly changing rates and dropping rates as you get closer to arrival is habit to avoid. After all, if you drop rates closer to arrival you are educating your customers to wait until you drop rate… not good!
Knowledge of market trend and where your comp set will be priced is key… stay one step ahead and protect your market share.
Please feel free to join the discussion by leaving your comments, or contact me directly at firstname.lastname@example.org.