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.

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