The different pricing strategies in the hotel industry

Grand Pigalle Hotel

In the hotel industry, there are many strategies that help you price your rooms throughout the year. These strategies help you to boost your revenues and maximise your bookings each season. What pricing strategies should you use? Whether it's segment pricing, competitive pricing, cancellation policy pricing, or sales forecasting, we'll take a look at the strategies that can help you grow your business.

Pricing strategy by segment

The segment strategy is frequently used in the hotel industry. It involves offering the same product at different prices to different customer segments.

Customers can then be segmented in different ways:

  • By volume (multiple rooms booked at once) ;
  • By level of requirement: customers who want rooms with sea view, mountain view etc... ;
  • Per service offered ;
  • Per hour of purchase...

With this type of strategy, you can, for example, choose to sell the room at a higher price to a customer who comes directly to your establishment in the early evening because their reservation is urgent. You can also choose to offer a more attractive rate to a company, as several rooms can potentially be booked. 

The strategy based on competitive prices

With this strategy, you set your prices according to your competitors in order to attract as many customers as possible. To ensure that your strategy is consistent, focus on establishments that have the same number of stars as you do, and that offer the same level of service.

Discount codes

Discount codes can allow you to stimulate direct bookings. With this strategy, when a guest visits your hotel or property after booking through a third-party platform, you can offer them a discount code for any future direct bookings they make with you. 

With this strategy, you build loyalty and encourage direct bookings, to avoid platforms as much as possible.

To optimise this strategy, equip your website with an online booking tool, such as Namastay. It will allow customers to book their rooms in just a few clicks. They will have visibility on all the rooms available on their dates, and will be able to make their reservation quickly. 

The length of stay strategy

Another pricing strategy often used by hotels is the length-of-stay strategy. As the name implies, it is based on adjusting prices according to the length of your customer's stay. 

When you have more demand than supply, you can implement a rule that guests must stay a minimum number of nights in your hotel to secure a reservation. Conversely, when demand is lower during certain times of the year, you can encourage guests to stay longer in your hotel by offering them a discounted rate if they stay for several days.

The occupancy-based strategy

Very often used in the hotel industry, this pricing strategy focuses on the occupancy rate of the establishment. It allows you to increase your revenues efficiently: when demand exceeds supply, you increase your room rates. And conversely, in the low season, when bookings are scarce, to ensure your income, you can offer your rooms at a more attractive rate. 

The up-selling strategy

Upselling is about encouraging guests to spend more on their current purchase or booking. For example, you can encourage them to upgrade to a more upscale room, a king size bed, or a room with a more attractive view. Upselling is often most effective during the booking process. You can then offer upgrade options as the customer makes their choice.

pricing strategy hotel industry

Cancellation policy

With this strategy, you take into account the cancellation policy of the room in order to set your price. You can then charge a lower rate when the room is non-cancellable and non-refundable. If you offer more flexibility on cancellation, you can charge higher rates. 

This strategy is widely used by hotels with high demand. For example, by charging lower rates in exchange for no refunds, hotels that are very busy will be able to benefit from the possibility of selling the same room twice in the event of a cancellation.

Pricing strategy based on forecasts

This is about mastering the use of forecasts to set your prices according to anticipated demand. The hotel room rate charged will depend on high demand. 

In order to implement a forecast-based pricing strategy, you need to use historical data such as :

  • Room occupancy rate ;
  • The income generated by your rooms depending on the time of year;
  • Cancellation rates by period ;
  • Room rates and average expenditure per room ;
  • ...

The data collected can then be used to make pricing decisions. For example, if your hotel has a low occupancy rate in February each year, you may choose to lower prices during that month to boost demand, or raise prices to maximise your revenue with the few bookings you have.

Ready to implement an effective pricing strategy in your establishment?

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