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Last year hotels have sold against a lower room rate then 2008. The selling rate for hotels was about 16% lower than previous year according to Hotels.com.

The current pricing strategy for many hotels is based on offering discounts, free nights, etc. These are efforts which will hurt your ADR and Revpar. According to a latest article in Reuters, Mariott has seen a dramatic decrease of the rate (about 19%) in the luxury collection. It has been mentioned that the luxury segment will not get back on their feet in the short term as market conditions have changed. In 2009 they have closed about 5,000 rooms, which is a normal fact. This year they will close over 6,000 rooms.

So what is the right strategy to follow for pricing your products? For this we have to go back a few years to find out how the business was selling at that time. Price differentiation is another technique and nothing to do with discounting but by adding value. To compete with your direct competitor we have added value to our product. Free transfers, free meals, spa vouchers, all to add value to your product. You get more for the USD of Thai Bath then when you spend it with the competitor. Added value will help you to keep your existing rate. In a normal market condition with inflation and a positive track record, hotels add 5- 10% to their room rate each year. A drop of 15%- 25%, due to discounting, in your rates, means you have to take another 3 years to recover from this. While if you add value in this year but keep the room rates, you can change your conditions the next year and keep a steady room rate.

Pricing and the internet

Still many hotels have not been able to utilize their website. The website is confusing and not focused on selling but on information. The prices are fixed and aren’t changed with the current situation in the market. Offers which you can get from 3^rd party websites are not available on their own website. The implementation of Facebook and twitter has been made, but Tripadvisor has been forgotten.

The internet is a very important partner for your sales. As it is a dynamic medium you can update and alter at any given time. Because search engines enable customers to find information easy, your own website will be visited more once you are visible on third party websites.

The pricing strategy for this market is not really looked after by the management, and business is lost because of this. Intelligent pricing, based on supply and demand, value added offers and rate parity in all markets are key elements to lift your business.

To let your website work, investment is needed. As all future business derived from your website is commission free, there is money on the table if you not free budget for internet marketing activities. Carefully analyze your current market share and set your target for the next year, Take 3% from your current revenue retrieved from your direct internet business and invest this in improvements, optimizing your booking engine, pictures and a webmaster service. You will see that the incremental investment will pay off itself within the same year.

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The business on the internet is fast and for many invisible, or just not entirely? There are many signals and indicators in your surrounding area which can spot the changing trend. Currently travelers make last minute decisions in order to obtain great discounts, the booking window is getting smaller. Currently many business have restricted the travel needs of their employees, this is why there are less corporate travelers on the road. To anticipate on these dynamic events, online sales can assist the hotel effectively filling their rooms. To increase your online sales effectively take note of these 4 important areas.

Competitors

The management of hotels has analyzed the market thoroughly for their competition when they have opened the hotel. Each year there is a change in your competition. Customers have now the opportunity to shop and they don’t always consider the location as the prime indictors, price has become a more valid decision maker. Your comp set has grown. If your were looking to hotels in the area of 40 km, currently clients have broaden this to 100 km or more. They can shop around easily with the presence of the internet and online travel agents. (OTA). For revenue managers and sales managers it is essential to look beyond the traditional compset and compare prices, guest comments and occupancies of other hotels as well. Even with the star rating, new opened 3 star hotels can directly compete with the “older” 4 star hotels.

Hotel Yield management

Yield is a common term in the Hotel industry. To yield your room rates, your sales team has to bring the right rate in the market which is currently accepted by the customer. Nowadays, with the internet presence, rates can continuous change at any moment of time. With a shorter booking window, customers are looking to book at the very last moment. Hotels nowadays do not have the staff available to anticipate on these fluctuations 24 hours a day. As management you have to find ways to optimize this trough revenue management system.

Page position optimization

The one on top of a webpage has a higher probability to be clicked on. Many OTA’s have lists of 2 or more pages. It is crucial to be at least at page number 1 or 2, and if possible on a top position. Rate optimization in combination of allotment control is the way to keep a successful position on a webpage to optimize visibility. By anticipating on your competition’s rate changes, you stay ahead of the group. Not forget to mention their star rating, guest reviews and location to ensure you are able to maximize your Revpar.

Room inventory control

As revenue manager you have allocate a certain amount of rooms to your various channels. An OTA channel is one of them which change rapidly. How can you manage this allotment with your inventory? Once you have a sold out status on your OTA channel, but still rooms in your inventory, you should allocate more rooms to your best selling channels. Successful channels have possibility to sell against a higher rate so it will contribute to your revpar.