Finding an Optimal Pricing Approach For Your Hotel

Hopefully the economic woes are now largely behind us and with demand now exceeding pre-recession levels is has never been more important to get your pricing right. Is it surprising, however that so many hotels still seem to struggle with finding the optimal pricing approach for their business?


While pricing is recognised as one of the key success factors, it is one of the most difficult things to get correct. Pricing is a very emotional process, it’s like marketing – everyone is an expert. In a Hotel, this means that from the Owners to the General Manager, the Finance Director, the Sales Department to the Reservation agent all have an opinion on how a Hotel should be priced. Reality is, you can never really get it right – and you can never get everyone to agree on what the right price should be. The best approach is to take the emotions out of the equation and to have a structured, measured and scientific, which is often counter-intuitive with the service – culture in a typical Hotel.


The most forward looking hotel companies realize that a) Pricing is very hard b) It has to be done on an ongoing basis c) it has to be part of the culture. Gone are the days when you established your pricing structure once during budget season and then let it run its course. Competitive pressures are higher and technology is giving guests more pricing power than ever. So these companies have really worked over the last few years on putting their pricing in order. They have either invested in technology to be able to dynamically price and to provide the analytical support they need to price optimally. With a structured and proven approach and letting the data speak removes some of the emotional fuzziness and provides everyone with a better framework to work from.


I think we are at the cusp of a huge leap in pricing sophistication. New analytics and technology makes it increasingly cheaper to crunch large amounts of data in a very small amount of time – which is critical for pricing automation. We could also envision in the next years the emergence of attribute based pricing, where every product a hotel might sell is priced individually – but dynamically – and then re-aggregated for the guest into one price at point of booking. These are very exciting times for the industry, the question is how the hospitality eco-system, including PMS, CRS, OTA and other technology providers will keep up or catch up with the rapid advances that are now becoming more and more accessible to the industry.


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