ADR dynamic pricing global distribution system

The Right Way to Price Your Hotel Inventory - Keep an Eye on Competition


Hotel occupancy

As an hotelier, it is imperative for you to know your competitors’ hotels as well as you know your own. Off the top of your hat, you should know their number of rooms, their primary business segment, their biggest accounts and most importantly their pricing strategy.

You need to keep an eye on your competitor’s pricing while pricing your own hotel. That doesn’t mean that you need to cut your rates and always offer a cheaper rate, definitely not. If you undercut your hotel’s tariff on the basis of your competitor’s strategy you would be eating into your own profits and damaging your ADR. A good tactic for hotels would be to set one room rate at the same price point as your competitor and another room at a slightly higher rate. By implementing the above-mentioned tactic, your hotel can sell their lower value rooms to guests who are looking for the best deals available but still make more money than your competitors by selling the higher priced rooms to other guests.

Nowadays many hotels have started implementing dynamic pricing strategy based on the demand and supply in the market. Instead of discounting your room rates, you should see ‘what else’ you can offer your guests by including value-added packages. Guests are not always looking for a cheaper offer; they want value for their money. So look at your target audience and create attractive packages for them, like for example, for a business traveler, you may be offering a breakfast inclusive package with complimentary Wi-Fi and access to the business center or a special spa package for leisure travelers. However, do research on the pricing and packages offered by the competition and see to it that the variance in pricing is minimal.

Having a property management system with real-time connectivity to channel managers and global distribution systems (GDS) will take care of pricing and booking woes. Still, a bit of competitor pricing analysis will help in optimizing the pricing for your room inventory. Since many hotels work on dynamic pricing, the tariffs of your competitor’s would also change. With the right integration, you can get competitor pricing changes real-time. This is an opportunity for your hotel to be proactive by analyzing the live demand in the market and adjusting your room tariffs accordingly. Another hotel may have increased their tariff because they don’t have many more rooms to sell; their inventory is getting sold out, this is a great opportunity for you to increase your room tariffs also and profit from the shortage of supply. Real-time data tracking of your competition also enables a hotel to capture last minute or next day bookings.

We want to reiterate the fact that by keeping an eye on your competition’s pricing, we don’t mean that you need to lower your tariffs. The above points indicate that in several conditions increasing the room tariff may actually be more profitable for your hotel – backed by data and analysis.

Right pricing strategy