Ever since revenue management came in to the vocabulary of the hotel business it has dominated the price that hoteliers would like to get, and the price that the guest is willing to pay. I know how we determine the price that the guest will pay, yet so many managers can’t determine what their product is worth. If the software program shows that the obtainable rate for a given period is x amount of dollars, then basically that’s the rate that shows up on the hotel’s website. Now is this rate based on the software configuration, probably since it goes out and reads the competitions price and decides that your property is well within that medium? I now propose to you as the hotelier behind the reports, are your rooms really worth that price? Are your rooms up to par and well maintained?
Mistakes Made in Pricing
One of the most common mistakes that are made in pricing is the idea that lower pricing will bring them to your door. I agree that we all want to get the best price for what we offer. Unless you are in a market that can triple prices and get away with it (Las Vegas) and most gambling casino hotels. But those of us that don’t have that luxury must stay within a certain parameter, or face losing clientele. When traveling, even though most of the time I am not paying for my hotel room, I still look at the website and see what the rate is for the time of my stay. The worst kind of client a hotel can have is another hotelier – they scrutinize everything. Ever have the AHLA convention stay at your property? Every CEO, VP, GM, walking around checking out how you operate?
Evaluate What You Are Offering
Look at your property and be honest with it – look at like a SWOT report. Then evaluate it without concern for your competition. What would you actually pay to stay in one of your rooms, what value do you place on it. One of the best business practices that I adhere to is that the properties need to be consistent in their pricing, and if the rate does change, publish it – and not in the fine print. If during the higher price season, add something extra in the room, which is not there during regular season. Check with your vendors: some are willing to provide gift baskets for every room or your bathroom amenities can be upgraded. There are a lot of things that can be done to give the guest a special stay during that time.
Doubletree by Hilton provides their famous chocolate chip cookie to their guest as they check in. It was my understanding that at one time the powers to be were going to stop the cookie. The company got so much flak from customers threatening to go elsewhere if they took the cookie away. The customers weren’t concerned about the rate, hell they could have raised the daily rate by 20% and no problem, but take away the cookie and watch out people.
There is a value of the room according to the revenue software that you have, and there is the value of the room that you perceive to be fair for your customers. How do you balance these two different aspects of revenue management? These formulas are applicable to most properties that are in the medium range of the industry. Luxury markets are in a class of their own. When staying at a luxury hotel, it is understood that you will be paying a higher price. Most of the time their rates are pretty stable, unless they panic and start selling 4 star rooms at 2 star prices, big mistake as far as I am concerned, but then again I just provide advice. Here is a perfect example of managers not knowing the value of their product. Well, so much for my rambling about what things should be, and not about what actually is.
About the Author
Alan Campbell has been in Las Vegas for over 30 years and has worked for the major strip hotels. He has spent some time in California, Los Angeles where he worked for the Radisson and Sheraton hotels. Alan considers the hospitality industry the best job in the world – it is the only place that both king's and Paupers will visit you.
The Hotel Guy
