David Collins, Co-Founder, Great National Group, looks at ways to get your pricing house in order before BREXIT crash-lands.
So the 31st October is looming hard along with an anticipated, almost Biblical readjustment for all concerned. After a sustained period of growth since the last recession, driven largely by cheap money, as well as significant personal sacrifice on an almost global scale, this easily avoided, self-imposed 3-year long car crash is going to turn into a crash-out with disastrous consequences.
Attention therefore is turning industry-wide to damage limitation and more specifically, to what hotels can do to sustain them through a period which will undoubtedly mean a significant softening in consumer demand. The indicators are already plain to see.
There is however a widely held misconception that hotel rooms’ pricing is something of a Dark Art and that like all Dark Arts there is something both magical and mysterious about getting price right, recession or no recession.
This need not be the case in that it is possible to manage your pricing strategy and achieve the best return for your property without somehow having to sell your soul at a crossroads.
I wrote recently that what the customer will actually pay is often ignored when it comes to pricing decisions. Similarly, what your brand stands for, or what you would wish your brand to stand for, tends to also be forgotten within rate strategy.
For some more brands, any discussion with consumers around price is seen as indiscrete – ‘if you have to know the price, you can’t afford to stay here’ – and whereas this is condescending at best, for some customers price per se is irrelevant.
The opposite is obviously true in that price can also be key to a brand and everything it stands for. Case in point, take Ryanair which became the brand it is today largely by cornering ‘The Low Fares Airline’ end of the market.
Ryanair’s recent softening in terms of brand positioning which has seen its hard-nosed approach to flyers ditched in favour of a more cuddly, ‘right on’ experience, does suggest that customers now expect more than just the lowest price. Instead, most people I suspect simply want a ‘fair’ price, instead looking for transparency on the one hand and possibly added value on the other.
Of course hotel pricing has never been so transparent thanks to WWW and more specifically OTAs and meta-sites: as if you didn’t already know, prospective guests on average check up to seven sites before arriving at their choice of hotel so where there was once Darkness, there is now a considerable amount of White Light. And White Noise.
Which begs the question is Pricing then an Art of sorts? Some folks would have you believe it is.
For example, research into the psychology of price suggests that the fewer the syllables in a pricing point, the lower it is perceived to be; furthermore, having a ‘lead in’ or ‘from’ price is recommended plus a more expensive alternative .. but always start with the higher of the two; non-rounded prices such as £59 (as opposed £60) may appear as better value to some clients whilst others can negatively associate them with the bargain bucket or being of a lower quality, lower standard; another one is to avoid using €, $ or £ signs and feature your price in red as this is typically associated with saving money.
The psychology debate on pricing continues to rage on but when it comes to using price to drive demand, look no further than the methods deployed by OTAs: for example, showing how many people are currently looking at the same hotel and dates as you are; flagging high demand and count-downs on discount availability; congratulating guests on securing the best value to overcome post-purchase dissonance, etc..
Much of this is however is what you would see any day of the week walking down any supermarket aisle. Again guiding (some would say ‘goading’) clients into buying product A over product B. Keep an eye though on legislation banning such ‘hard sell’ techniques, some of which it’s argued are spurious at best.
So as a key takeaway, as we head into a likely recession in the wake of BREXIT, hotels are now more than ever well advised to proactively and enthusiastically embrace yield management and rate strategy.
With so many opportunities and channels now available to promote your hotel, it is critical that you have a coherent strategy for managing rate across your various distribution channels, the primary starting point of which micro-managing your rooms budget for 365 days of the year across your various target markets.
This granular approach to rate management includes tracking pick-up daily against both budget and year on year; understanding what your competitive set is pricing at and what their achieved occupancy levels are; knowing your customer, analysing demand build and pricing for when they want to buy, not when you want to sell; and finally reporting movements in an easy to understand and easy to communicate way so that all members of your hotel team, from back of house to front desk, are singing off the same proverbial hymn sheet.
Hotels that adopt this deliberate, structured approach to proactively managing cross-channel rate decisions with one eye on budget and the other on market elasticity, will and do experience significant, accelerated growth in rooms revenue and occupancy practically from a standing start. And without any additional marketing spend.
So is pricing a Dark Art? In my view, no. Is it common sense?