Perfect pricing is not a myth or impossibility. All it needs is for hoteliers to rethink their approach to traditional revenue management
By Vinita Bhatia
The one word that governs the hospitality industry’s lexicon is ‘price’. And perfect pricing is often considered to be an unfathomable concept, especially when it comes to revenue optimisation. Or is it?
According to Kabir Ahmed, complex director of revenue, for Sheraton Grand Bengaluru Whitefield and Convention Center as well as Aloft Bengaluru Cessna Business Park, pricing that is in line with a company’s strategy and with what a customer is ready to pay for the product is, simply put, perfect pricing. Both these components – the hotel’s strategy and customer expectation – are equally important.
If the hotel gives more importance to strategy and price than customer expectation, their demand will fall. Likewise, if they ignore their strategy and price lower than customer expectation, they might gain room nights, but lose potential revenue. The right mix of both defines perfect pricing. This is also where the concept of rate integrity comes into play.
In his opinion it is possible to achieve perfect pricing. In fact, this equation was a lot easier to attain when there was lesser competition and market intelligence data. “With increased segmentation, distribution, competition and market information, achieving perfect pricing has become tougher. A perfect price in modern times doesn’t last long as your competitors will devise strategies around them,” Ahmed claimed. According to him, the key to beat this is to continuously keep revising one’s pricing as per market undercurrents.
OUT WITH THE OLD?
With the rising opportunities that the new-age infotech era has visited upon the hospitality industry, are traditional methods of revenue and price management on their way out? Well, according to Ahmed, these conventional ways of pricing are still important while undergoing the pricing exercise.
The only difference is that in contemporary times, more factors have started emerging. Now, hoteliers have to factor their advantages and disadvantages vis-à-vis growing competition and the core market segments they want to focus on. After comparing their major business sources with that of their contenders, they have to charge a market average judging on what they have to offer,” Ahmed pointed out.
Sheraton Grand Bengaluru Whitefield and Convention Center as well as Aloft Bengaluru Cessna Business Park use a mix of traditional and modern models for setting rates. Besides analysing their competitor’s rate, they take elements like upcoming city events, socio-political factors into consideration. “Our software helps us in accurate forecasting by doing complicated back-end calculations, considering historical data, on-the books info and the pace. Using this, it recommends the optimal pricing for every date,” Ahmed explained.
BE DYNAMIC
Realising the merits of dynamic pricing, most major hotel companies, and even some standalone properties, have already adopted it into their revenue management practices. Hotels have developed strong forecasting tools that help in making sound pricing decisions to improve their revenue and profit.
Diving into the drivers of additional revenue generators in the future, companies are likely to shift focus only from rooms to other F&B avenues including like banqueting, catering, in-room dining, etc. Loyalty programs will be further combined to include both resident and regular guests. Perhaps, it is time for hoteliers to understand that they need to tap a diverse set of growth drivers to maximise their revenue outcome.
