A few days ago, as I reflected on the challenges our industry faces, a recent conversation came to mind. I was asked, “Vito, how do you establish the right price in such a volatile market?” The answer isn’t simple, but it is clear: The right match between target and product leads to the right price.
In the world of hospitality, pricing is more than just a strategy; it’s an art that requires a deep understanding of market dynamics. Starting with the lever of pricing, we must focus on the market itself: understanding its needs and demands is the key to achieving strong results, not only in occupancy and productivity but also in the reputation of the hotel.
In today’s context, with a challenging 2024 and 2025 on the horizon, adapting pricing to the market’s needs and demands is crucial. The fundamental yet complex question is: do we sell at a lower or higher rate? Selling at a lower rate might seem like a practical choice compared to not selling at all, but lower compared to what? Compared to a competitor who may have low occupancy during that period? Or choosing a higher rate to capture more revenue? Again, higher than what? Higher than last year, when factors like the market, weather, or other variables were different? Even the three books I’ve written can’t fully answer this question.
One initial response to these questions lies in a flexible and dynamic pricing system, which suggests segmenting the offer. Being able to cater to all market segments and meet diverse needs inevitably increases the conversion rate and, therefore, revenue. Here, the value of an “initial rate,” set well in advance and below last year’s average rate when occupancy was unsatisfactory, plays a crucial role.
The hospitality sector demands a conscious and innovative approach. Dynamic pricing is not just a trend; it’s a necessity in navigating an ever-evolving market. Constantly monitoring data, adapting to changes, and anticipating customer needs are crucial elements for success.
I discuss this in my webinar. Click here to watch it for free.
Vito D’Amico
CEO, MyForecast RMS