Getting into the hotel business is a dream for many people. And it is no wonder, it is a great way of creating a stable revenue. However, like with all businesses, starting small carries plenty of challenges, and the situation is the same when it comes to smaller hotels.
The big players in the hotel game are quite experienced and have the tools and knowledge to determine what the best pricing methods are, e.g. high-end pricing software and years of solid data to draw conclusions from.
On the other hand, smaller hotel owners and managers are less experienced, meaning that it is necessary to take some steps in order to optimize small hotel revenue.
Let's take a look at a couple of steps that will help you optimize your small hotel revenue.
Factors that directly impact initial pricing
When creating hotel room pricing, it is essential to remain realistic. You want to actually make a profit don't you? Well, in that case, the following are the most important parameters you should take into consideration.
- Location - This the first parameter that is going to dictate your price. Is your hotel downtown? Is it in the suburbs? Is it in the business district? Are you near the seaside? Are there any tourist attractions or significant landmarks nearby? All of these things have a significant impact on what price you are going to rent the rooms for.
- Competition - Taking a look at the competition is always a good thing. The most important things you should consider about the competitor's hotel is its pricing, location and rating. This will give you a great idea of where to start when pricing your rooms.
- Hotel rating - The rating of your hotel is going to directly impact the price you are going to ask for when renting rooms to your customers. Check what you are offering that competition isn't. If you conclude that your offer is the same, consider offering a bit more to your future customers for the same price.
- Value - Pricing is not just about being cheaper than all the competitors, it's about offering good value for the money. What is it that sets your property apart? What kind of unique experience will the visitor get there that they won't be able to get anywhere else? You may be able to pamper them with exceptional service and interesting perks, and the final price should reflect the overall experience.
- Guest reviews - People trust the opinion of their peers a lot more than they trust marketing material. Even if you offer luxurious rooms with great views, no one will want to pay good money for rooms in a hotel that other guests have rated poorly. Since guest reviews play a big role in the final pricing of a room, you need to do your best to make your guests feel good and ask for feedback.
With all this in mind, you are going to be able to set an initial price that will lure customers to your business. Try to price your hotel room rates lower than the competition, as you want more people to approach your hotel.
This might not bring the best financial results from the start, but in the long-term plan, it is a very good move that will pay off later.
Following demand
Once you have set up the initial price, it is time to start following your hotel's financial performance.
No matter where your hotel is located, you are going to have the season and off-season periods. This will directly affect the demand for rooms in the area. During the season, you should set higher prices for your room, but not too much, to avoid scarring of certain customers. Finding this sweet spot is very important, as it will help you maximize the financial revenue of your hotel.
In order to achieve this goal successfully, it is necessary to rely on a Hotel PMS tools. This hotel software will help you collect data about your hotel's performance every single season. With enough time, this data will help you find the room pricing sweet spots during the season and off-season months.
Many hotels attempt to manually capture the data, but it can lead to serious errors, making the Hotel PMS tools quite important.
Segmenting your customers
You are aware that you should be doing everything to get as many guests as possible. When a hotel is sitting empty, it is literally losing money. In order to ensure that it is going to be full at all times, it is necessary to segment your customers.
What does this mean? Well, there are institutions and organizations that take group trips from time to time. It is essential to establish group pricing and scale it to the size of the group that is coming. Figuring out this type of pricing is very important, as it can save your hotel in the off-season periods.
Let's say an excursion of 100 students is in your town? Those are 100 customers that you can accommodate in your hotel space. However, it is crucial to develop attractive and competitive prices that will make your hotel the perfect choice for them.
Targeting different regions
The exact time of year when you'll have the most business will depend on your hotel's geographic location. For example, when the entire Northern Hemisphere is knee-deep in snow, Australians start hitting the beach to have some summer fun. This is why you need to know where your guests are coming from and when you can expect their interest to peak so that you can begin marketing your property a couple of months in advance.
The best way to do so is to increase your social media activity and post daily, offering pictures of your property and the surrounding area, sharing articles about your location (e.g. great tourist activities, cafe and restaurant reviews and so on) and engaging your potential guests. Join some groups, post regularly, engage people in conversations and target them with promotions.
If you can successfully target different regions and use the right promotions, you can see a good deal of business throughout the year and never experience the full brunt of the low season.
We hope that you will find these tips helpful. Determining hotel pricing is a very complex task, as it should scale with the different types and number of customers. Remember that to completely record the whole process, you will need to utilize a hotel PMS tool.
However, such a tool is worth if - with a small investment like this, you are going to achieve much better financial results. Establishing a steady revenue in the hospitality business is quite important, and the abovementioned tips will help you achieve this goal.