Have you ever wondered when you are booking a flight, why the $200 ticket price you saw yesterday is $300 today? This is because the airlines have complex yielding algorithms set up to maximize their revenue.
Here’s a Hotel Authority secret—the airline pricing strategy isn’t only for the airline industry. Apply it to your hotel now.
The Pocono Inne Town Magnuson Hotel of Stroudsburg, PA used every avenue to drive reservations including opaque, standard promos, mobile-only promos, limited-time promos and advanced purchase promos.
But when they used airline pricing, their average room rate increased 18.8%, while similar hotels only increased 1.67% in the same period.
The concept is simple, and can be used under 2 scenarios.
Projected high demand – start low then raise rate.
60 days out $75
15-30 days $90
5 days $100
Projected low demand – start high then reduce rate.
60 days out $100
15-30 days $85
5 days $75
Last minute $65
Maximising revenue per available room does not have to come at a huge cost with perfect science. Today’s hotels can increase profits by targeting the right distribution channels, controlling costs, and having the right market mix.
Use the following simple steps to increase rates with airline pricing.
- Utilize a Central Reservation System or Property Management System that has the ability to set tiered rates to specific, prioritized rooms. Limit each rate level to a selected number of rooms according to your strategy. Generally speaking the more expensive rooms should go first leaving a lower rate for last-minute deals. Reverse this for special event dates or high demand times.
- Sell your rooms across the widest distribution possible at all times, know what the costs are for online distribution channels and utilize the right mix. Don’t sell rooms on high margin sites during peak periods.
- Add a timeline to your CRS/PMS such as the rate is $100 for a booking window of 60 days or less and $90 for 30-60 days and $80 between 15-30 days with last minute deals of $75.
- Know your market – By understanding guests’ booking trends, you will be able to fine-tune the aforementioned rates and inventory. Last minute bookings are up as a trend; when travellers arrive in a destination, they now use mobile devices to search for the best possible local rate.
Use the airline pricing strategy and soon your profits will be sky high!