When they ask me what the tourist year is like, I say it’s a marathon that’s still going on. Unfortunately, with certain hotels, because of the destination, the offer and the destination and the facility, the very demand that is specific to that destination, that “marathon” lasts shorter, and we are talking about the season here.
Whether the year or the season was successful, there is no right answer. I believe that the majority will be satisfied with the results in the end, but I say again that the year is a marathon and EBITA is looked at when the line is drawn.
The fact is that every year (or season) is different and each one has its own specifics – which are influenced by various external factors such as the weather, world and local events, some trends, competition and the like…
The key question is, did you recognize these specifics in time, did you have the right price at the right time? And how did you do it – manually or with the help of technology? In other words, have you properly optimized your hotel room rates?
Find out how WebBookingPro as an integrated Revenue Manager+Channel Manager+Booking Engine can change your mind about dynamic pricing and overall better results in tourism!
A properly set pricing strategy can be the difference between simply hitting your KPIs and exceeding them, between falling behind your competitors and staring at them in the rearview mirror.
What is room rate optimization?
Room rate optimization is an umbrella term for the process of adjusting your rates in real time based on various factors such as market demand and supply, competitor rates, historical data, customer behavior and market trends. The ultimate goal is to set the right price at the right time for the right buyer to maximize your property’s revenue and increase profitability.
A brief history of room rate optimization
With so many factors to consider and the analysis required, determining accurate real-time room rates for your property can seem complex and time-consuming. And if you do it all manually, it is.
Because of this, traditionally, hoteliers set different prices on weekdays and weekends and make seasonal price changes in advance based on historical demand patterns.
Or perhaps you used a cost-plus-cost approach, whereby you calculated all the fixed and variable costs associated with operating your hotel and subsequently added a profit margin to this total cost by applying a markup for each room type.
The key problem with older revenue management strategies like these is that by selling at flat rates most of the time you ignore market conditions, competitor rates, market data and variable demand.
Given that the online market today is incomparable to a few years ago, which is reflected in the growth of online bookings, the growth of bookings through OTA sites and metasearch sites, the hotel pricing and distribution environment has begun to develop at an extraordinary speed, and more agile pricing strategies have moved from what nice to have as a basic instrument.
As I said at the beginning, every year/season is specific. After the pandemic, many things are different than before, and you yourself know.
Today, the inevitable outcome of using traditional hotel pricing strategies instead of a dynamic pricing strategy will be loss of revenue and loss of leadership in your market.
Of course, many hotels will say that they use a dynamic pricing strategy – manual yielding. They monitor some “things” and “assess” the price correction.
Dynamic pricing and the role of technology
Optimizing your room rates to maximize every revenue opportunity requires a comprehensive strategy that aligns with this goal. Dynamic pricing is now the industry standard for this purpose and can be used almost interchangeably with the term room rate optimization or rate optimization.
With dynamic pricing, room rates are not fixed, but are adjusted based on market demand, competition, booking time, customer behavior, occupancy and other factors that may affect booking patterns.
Prices change dynamically (hence the name) using real-time data to increase your revenue and occupancy rates.
As a basic example of what you might do yourself, in periods of higher demand you raise the prices, and in periods of lower demand you lower the prices in order to still get a few more rooms.
But how do you determine higher or lower demand and the proper increase or decrease in price?
In order to make a decision for each day in the future, for each type of room, about the state of demand and the assessment of how much to raise or lower the price, it is necessary to collect and analyze a lot of data.
The time spent on data collection and analysis can take several hours a day. To fully optimize your room rates, you need pricing software to do the heavy lifting for you.
With a room rate optimizer in place, you can automate your dynamic pricing strategy.
But it’s not just about income. Optimizing your room rates with a dynamic pricing strategy has numerous benefits.
Why is hotel price optimization an important aspect of revenue management?
When done right, room rate optimization can lead to significant improvements in business results and deliver outstanding results for your hotel, including:
Saving time. The system can do analysis for you, recommendations based on your pricing strategy. You can “respect” them or additionally correct them and, as such, “release” them for sale. If you put together a strategy that can work 100% automatically every day in the future without your influence, why not. Whether you use 100% automatic Price Management or semi-automatic, the time savings are enormous. Imagine adjusting the prices for each day in the future for all room types every day.
Preventing a decline in income. By automating your room pricing strategy, you eliminate the risk of manual pricing inaccuracies and human error, thereby preventing the loss of key revenue.
Taking advantage of new revenue opportunities. Adjusting room rates based on real-time forecasting and competitive data means you can take advantage of every revenue opportunity, whether you’re in a period of low or high demand. You can target different guest segments depending on the season and your active channels.
Gaining a competitive advantage. Understanding and quickly responding to competitor demand and pricing with the correct price point ensures you are more competitive. If you can offer better value at a similar price to your kit, you’re likely to attract more bookings.
Maximum occupancy. Price optimization helps manage occupancy levels. During peak season, higher prices can prevent overbooking, while lower prices during off-peak periods can attract more guests.
What to pay attention to when optimizing room rates
There are dozens of tools for dynamic pricing on the market today – the so-called Revenue Management Systems. Most of them exclusively deal with “optimization”, and are connected by special integrations to the Channel Manager, Booking Engine and PMS system. There are also “Rate Shopper” systems that deal only with analyzing the competition and their trends.
Most of these solutions offer a “Price Proposal” that is calculated based on some of your settings, but the systems do not have the necessary flexibility that you, with your experience, need to provide.
WebBookingPro is an all-in-one solution, 100% Croatian development and support, with 15 years of experience that offers:
- An integrated Revenue Manager that provides you with an extremely flexible model for defining a price strategy that you manage at any time in the way you want, but using smart algorithms, data from the past, present and competition in real time !
- Integrated Channel Manager with direct premium links to the most important hotel channels and hubs – Booking.com, Expedia, Hotelbeds, Trip.com, Agoda, Keytel/Hotusa, HRS, Webbeds, Hyperguest, ETG, …
- A booking engine that integrates into your website – the guest does not leave the website and has full Brand Awareness and Guest Trust from the beginning to the end of the booking.
Smart and balanced distribution.
With the WebBookingPro system, you can not only optimize room prices, you can also manage distribution smartly.
Working with OTAs and other distribution channels is now unavoidable due to their exposure and booking volume, but partnering with these sites carries a hefty commission that cuts into profits. You need to develop a strategy to drive direct bookings and carefully manage your relationships with third party sites, especially the level of commission to effectively manage the bottom line.
With WebBookingPro tools, you can easily limit a certain number of last rooms for a certain channel/rate.
PMS integration.
WebBookingPro has 2-way integration with the following systems in Croatia – Milenij, Diventa, KOR, Opera and Opera Cloud. “Manual” updating availability/contingent is a thing of the past – it’s a waste of time and a chance for error and overbooking!
A pricing approach that unlocks your commercial potential
In the fiercely competitive hospitality industry, optimizing your pricing by automating a dynamic pricing strategy allows you to capture the right customer at the right price at the right time.
Every moment you spend manually working with pricing data is time competitors who have already adopted dynamic pricing are using to increase revenue.
By choosing the right price optimization tool, you can take control of your pricing strategy to maximize your RevPAR, leading to sustainable profitability over time.
