It’s understandable that there is some confusion about what the best hotel room pricing strategies are, and how to implement them. By nature, the hospitality industry is highly location-oriented and multifaceted. Due to the extreme level of competition a hotelier should know the most effective hotel pricing strategies that will be useful in 2024 and beyond.
Fortunately, there are some hotel pricing strategies that work across the board and can be applied painlessly with a little effort, and testing these strategies could even result in remarkable changes in a hotel’s ROI. Apply a handful, and real magic often happens.
And if you are wondering where to start, you have come to the right place.
In this article, you will learn why hotel pricing strategy is important, and the top 12 pricing strategies for hotels today.
What is a Hotel Pricing Strategy and Why is it Important?
What is the goal of a hotel room pricing strategy? These strategies are used to increase revenue by renting as many rooms as possible. Hotel revenue management relies heavily on it, and it can make or break a hotel’s profitability.
A hotel that optimizes its occupancy rate will not undercharge guests while keeping rooms full. Mastering pricing strategies requires a willingness to make adjustments as circumstances change, creativity, and open-mindedness.
Before and during the application of these hotel pricing strategies, a number of factors should be considered. The current market supply and demand should always be considered, with emphasis on the property’s position compared to its direct competitors.
The owners and management should also give a fair assessment of the quality of the rooms, in comparison to past reviews, which are exposed to guests before they decide to book.
Knowledge is power in the hotel space, and the more data that can be tracked and evaluated, the better.
Top 12 Hotel Pricing Strategies
Here are the 12 most effective hotel pricing strategies for 2024:
- Day of Week Pricing Strategy
Hotel rooms on a Monday are often much cheaper than those on a Friday or Saturday. If you consider the days of the week when setting up your room rates, you can increase your profit potential. Pricing strategies such as these can be put into place quickly and easily, and have the potential to be significant.
Tracking days of the week and comparing occupancy rates can uncover actionable data that would otherwise be overlooked.
Are you able to charge more on Tuesdays than on Thursdays? Could it be the other way around? Use the data to optimize your day-of-the-week hotel rates by answering these questions as accurately as possible.
- Length of Stay-Based Pricing
A goal of optimizing hotel room ROI is to maintain a high occupancy rate. Offering discounts based on length of stay is an effective hotel pricing strategy in this area.
Guests who stay a week or more receive a discount, while those who stay a full month may receive an even better rate.
In many cases, this strategy can make a big difference when it comes to attracting business guests, who are arriving for work-related tasks and prefer to rent a hotel over finding an apartment.
An offer based on length of stay can make a hotel room more appealing, and may even open up a previously ignored guest segment to interest.
When this strategy is emphasized, the number of rooms rented can still be high even if bookings drop. In this regard, hotel pricing strategies based on length of stay are worth considering.
- Competitor-Based Pricing
Analyzing the competition is a great way to find actionable information about a market. In the event that rival hotels are offering much lower or higher rates for similar rooms, it may indicate where more careful pricing choices should be made.
Take into account factors such as star ratings and hotel segment when using competitor-based pricing. The more similar the rooms are in these qualities, the more valuable the results.
Tracking price history or seeing the current prices of competitors are just a few ways to use this strategy. You’ll need to monitor competitors’ pricing trends, rates across hotel room categories, when they cut or raise room rates, and what kind of discounts they use.
This will help you make your own pricing strategies more effective and on point since you know what your customers are willing to pay. Knowing what your local competitors are doing and why is extremely important if you want to be at the top of the pack.
It can be useful to look at what competitors are doing that works and what they are doing that isn’t working, both positively and negatively.
- Forecast-Based Hotel Pricing Strategies
It is possible to make some predictions about occupancy by looking at the time of year and comparing it to past sales. In addition to seasonal factors, annual events or conferences may also have an impact.
The trend of booking your rooms for events, conferences, or festivals tends to continue when you receive positive feedback about your rooms. Tracking them enables you to predict bookings and price rooms more effectively to increase revenue.
Hotel room ROI can be greatly improved by setting prices based on these types of forecasts.
A proactive manager or owner should always be aware of local happenings, since trends change frequently.
Using forecasting as a pricing strategy will let trends and historical data work for your hotel, rather than against it, while also safeguarding against surprises.
- Pricing Strategies by Segment
Airline models are a good example in this area. Your hotel rooms should not be marketed or offered at the same price to different segments of the market. Quite the contrary, in fact. According to what segments can and will pay, you can and should offer different prices for the rooms available.
How are the segments classified? For example, local guests vs. out-of-town guests, business guests vs. vacationers, one-room guests vs. volume renters, walk-in guests vs. guests who book ahead of time, and others.
What segment-based pricing strategies you employ will be determined by your own specific circumstances. Make your hotel pricing strategies easier and more effective by keeping an open mind and developing segments.
You can also benefit from understanding segments of the population you serve beyond pricing strategies. As a result, you can make more informed decisions regarding amenities offered, future upgrades, etc. There is nothing better than feeling as if your needs are being met more precisely.
You can benefit from learning what works for another industry similar to yours.
- Guest Detail Based Hotel Room Pricing
A guest detail room-based pricing strategy is similar to the segment-based pricing strategy we looked at just now. In this case, it is the type of guest that determines hotel room pricing.
A demographic breakdown of guests can be done based on their age, occupation, marital status, whether they are single or married, whether they have children, and what type of advertising attracted them.
Initially, you may be surprised to find how well this fits your pricing needs. It is important to track these different factors and adjust pricing accordingly. Positive trends can be captured and developed quickly even if it takes some time to be totally optimized.
- Incentive-Focused Hotel Room Pricing
Online price incentives are often sought by guests before making a booking. You should strive to ensure your hotel is the one that captures their attention when they are considering your area.
Discount codes, coupons, packages, and other promotional offers are used to offer incentive-based hotel room pricing. The obvious moves in this area will yield positive results, but creativity can also boost a room’s return on investment.
In this area, marketing tactics such as face-to-face, email, website offers, and even affiliate marketing can be utilized. You will more than makeup for any discounts you present by using this pricing strategy to help keep more rooms occupied more often.
It is possible to update and switch incentives on a regular basis to keep things interesting for guests and maintain excitement. By doing this, you can bring in new guests and make return customers feel more inclined to stay at your property in the future.
- Loyalty-Based Hotel Room Pricing Strategy
Similar to incentive-focused hotel pricing, loyalty-based hotel room pricing strategies offer repeat, regular guests discounts when they book their rooms. In addition to being good for ROI, these programs can also help hotels run more smoothly by bringing back good customers. In general, repeat guests are known quantities, and unexpected negative behavior is much less likely to come from them. It saves both time and money.
A loyal customer getting a better price is a win for everyone. As their numbers grow, a hotel becomes more stable.
It is recommended to be generous with return guests. Formal loyalty programs are proven to work, but if one isn’t available, or as a stop gap measure while one is developed, a discount loyalty policy will enhance ROI in the long run.
- Upsell Focused Hotel Room Pricing
The upsell is one of the fundamentals of marketing. A hotel manager or owner should not rush through the process of getting the best returns possible.
Once a guest decides to book a room, the biggest hurdle has been overcome, at which point it doesn’t take much more effort to offer them a more expensive room or package, so long as it is done right.
One of the biggest factors helping hotels increase monthly revenue is focusing on upselling rooms. An upsell hotel room pricing strategy, and a team that is comfortable pushing it, can deliver immediate results.
- Optimized Rate Level Pricing Strategies
There are many places where hotel room management software can be of assistance. Various hotel management software solutions automatically analyze your room rental rate and suggest ways to optimize it.
With this software, owners and managers will see an increased return on investment by removing manual error.
When a room is booked, the software will automatically select from four (or more) different tiers in order to maximize rentals and revenue.
You can decide if this is an element of your hotel room pricing strategy that works for you by checking out reviews.
- Cross Selling Strategies
Using cross selling to boost ROI is not technically adjusting your hotel room price, but it is a way to boost it dramatically.
As opposed to upselling, cross-selling is putting offers in front of guests who take things that you also profit from.
These include spa treatments, airport pick-ups and drop-offs, restaurant bookings, tours, and so on. The type of products you can cross-sell will depend only on where your property is located, your facilities, and what your guests are interested in.
Additionally, cross-selling can help build relationships with businesses that may serve as another source of rental income by sending guests to your hotel properties.
- Cancellation-Based Hotel Room Pricing
The cancellation policy you set can affect your ROI, so don’t assume that it doesn’t matter. Cancellation policies have contributed greatly to the bottom line of many medium- to large-sized hotels.
Getting cash from canceled rooms in an ethical manner that doesn’t burn customer bridges, while also being able to rent the room again rather than have it sit empty, is obviously something that can help boost a hotel’s fortunes. It can be a game changer for some properties to put this strategy into action in a way that makes sense.
Various options are available for refunds, including free refunds within 48 hours, a percentage charge, no refunds during peak season, and partial refunds.
Check your own cancellation rates, and then consider how this strategy can benefit your own ROI. See what other local hotels are doing when it comes to cancellations and refunds.
Wrapping Things Up
It is rare for hotels to be satisfied with their revenues. The nature of the business necessitates optimization to boost profitability while maintaining high standards for guests. There are many tools you can use when considering hotel room pricing strategies in 2024 and beyond, as you can see. Even if you haven’t tried some of the methods listed and described in this article, you likely have room to grow revenue.
Seasonal options may be more appropriate, while year-round options will provide value at any time of the year. It is not uncommon for hotels to use all 12, if not more, of these elements in order to maximize their performance.
However, it will be up to the hotel’s leadership to determine which strategies to apply and when to apply them.
