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Below is the full transcription, but for the best experience, we encourage you to watch the video. Learn how to make informed decisions by understanding key performance indicators (KPIs) and mastering pricing strategies. This course dives into data-driven techniques designed to boost your hotel’s performance.
Don’t miss out—watch the video and take control of your business today!
Below is the full transcription, but for the best experience, we encourage you to watch the video. Learn how to make informed decisions by understanding key performance indicators (KPIs) and mastering pricing strategies. This course dives into data-driven techniques designed to boost your hotel’s performance.
Don’t miss out—watch the video and take control of your business today!
Module 1: Data-driven Decision Making
Understanding the past is vital for predicting the future. In this module, we're going to dig deep into the historical data and demand trends of your hotel and equip ourselves with the necessary tools to better predict future demand. So I'm going to start by listing a few different KPIs or key performance indicators for the rookies out there. Namely, occupancy rate, average daily rate, and rev per. I'll explain what they each indicate and how you might make use of them. Then in the second section we're going to learn how to calculate and collect data from these KPIs. Finally, to finish up, we're going to do a little on something called the demand curve. All right, that's the map guys. Don't get lost. Here we go.
So KPIs or key performance indicators are indicators that measure the performance of a business. They are extremely useful and absolutely necessary to understand the performance of your business and to gauge its general well-being at a given moment or over a given period. The first indicator we’ll take a look at is the occupancy rate, which we'll abbreviate to O. Or plainly put, the occupancy rate is the percentage of your rooms occupied over a certain period. You can do it daily, monthly, or annually, whatever works for you. The owner is a good tool to evaluate your hotel because, in very ordinary terms, it indicates the overall popularity of your property, which is a good thing to know about, especially if you're in the business of trying to make it more popular.
Another indicator worth knowing is ADR or average daily rate. This is the average revenue generated per room over the course of one day. So if the ADR is high or increasing, it bodes well for your business. To increase the average daily rate, you obviously have to increase the price per room. And if you're doing this and you're smart, it means that you have a good reason to, which is even better news. But once again, let's save the pricing shenanigans for chapter four.
The last KPI I want to bring to your attention is RevPAR, otherwise known as revenue per available room. Now, RevPAR is comfortably the most important indicator for hoteliers because it tells you plain as day, the revenue you make from all of your rooms. It helps you to settle on fair, competitive prices, compare your own prices with those of the competition, and get a better idea of where you sit in your own little section of the market.
So now we know a little bit about the most important KPIs in our industry. We're going to give that one a big fat tick, and we're going to move on to point number two, which will tell us how to calculate and collect data. Okay guys, you ready for some maths?
The occupancy rate is really quite simple to calculate. Just divide the number of rooms rented by the number of rooms available over the desired period. Simple as that. I mean, maybe not easy, but easy-ish. So the Hotel Ace of Clubs, for example, has 40 rooms, 40 fine rooms, beautiful rooms. You should stay there sometime. During the month of July, which lasts 31 days, the hotel has 1,240 nights available to it. So that’s 40 rooms by 31 nights. Okay, so it's 1,057 rooms, let's say, were rented during that month of July. The occupancy rate would be 85%, which is the result of 1,057 divided by 1,240, which is equal to 0.8524. And for anybody who remembers their primary school mathematics, you multiply that result by 100 to get a percentage, which, to be completely accurate, is 85.24. Not bad.
Then there's the ADR. To calculate ADR, the revenue generated from rooms is divided by the number of rooms sold over a day. And back to the five-and-a-half-star Paradise, the Ace of Clubs Hotel, as our example. It sold 39 rooms on a Thursday, 9th July, generating €5,410. The ADR would then be €139, which is 5410 divided by 39. The number of rooms sold is equal to 138.7179. Get it yet? Do you get the idea?
Lastly, for the RevPAR, the occupancy rate must be multiplied by the ADR. So with the previous examples we gave from the Ace of Clubs Hotel, the RevPAR would be €118, which is 0.85 multiplied by 139, equaling 118.15.
Thankfully, now with new technologies and big data, etc., the hotel industry is going digital. There are PMS or property management software systems. These contain digital tools that make it possible to collect a larger amount of data than ever before, and to output it all at once in just a few clicks in reference to whatever period you like. Basically, this means you no longer have to put on your Einstein hat in order to get the figures you need. PMS reports will do it all for you.
So now that you know how to calculate your KPIs and you also know why you don't need to do it anymore, and you also know where you can find fresh ones any hour of the day on your PMS, we can move away from point two and on to point three.
So, the demand curve. The demand curve is a fairly basic concept in economics. Anyone who sells anything can benefit from having a look at theirs. You sell rooms, so why not? Let's have a glance at yours. The demand curve is a visual representation of the relationship between the price of a product and the demand for the product at that price. Generally speaking, demand curves slope downwards in accordance with the law of demand, which states that demand lowers as the price increases and vice versa. The beauty of these curves is they're relatively easily predicted. You only need to look at past data to base it on, and that’s that. It's one of the many reasons data collection is so essential.
Okay, so almost time for an exercise. Firstly, I should clarify that you should, in the end, have several demand curves because in order to be effective with your data, you need to create a curve for each category of room that you have. For example, in the fabulous Ace of Clubs Hotel, if you remember correctly, we have five categories of rooms, so we are to have five different demand curves like so.
In order to create it, you will need to count up—or ask a computer, if they're not busy—the number of rooms sold last year by category and then by selling price. So look here at the Ace of Clubs. For our standard room with a double bed, here are the figures from last year (fictitious, of course). It was occupied every single night and with a very high price and the most sophisticated guests, all of which left five-star reviews except for this one lady on Yelp, who we're pretty sure was just having a bad day. But anyway, following on, I've simply indicated here the number of these rooms that were sold last year at a variety of different prices. As I can see from the curve, we sold the room at €200 the most during the summer, aka high season.
I'm sure you will reflect something of the seasonal trends in your own curve, as well as a whole bunch of data that's directly reflective of your property and yours alone.
That said, time for a pause again. I'll be just chilling out here. You'll be filling the tabs in the Google Sheets file with each one of your categories, and that’s done.
Studying the past is key to shaping a successful future in the hospitality industry. You should now consider yourself better prepared to use these insights and strategies to enhance your operations and increase profitability. See you soon.
Module 2: Event-Driven Analytics
Events can shift your bookings dramatically in ways you might not expect. Today, we're going to look at how you can use data to stay ahead of the curve. That's right, guys. You're going to have to get the crystal balls out and check up on how Jupiter is lining up or whatever, because we're about to do some severely educated guessing.
In this video, we're going to learn what data we're interested in and where to find it. Then we'll look at how it can be interpreted and put to use, and then we'll pop a cherry on top of all of it by creating a calendar indicating important upcoming events that will more than likely have an effect on pricing. Strap in, folks, it's going to be bumpy.
So what's this magic data that's going to predict the future? To get to it, you need to take a very broad view of everything and pick the things that are specifically relevant to your property. Okay, I'm going to give you a standard enough list of things that you should take note of.
First, public holidays in your region, but also in countries whose citizens belong to one of your segments. And where can you find this data on public holidays? Give it a Google or any other search engine for that matter. We're not sponsored by Google. You can very easily find the dates of public holidays for the coming years. Just type "public holidays" and the country in question into a search engine of your choice.
Perhaps school holidays in your region and in the countries whose citizens belong to one of your segments. Where can you find your information about school holidays? Well, you can usually find the official stuff on government websites and so forth.
Next, consider the various events planned in your region in the upcoming months. There could be a music festival, a fair, sports events, a carnival, the arrival of a celebrity, a trial—any other important event that might bring tourists into town. To get this information, you can visit the website of your local tourist office, where you'll generally find a calendar of upcoming events. Cities also share their cultural agendas on their websites. Besides all that, checking tourist websites, Facebook pages, and magazines like *Time Out* (if you're in a big city) wouldn't be a bad idea. Get it wherever you can, my friends.
Yes, and as per my observation earlier, I've decided that weather is also important. Watch out for it on two fronts: short-term and long-term. In the short term, if you see rain forecasted and you're by the sea, you might want to prepare for some cancellations or dips in demand. In the long run, you can usually find reliable statistics for what you might call event weather, such as storms or heat waves. All of this can be found wherever you normally get your weather, but sites like *Actual Weather* are specialized websites that provide more round-the-clock updates.
Next up is the socio-economic environment in your country and in those whose citizens number high in your segments. It's worth taking a look at this too. This could include political, economic, social, or natural events that can strongly affect tourism. It's best to follow the news of the countries where you're expecting your customers to come from.
This one is much more difficult to study, but it can have a significant impact on tourist flows. A concrete example right now is the war in Ukraine. If you're used to having Russian tourists, a lot of them used to flock to Malta, for example. This will have a very strong impact on your occupancy rate.
The opening and closing of competing establishments is another factor. Now, with the competitive intelligence you gathered for your exercise in module three of the last chapter, you should have that data somewhere at the ready—I'd imagine if you did your work.
Of course, there may be a lot of other data that is relevant to your property, so don't be shy. Add it in there if it makes sense to you; it probably does. Pop me on pause for a little bit and go ahead and list all the data you think could be relevant to your own property. Okay, see you when you're done. Okay, I'll do, pig. That will do.
Let's move on.
So, next up, what will this data be used for and how will it be used? Okay, guys, this is where the horoscopes and tea leaves come in. All the data you collect can help you spot patterns and trends and help you anticipate demand and the arrival of more or fewer tourists, which you should know by now will have an effect on how you price your rooms.
The most obvious examples are July and August. These months are the busiest and are usually known as high season. Now, this isn’t a name they got from some Roman calendar specifically designed for hoteliers. This is a name given to them based on past data and future predictions. We know that during these months, kids have school holidays and the weather tends to improve in a lot of places. You probably do a little bit of revenue management instinctively without even realizing it, by increasing prices to make the best of the bigger business in those months.
Now don't pat yourself on the back too quickly. Everybody and their moms raises prices during those months. What we're going to do now is try and make some advantageous adjustments to less obvious months of the year. But not now. No, no, no. Later. Later in what chapter? In what chapter? Wait for it—Chapter Four. Man, I can't wait to get to Chapter Four. It sounds like it's got all the answers.
All right, point two and one point three. We're going to create a calendar of events to work your pricing plan around. The best tool for this is, unfortunately, our sponsor, Google Calendar. Google Calendar, firstly, because it is free (which is nice), but also because it is very easy to use. Ideally, you should create a new Google account with a different email address so that you have a calendar that is truly dedicated to the events. You can also add calendars to have distinct colors for holidays, public holidays, events, etc.
So here's one I prepared earlier to give you an idea of what I'm talking about. Go ahead and pause the video, take the list of events you created in the previous exercise, and insert them into a Google Calendar.
Understanding how future events can sway your bookings is seismic when it comes to optimizing revenue. Good forecasting turns guesswork into strategy and ensures that you're prepared for whatever comes your way.
See you next time.
Module 3: Mastering the Demand Calendar
Demand is tricky. With a well-structured demand calendar, we can anticipate, adjust, and never miss a beat. Together, we will construct one of these calendars and use it to fine-tune your prices in order to optimize occupancy rates.
So, the preview. Just three points today. First, we'll look at what the demand calendar is and why it's a good idea to use one when setting up a revenue management pricing strategy. The second point is when we run through the creation of the calendar and the data required to do so. Lastly, we'll show you how the calendar works, how to read it, and what to do with all the exciting new data it'll give you to work with. So seatbelt sign is on, no smoking on board, the life jacket demo is done, and we're in the air.
Firstly, a very good question followed by an even better one: what is the demand calendar, and why should I use one? Simple answer to both at the same time: by creating a demand calendar, you can facilitate your pricing decisions based on the past and future data that we've already learned how to collect. It is an absolutely crucial exercise when it comes to establishing a consistent pricing strategy and practicing effective revenue management in the long term.
In many ways, it is a demand forecast. As mentioned, it ought to combine past statistics and planned events. It's a sort of fusion of the demand curve and the event calendar—horoscopes with statistics, if you will. Once again, the racehorse is your hotel, and you're the guy at the track. Everyone's going to want a copy, but keep your notes to yourself! With the demand calendar, you can plan your staff timetables more efficiently to meet guests' needs. You can better manage your stocks: breakfast items, staff, towels, soap, sheets, etc. You can estimate the future profitability of your property and apply the data to the present. You can increase your occupancy rate, and of course, you can combine all of these to ultimately optimize your income.
So that's the *what* and the *why* in the bag. Let's move on to the *how*, meaning how to create one of these bad boys.
By the way, as you'll see, the data you dug up in the previous chapters will help you immensely in this one. So, firstly, in order to make a simple version of the demand calendar, it is useful to take data that may influence demand as well as past data that may tell you about trends in demand.
Okay, so have handy: last year's RevPAR, the value of demand in the past year (available via the demand curve), a list of upcoming events, and a basic forecast of demand (say, low, medium, high, or very high). Based on these three pieces of information, guys, here's one I made earlier. Tell me you don't want one of these immediately for your own property. Doesn't it just scream "useful display of data," right? You've got your days of the week, last year's RevPAR, demand for last year (red being scary because it's very low, green being pleasant because it's high), the events that you might run into, and the weather forecast for the next few days—that's how often you want to be updating your calendar.
Okay, and then the current demand. On account of the rain, you see very low demand. But next week, when we've got American holidays happening, we've got very high demand. This is what you want: a clean, easily legible visual display that will help you conduct your business.
Okay, folks, stop over in pause town. I'm going to have a coffee and think about which fruits are best to dip in melted chocolate. You guys work on your calendar—use the provided template to save yourself some time. See you in a bit.
Okay, guys, we're back. For those of you who were paying attention, the answer is pineapple. Now let's cross out point two and mosey towards the finish line for chapter three.
As you can see, guys, we have arrived at the raison d'être. What can you do with your calendar now? To start with, as with your benchmarking, the key to making this process work for you is regularity. Once you have it up and running, you'll need to update it. For example, when you hear of a new event that might see a surge in demand, ideally you should have a look once a week and update your calendar.
The most important takeaway from the demand calendar is the current demand value. This is what will tell you when you can expect an increase in guests arriving. Keeping this as accurate as possible so you can adjust your rates to meet demand is why you'll want to regularly update the calendar. It's a great way to keep abreast of your competition and avoid any unpleasant surprises. Do it now and thank me later (I like chocolates and flowers).
Understanding and anticipating demand is the secret to making occupancy rates soar. With a good grasp on demand, we can tweak our prices to keep rooms full and profits flowing.
See you next time!
Module 4: Cost-Based vs Value-Based Pricing
Pricing your services correctly is not just about covering your costs. It's an art that balances business goals, market conditions, and customer perceptions. Let's take a look. This module is divided into two points: starting with an explanation of what cost-based pricing is and why it should generally be avoided, and then moving on to value-based pricing—showing you how to implement it and thrive accordingly. Now that we're all well summarized, let's get going.
So, let's start at the very beginning—famously, a very good place to start. What is cost-based pricing, you ask? This is a pricing strategy based on cost constraints and expected margin. Essentially, the selling price of the product or service is determined according to the fixed and variable costs (maintenance, salary, etc.). This is a very common strategy, and it's fairly logical to land on in many different types of businesses, but it is not necessarily well-suited to the hotel industry.
This is because the cost of the room varies very little based on the actual category of the room, while the value of the room can vary drastically. Take the obvious example: a single room versus a double room. The maintenance cost will be broadly the same, while the value of the double room is much higher than the value of the single room.
There are two types of cost-based pricing, and the first we will deal with is called cost-plus pricing. Cost-plus pricing is a method in which a mark-up is added to the cost of the product or service over the production and maintenance cost. Essentially, you just add a fixed percentage to the cost of production to make a margin. The limitation of this strategy is that it completely ignores demand, which is not ideal.
The second type is break-even pricing. With break-even pricing, the price of the product is determined by the cost of production and delivery without adding any mark-up. This strategy determines how much you need to sell to cover production costs. Obviously, this is not applicable in the hotel sector, as the product (rooms) is not mass-manufactured.
In summary, cost-based pricing is generally not recommended for the hospitality industry because it doesn’t allow you to optimize your income and will likely cause you to miss out on opportunities.
Okay, that's it for point one. Let’s move on to the second point: value-based pricing.
What does value-based pricing look like? Value-based pricing is a strategy that sets the price according to what consumers are willing to pay. Instead of calculating production costs and adding a mark-up, the value of the product is assessed based on customer perception. A great example of perceived value pricing is the art market. Some artworks are sold for thousands or millions of euros simply because the buyer perceives them to have great value, regardless of their production costs.
Remember, value is not only about money; it’s also about emotions—namely, the emotions a product or service can evoke. Travellers are willing to pay more when they perceive your offer as an enjoyable or unique experience.
Several criteria influence the customer's perception of a product’s value. For example, the evolution of the market—most notably, demand. If a traveller is heading to a country hosting the Olympics, they know that accommodation prices will be high due to the increased demand. Similarly, the benefits that come with a product influence its value. In the hotel industry, this includes the services offered, the quality of the room, and the overall hotel experience. A traveller expects a hotel with breakfast and more stars to cost more.
Another factor is price comparison with competitors. Travellers rarely book a hotel room impulsively; they take the time to compare prices and experiences between different establishments. Your competitors' pricing and the value they offer will affect how your potential guests perceive the value of your hotel.
So, how do you implement a value-based pricing strategy? This is where everything you've learned in the previous chapters comes into play. If you've completed the exercises, you have all the information needed to implement value-based pricing effectively.
The steps should be familiar. First, we analyze customers. Remember in Chapter 1, Module 1, we did segmentation and personas. In Chapter 2, Module 2, we worked on how those personas might perceive your hotel. Then, we do a demand analysis. In Chapter 3, Module 1, we created a demand curve, and in Chapter 3, Module 3, we developed a demand calendar. Lastly, we analyze the competition. In Chapter 2, Module 2, we did benchmarking, and in Chapter 2, Module 3, we did competitive intelligence.
You can use the personas and room categories you created at the formidable Ace of Clubs Hotel. For example, we know that our standard double room category is geared toward the couple persona. By cross-checking this information with the demand curve, you can identify the best price to offer this room at a given time of year. Similarly, your study of the competition allows you to adjust your prices intelligently. For instance, when a competing hotel is closed, you might raise your prices slightly to take advantage of the reduced supply in the market.
All of this information should be summarized in your demand calendar, which is your most useful tool for value-based pricing.
We’ve just learned about pricing in hospitality management. Hopefully, you now feel more confident about setting prices from a revenue management perspective.
Module 5: Advanced Pricing Strategies in Hospitality
There are numerous pricing strategies out there. Each has strengths, weaknesses, and an ideal application scenario. Our goal today is to get a strong handle on these strategies and identify the one that aligns best with your business's unique needs and goals.
So we'll begin. The only logical way I can think of is to name a few of these strategies, see how they work, and whether they ought to be of interest to hoteliers. Then I'm going to talk more specifically about open pricing, which is ideal for anyone coming at it from a place of effective revenue management. Finally, I'm going to conclude by explaining how to successfully raise prices. So basically, today I'll be anointing you all revenue management gods, for want of a better term. And you're welcome, by the way.
So let's get started on some of the different pricing strategies. We'll begin with the simplest and consequently the least interesting: **single price**. Single rate pricing consists of always offering the same price to everyone at any time. This is the pricing strategy that was used before revenue management was integrated into the hotel industry. It's an easy solution, and it will get the job done, but as we've all seen in the preceding chapters, it's hard to imagine this improving your revenue in any significant way. In fact, the contrary is much more likely to be the result.
Another strategy that varies only slightly from the single price is the **weekend price**. This is very similar to the single price, as the price has changed very little. It is a bit like just a double single if you like, with a fixed price for weekdays and another fixed price for weekend days. It's a bit more interesting than the single one because it takes into account the difference between weekend and weekday business, and that you tend to sell more during the weekend. But it still leaves a lot to be desired. What about weekdays that are public holidays or weekdays when there's a concert or a match in town, you know? So all in agreement, this is not the most ideal strategy.
Moving on, we've got another evolution of the same idea: **seasonal pricing**. It follows the same logic as week-weekend pricing, but rather than dividing the prices according to the days of the week, the prices are established according to the seasons now, namely the business season—low season, mid-season, and high season. Different rates for each. And as with week-weekend pricing, it reaches its limits. Who knows? There might be a big event in low season.
The next one is very similar to the cost-based strategy we've seen in the previous video. It is often used, but not necessarily effective in terms of revenue management: **budget-based pricing**. As the name suggests, with this strategy, the price is set according to the annual budget of the hotel. The problem is that the budget is set for a full year, whereas sensible pricing should change throughout the year. As we've seen, it should maybe change week to week. When a hotel sets its prices according to its budget, it does not really look at the market and the demand, which, as we know, is the real meat when it comes to setting prices.
Now, here's an interesting but risky pricing approach: **competition-based pricing**. Using this strategy, room rates are determined in relation to the price of one or more of the competing establishments. Many hoteliers set their pricing using this method, wanting to be cheaper than the competition to steal customers. It's not really the best method to follow, and it should be clear enough why. To be honest, it's basically a race to the bottom in a way.
An interesting new strategy is **BAR (Best Available Rate) pricing**. As mentioned in the first chapter, BAR is the best price you can offer to your guests. It's a strategy used when the hotel is present on several different channels. Indeed, a lot of people are now offering their best price on their own website and a higher price on the big OTAs, in order to compensate for the big fat commissions that the OTAs charge. This strategy is actually very useful because it allows you to get more direct bookings precisely by guaranteeing travelers the best price from your own website. It's just a very good way to retain customers because they're going to your website as opposed to a big, innocuous, generic one, you know.
Finally, before we move on to the golden nugget of **open pricing**, we have one more interesting strategy to talk about: **length of stay pricing**. Length of stay pricing means that the price is adapted according to the length of the stay, with discounts established if the guest stays for several days when demand is low, or an obligation to book several days in advance if demand is high. This is an interesting strategy because it allows you to increase your occupancy rate, but it is not yet at the top of revenue management because it does not take into account the personas and their perception of value.
We've seen several strategies at this point which can help to varying degrees to maximize your revenue. You can apply them at different times when they might be appropriate, for example. So we're going to go ahead and cross out point one and move on to point two, which covers my, and eventually your, personal favorite: **open pricing**.
I'm not going to tell you which strategy to implement in your hotel, but we are going to see that open pricing is arguably the best strategy in terms of revenue management, especially if you want to see your profits rise, which I kind of take as a given that you do. Literally, open pricing means that there are no specific rules and that pricing is open to all possibilities.
The open pricing approach uses all the different types of data we've learned to collect over the previous videos to determine the prices your rooms should be at a certain time of year. More accurately, the data is used to forecast the near and distant future together with the demand calendar that we made. Thus, the prices are adapted on a daily basis according to the forecast. It's for this reason that I insisted the demand calendar should be looked at on a day-to-day basis, so that you can focus on the key dates coming up and adjust accordingly.
If you make accurate forecasts and you notice a high demand at a certain time for a certain segment, then you need to adjust the prices to make the most of it. This means increasing the rates, stopping any discounts, changing price differentials between the different room categories, etc. — the whole shebang. This approach to open pricing, based on data analysis, is becoming common practice in the hotel industry, so keep up.
Open pricing also means keeping the doors open and never closing them to a guest who wants to book at a higher rate and is willing to. Rather, the hotel will now only close the distribution channels to guests who are not willing to pay these higher rates.
So there you have it. Open pricing should now be an open book to you. We can cross that one off. And now let's look at how to become a god of revenue management and drive up prices.
To use a popular metaphor for many things, hotel reservations are like an iceberg. At the top, you have the reservations that you have received, but underwater, in the submerged and much larger section, you have all the reservations that you have not made—or that have not been made, rather. Either because the guest visited the site and did not complete a booking, or because the guest was ready to book, but there were no rooms available. Among all these missed bookings, there are guaranteed to be some that could have been closed somehow. And we're going to look at how to get these kinds of bookings over the finish line.
There are sources of data that warrant looking at before making a pricing decision. Firstly, that sweet **demand curve**, of course. This curve will allow you to view in an instant the past periods of high and low prices for each of your rooms. The demand curve reveals two important points: the pace and the pickup. The pace is the price at which you get bookings, and the pickup is the number of bookings you get over a certain period of time. These two points together can help you raise the price appropriately at the right time.
Next, of course, is the **demand calendar**. Now, while the demand curve is based on past statistics, the demand calendar is based on future data. This means that you can learn about, for example, an important conference in your city and raise prices several weeks in advance.
To put this in context—and who doesn't love context? It's great. I'm a huge context fan. Let's have a look at the demand calendar that we created for the last module. We can see that, for the month of May, there are two very important events: the U.S. holiday season and a comedy festival. These two periods were not particularly prolific last year, so there's clearly a card to play to increase this year's revenues. Room rates can be increased during these two weeks, especially on the channels that are mainly used by these two segments. For example, we know that Americans, let's say, primarily use Booking.com. So for the week of May 5th to 11th, it would be the right move to increase prices on their channel.
And another very important point, and this is going to tie into the next video: you have to show these segments that they can and should book into your hotel. You need to make sure that the perception that the guests have of your establishment is very, very good, that they can imagine that the experience they're going to have there and pay for is worthwhile. Then they'll be willing to pay the premium price. This is done through promotion and branding strategies, which we'll cover.
We now know that it's not only about the revenue we earn, but crucially, about the profit we retain once the dust settles. Pricing, when done strategically, is one of your most potent tools in achieving sustainable profitability. There's no one-size-fits-all strategy in pricing. What works best for your business depends on a myriad of factors, including your
target market, competition, cost, and overall business objectives.
My final piece of advice is to continue to assess, adapt, and improve your pricing strategy as your business evolves.
Module 6: Crafting Effective Hotel Offers
In this module we're going to dissect demand, its nature and how to anticipate its shifts. We'll show you how to adapt your offers and ride the tide of demand, rather than being swept away by it. Let's get into it.
The first concern is the definition of promotion, because, as you will see, it does not necessarily mean a price reduction. The second point looks at adding value to an offer. And finally, we're going to look into the more widely accepted meaning of promotion, namely the discount.
So what does promotion actually mean? Well, promotion is the act of promoting. But what is promoting? Promoting is improving the visibility of something, in our case, an offer in an attempt to increase sales of a product or service. These days, the definition you're more likely to run into is how someone working in sales would think of it. So a short-term reduction in the price of a product or service. Sales vouchers, free samples, competitions, that kind of thing—these are more commonly known as promotions. As I said, we're going to return to look at this more closely in the third point. But now that you know the nuances of the definition, let's move on to point two, while I've still got your eyes and ears.
As we've just established, promotion in accordance with the actual definition—not the sales definition—is not synonymous with price reduction. This is because a lot of the time, by lowering the price, you give the impression that the quality of the product is also lower, and thus you might devalue your property in the eyes of potential buyers.
Promotion, literally putting something forward in the hotel industry, means adding value. It can be the quality of the room, offering extra or personalised services, or offering an enriching experience to sell more rooms and to sell them at a higher price. For example, if you set a price rather than experience a low-cost room, you are only selling that. The customer will only be interested in that; they'll be interested because the price is low and the competition can play the exact same game as you in this case. And the winner basically ends up with all the business technically, but probably with a margin in the minus. So who cares? It's a race to the bottom.
This is why it's better in the long run for you to put forward that you are selling something else—a specific, more personalised service, a unique, different customer experience from what is commonly done or what's commonly available. And like that, it will be much more work for competitors to line up alongside you.
The fact is that a guest who comes to your place because it is cheaper will just as easily go somewhere else if it's even cheaper again. Alternatively, if somebody comes to your place because they like the look of the place, the atmosphere, the decoration, or the service, these are things they cannot easily find somewhere else. They are more than likely willing to pay a little more for that, and certainly more than your average bargain hunter. And if you get customers like that and you treat them well, then guess what? They might be yours for a lot longer going forward.
It's like this: what makes you different is your strength, and that's what you need to push. Anybody can knock five euros off a room, but only you can be you. So lean into it. But how, you might ask?
Like this: by describing your offer in terms of value as best as you can on all the channels where you're selling your rooms. You need to get it across to potential customers exactly why it's better to stay with you than with someone else. Get your Hemingway hat out of the cloakroom and write some great descriptions of your services, your establishments, and the experience you offer.
Cynics can doubt all they want, but the research has been done on this. Good descriptions foster sales. Playing on the added value of your offer is very effective, especially in high season, because fewer people will be playing the price game. Competing hoteliers will be looking to make money, and more guests than at any other time will be looking at value more than price. This is exactly the moment to double down on your offer in order to attract the right customers—the ones who want to pay for quality, who know a good thing when they see it, and if it lives up to what they read about, they will return and return again.
And then when all that's done, you still have your off-peak periods when it's appropriate to play the price games. There are good ways and lazy ways to do this. And you know which one we're going to do. We're going to look at some proven effective methods of promoting via discount, which rather than being a race to the bottom, I'm going to show you ways where you can still gain, like sowing a few crops when there's a drought, let's say. Which, of course, means we can put a line through point number two and move on to point number three to find out all about how to use promotion when by promotion we mean discount.
Value promotions are intended for periods of high demand. Discount promotions are the order of the day during low seasons. There are, however, right ways and wrong ways to do them, and we're going to look at both.
So first of all, we're going to look at some of the ones you should avoid. So, last-minute promos. You'll end up doing these if you don't make enough of an effort to fill your hotel in advance. If you don't anticipate the peaks and valleys or engage in a strategy that employs effective revenue management, you'll end up dropping tomorrow's room rates into the £5 bin. And then what happens? Guests will start waiting until the last minute to book, thus throwing your plans that you might have into complete disarray. You'll find yourself understaffed, with a hotel full of people who are barely scraping by. This can and should be avoided.
Then there's promotions to match the competition. Not a good idea either. It is a serious mistake to lower prices if a competitor lowers prices. We've said it already, but I'll repeat it: it's a race to the bottom. The best way to think of it is that this competitor's hotel is an entirely different beast to yours. It has different services, ambience, and whatever else you might think of. You might as well lower the price of pineapples because the regular Apple man is having a fire sale. What makes sense for them may not make sense for you. Trust in yourself and in your business. If a competing hotel jumped off a cliff, would you jump off a cliff? Exactly.
Then there's panicked promotions. Guys, it's all in the title. They're not good. Panic promotions are often implemented because of a lack of confidence in the revenue management strategy and the timing of the demand, let's say. Now, this is a human reaction, and it's understandable. But you have to learn to trust in the numbers. They do not lie. The only reason you might make a mistake is if you misread the figures or analyse them badly. But with all the exercises we've already done in this training, you have all the tools in hand to do effective revenue management. Okay? So don't panic. You're a revenue management guru, okay? You don't need to be afraid anymore.
Then there's a vague or teaser promotion. So let's look at an example. Let's say you see a site that displays something like "50% off in March." Here, the message is not clear. What is the basis for this promotion? Who is the promotion aimed at? The guest has no reference for comparison. 50% off of what? This type of promotion will only attract customers who are interested in price and nothing else—and therefore volatile and not loyal.
So then there's the OTA promo. Frankly, the worst kind of unhealthy promotion is these discounts on orders like these. Unfortunately for them, there are still many hotels that let platforms like Booking.com or whoever else offer discounts in their name, even in times of high demand, right? So, on top of the commission that they have to pay, the rooms are sold at a lower price than they should be. So in the end, how much money goes into their pockets?
But then there are healthy promos. So, for example, preplanned promotions with good data analysis. You know the low-demand periods in advance, so you can anticipate what you're going to do, right? Promos can be set up well in advance for specific periods, allowing you to fill your rooms well in advance. And then you can withdraw the promos as you get closer to the time in question.
Promotions that have a clear objective are also good. So, by setting out with a goal to achieve, promotions will make much more sense and be easier to implement. For example, your objective might be to motivate customers to book as early as possible or to attract a specific clientele, such as American travellers during their holidays.
Then there are promos with strong hooks. The best promos are those aimed at a specific segment. To attract these kinds of customers, you need to sell them the dream. And you know what their dream is because you have stepped into their shoes, or the shoes of the personas, to try and perceive your hotel as a guest. Be proud of your establishment and the services you're offering. Showcase it to them in strong words and with an authenticity that will really, really speak to them. With this strategy, you are addressing customers who are interested in an experience, not a price. Sounds simple, right? Not a lot of people are doing it.
Promos that are well communicated are also important. For a promotion to work, it has to be visible. And for it to be visible, you have to have a plan—a communication strategy beforehand. Whether it's on your website or on social networks, you have platforms at your disposal that can easily highlight the offer that you are promoting. Don’t hesitate to call on a design professional to build a great promo. There are cases where this is the case, and this is one where you might have to spend money to make money—but
you will make money.
So to finish this video, I'm going to give you the steps you need to take in order to create a solid promotion. You start by looking at the demand calendar that you created earlier in these trainings and identify a period of low demand. Next, you select a segment from those you have identified that you wish to target during this period. Choose the type of promotion you want to create. Is it a percentage discount on the price? A fixed amount to be subtracted? A service offer? A package offer?
Then, choose how to promote your promotion. Will you put a pop-up on your own website or do a competition on social networks? Prepare the design, text, and conditions of your promotions so that you only have to put it live when you want to launch the promotion. Be clear on your conditions because it can turn against you. So think of indicating the start date and the end date, the amount of the promotion. Specify if it is on the price or TTC. If there are exclusive conditions, for example, the promotion is valid only for customers that have a loyalty card.
So, keeping all that I've just explained in mind, and going back over it if you need to, I'm going to ask you to construct two promotions that can be implemented on your property in the next six months. You've learned how to adapt your offers to the rhythm of demand and how to employ different types of promotions strategically. Congratulations. See you in the next module.
Module 7: Top 10 Pitfalls: What NOT to Do
We've spent a lot of time discussing what you should do to drive success in your hospitality business. Now, to finish this course, let's delve into seven things that you should definitely not do. Let's get into it.
All right, so the seven deadly mistakes are: selling too early, not changing your prices, implementing intuitive pricing, changing the prices in line with the competition, selling on a first come, first serve basis, displaying different prices on the same channel, and lastly, lowering prices.
All right, so here we go with the first mistake: **selling too early**. This may contradict what I said in the previous video when I mentioned last-minute promos not being good and planned promos being a good model. But the truth is, you have to find the right balance. Selling early is great for ensuring a good occupancy rate, but selling early also means leaving money on the table because guests who book rooms early will, of course, end up paying less than those who book a little closer to their stay. As you know by now, revenue management is about optimizing both occupancy and income, so you need to find the right time to sell your rooms. All right, so now you know that you don't want to rush into anything. We can cross off this first point.
Second big mistake: **not changing prices**. The aim of revenue management is to be able to apply a pricing strategy to increase your income. So if you plan on continuing to sell at the same prices, you need to redo all the training basically. I mean, no joke. With all the tools and exercises we took the time to do, you have all the resources you need available to you to know when to increase your prices, for which customer segments, or when to apply promos in order to sell your property when you're having a difficult time doing so.
And if the price of a room is £100 for a night, right? A busy night because of a big sporting event going on in town, and all the hotels in the city are full or nearly there, and you only have ten rooms left, guess what? Your rates should be much higher than £100, and if they're not, then guess what? You are leaving money on the table, right? You have underestimated demand. Well done. I know I'm speaking mainly to a fictionalized version of you who didn't learn your lesson, but there you go. Well done. That is what you get. Now you understand why not changing your prices is a really bad strategy for the profitability of your property. All right, we can cross this second point out.
**Number three mistake**: setting up a pricing system according to your intuition. Now, as you have seen throughout the course, revenue management is based on collected data. And as I have already said, numbers do not lie. So why try to imagine scenarios when you can accurately predict what will happen? The lesson here is not to confuse intuition with forecasting. Intuition is based on feelings and cannot be verified, while forecasting is based on analytical reasoning, and it's pretty difficult to argue with that.
Let's take an example. If one day you say to yourself, “I remember that this weekend, last year, there were lots of people here. So I'll set a very high price for this time this year.” Well, you might find your hotel almost empty with a lot of lost revenue. Maybe there was a big event last year, like a concert or a convention, that filled up the hotel. And it's not happening again this year. I mean, you'd know if you put the work in. And guess what? Following your gut, I'm afraid to say, does not fall into the category of work. Seek out the data on spreadsheets and then listen to the force if you want to, but not before.
So now you know why choosing your pricing based on your feelings will not help you optimize your income. Okay, so we can cross this one off the list.
**Point four** will officially make me a broken record, but I don't mind. **Don't change prices according to what the competition's doing.** Okay, guess what? The competition jumps off a cliff. You don't even notice because you're knee-deep in research, looking at Swedish school holidays and the tour dates of that Armenian folk band that's popular with one of your segments.
A competing hotel, even if it shares similarities with your establishment, will never be an exact replica of your establishment for many different reasons, such as the fact that you do not have the same services or the same targets. What works for them will not necessarily work for you, and conversely, what works for you will not work for them. Although we secretly hope that they make all the mistakes—all the ones in this list—that’s why we call them the competition.
All right, here's a quick example. Our final illustration, if you will: If your competitor increases the rate from £100 to £150 because they are hosting a wedding ceremony and you follow their strategy, you are headed for a big disappointment. The wedding guests will probably stay at the competitor's hotel and not yours because, as mentioned, they're hosting the thing. So in the end, you miss out on the wedding guests, but you also miss out on whoever might have stayed in your hotel had you not raised the prices inappropriately. So I'd say that now you understand that aligning yourself with your competitors is not always necessarily the soundest strategy. So we can cross out point number four.
**Moving on to the fifth mistake**: **selling on a first-come, first-served basis**. Do you remember that the motto of revenue management is to sell the right room, at the right time, to the right customer, at the right price? Do you see what I'm getting at? If you sell to the first person you meet, you may not sell at the best time—not to the right customer, and certainly not at the best price.
All right, this goes back to that first mistake. Selling to the first mover is sometimes selling too soon. Not all bookings and not all travelers are the same. Every booking and especially every customer is unique. Someone who books to stay on Expedia, for example, is not as profitable for you as someone who books on your website. Now that you understand that sometimes not selling can be beneficial because you can make a better sale later, we can eliminate this one from our list.
**Sixth and penultimate mistake**: **displaying different prices on the same channel**. Now, unless you have been living in a cave for the last 6 or 7 years or so, you should know that price parity hasn't existed since 2015. It is now possible to offer different rates on different distribution channels. Great for boosting direct bookings in particular. It is therefore imperative to have as many different price ranges as possible. But it is also very important to never display different price ranges in the same place, as this can devalue your offer. Generally, people might see it as a bit of a swindle. The price you offer on Booking.com should only be available on Booking.com. The price you offer on Expedia should only be available on Expedia. I could go on. Finally, the best guaranteed price you offer should only be available on your website so you can maximize your revenue. Now you understand that a channel strategy is essential to maximize your revenue. All right, we can cross this one off the list.
And finally, the last mistake—the biggest one, and the one I have already mentioned several times—**lowering prices without doing the necessary research behind it**. Okay, I literally can't say it enough, and so I suppose it serves as a perfect conclusion to this course. Never lower prices if you don't have to. If you want to attract more travelers, do not play the price game. Increase the value of your offer.
Thanks to the segmentation we saw in Chapter 1, by understanding the needs and expectations of your guests, you know the sensitivities of your guests and you therefore know on what points to rely to enhance the value of your establishment and your services from their perspective. Moreover, it is very important that your services are highlighted on all the booking platforms. This is the way to enhance the value of your product. Once your rooms, your services, or even the experience you provide to travelers are highlighted appropriately, you will no longer need to worry about your prices being too high. You might need to worry about not having enough rooms, but that’s a different point for a different day, right? So don't just dive in and lower your prices and play the price game, okay? It seems desperate. You don't need to do it. Believe in yourself.
Okay, there we have it, folks. The don'ts to wash down the do’s. I want to thank you all for following this course to the end. I'm confident that if you put what we covered into practice, the results will speak for themselves. Bye bye now.
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