It’s obvious that pricing plays a crucial role in any business, but did you know that you can use pricing strategies to do more than just fatten up your small hotel’s bottom line?
How you set your prices can have positive or negative implications. The right pricing strategy can help you increase your market share against other properties in the area (or prevent new competitors from entering the market), while the wrong pricing strategy can do just the opposite.
These clever pricing techniques can help you get more bookings (and market share) for your bed and breakfast, inn, guesthouse, or small hotel.
1. Price match your competitors
If there’s an accommodation provider near you who you consider to be a competitor, set one room rate at the same price point, and set another room at a slightly higher rate.
Why? It gives you the best of both worlds. Your small hotel to gets to win over deal-seeking guests without losing the opportunity to make a little bit more than your competitors.
2. Psychological pricing
Set your rates at an unrounded price – for example, $99 instead of $100. The odd pricing technique is simple, but effective, making it one of the most common pricing strategies used around the world. We’re just wired to be more attracted to the odd price.
Why? Some say that it’s because of the digital places – for example, if 9 gets rounded up to 10, 10 itself has two unit places, therefore the amount will be psychologically perceived as a lot higher despites its real difference. This technique is psychologically proven to work, so use it to boost room sales.
3. Surround your middle market
Set the price of your most basic room to the cheapest price in the market and price your other rooms close to your competitors’ basic room prices.
Why? Essentially, this allows you to capture the middle market – as well as the lower and higher markets – all in one go.
4. Be better than the rest
Set your small hotel’s room rates higher than your competitors. Consider throwing in some extras to justify the increase in price.
Why? By doing so, you will set a standard that your property is of higher value and therefore worth paying more. If you pursue this strategy, be sure to deliver on your value promises.
5. Penetrate the market
Offer your rooms at the lowest price possible to draw in a crowd of guests to your small hotel.
Why? Most guests are familiar with the idea of running promotional discounts to raise awareness, so this strategy is great to get the word out about your property. However, it should not be long term – do it in short bursts or your guests may start thinking you’re of low value, and your profit margins will drop over time.
Work out what’s right for your small hotel
Each property is different, so measuring your success and tweaking your pricing to suit is instrumental to your success. How else will you know whether it has increased your occupancy rate and your revenue?
As a small hotel owner, you will have to make the final call on what you want to achieve most with your pricing and then put your chosen strategy in place.
Use your reservation and accommodation management system to draw up essential hotel reports for specific periods of time to know if you have the correct pricing strategy in place.
If yours doesn’t currently have this capability, why not see how useful and simple Little Hotelier’s reporting tool is.