One might remember geometry class when the teacher said something along the lines of a square is a rectangle, but a rectangle is not a square. It took a while for you to process it, but eventually it made sense. Similar to the famous rectangle and square comparison made in geometry classrooms around the world, it is similar to marketing and pricing.
Pricing is a type of marketing, but marketing is not price.
Price is a vital part of a comprehensive and effective sales & marketing strategy, but it is not sustainable for price to be your top tool to fill a hotel.
Price as a Market Position Indicator
One of the important roles that pricing plays in the marketing space is as an indicator to potential customers about where your property service level aligns in the market. Along with having the cheapest price in any given market comes certain guest assumptions that the product is also going to be of the lowest quality. Conversely, when prices increase, no matter the cause, they come with increased expectations and a certain image of what type of hotel or resort to expect at that price point.
Having a well-thought-out floor and ceiling rate is a strategy to make sure that there is alignment between your brand position in the market and the prices that an autonomously yielded price might reflect.
A floor is the lowest price you are willing to charge a customer. Floors are important brand protection tools because if you are a mid-scale hotel, you don’t want to compete with Motel 6 on price. Conversely, if you are a five-star resort, you don’t want to be priced head-to-head with the mid-scale market.
A ceiling is equally important because it ensures that, to a degree, the service and product expectations painted by the price point can be fulfilled. There are things revenue leaders and operators can collaborate on to make the ceiling higher; however, at a certain point, the product cannot extend to meet a price that sets too high expectations.
For these reasons, HouseCount RMS configurations nearly always have a floor and ceiling price as part of the algorithm. If you don’t have a floor and ceiling already in place, then you should consider doing exactly that.
Price and Group Sales
Any meeting or event planner who says price isn’t a factor in their decision-making is probably not telling you the whole truth. Conversely, any meeting or event planner who says price is the only factor is also not telling you the whole truth.
Price is a critical component of any group decision-making process. Everything we just talked about in the transient market also applies here, but this segment has added complexity because we must calculate a discount that makes sense.
According to Luxe Pricing, some best practices to make certain that you use price as a sales tool, but don’t lose revenue because it was your primary or only tool, are:
Dynamic Yielding is based on price ranges determined by competitive analysis. It is essential to establish ranges within which your tools for quoting group rates define the rate. When you have a group rate quote that is yielded up toward the ceiling, you should overtly call that out to the client when quoting the rate and offer to quote alternative dates. One of the things that we in HouseCount RMS do is quote minable allowable rates, and it will even tell you when a group doesn’t make sense to discount due to displacement.
Segmented Group Pricing based on the type of group (e.g., corporate, leisure, SMERF, etc.) will allow you to capture groups where they are at on rate sensitivity. This strategy is a lot of art backed by some math and science, which means it takes skill and intentionality to land it well, but when done well, it can land great results.
Pricing is an essential part of getting group sales right, and while these are designed to be gut checks against what you are doing, they aren’t an exhaustive list.
Pricing is an essential part of getting group sales right, and while these are designed to be gut checks against what you are doing, they aren’t an exhaustive list.
How Luxe Pricing Can Support
At Luxe Pricing, our HouseCount RMS tool is a great partner to autonomously yield rates within floors and ceilings. During our configuration phase, we collaborate with properties to set floor and ceiling rates, as well as calibrate and set up group rates that make sense. While the details matter a lot at the core, a great pricing strategy is intentional and operates within a larger ecosystem that supports positioning your brand, comprehensive marketing for your hotel, a well-thought-out group sales flow, and operational excellence.