This is a guest post from Guesty Marketplace partner RoomPriceGenie, an app that connects to your PMS, automates your pricing, and helps to increase your revenue.
Revenue management technology for everyone
Revenue management used to be preserved for large hotels. They would have the money to invest in getting their prices right, either with revenue managers, software, or both together. In doing so, they had a big advantage over their smaller competitors.
However, the world is changing and what was a fantasy 5 years ago is now a reality. Today, revenue management technologies are designed also for professional hosts and property management companies that boast short-term rental portfolios; they are used to identify when to increase your rates to get the full value from your properties, and ensure you are competitively priced when demand is low.
The 3 biggest mistakes in pricing
Based on experience analyzing thousands of properties, there are 3 major mistakes property managers make when pricing their properties manually.
Mistake 1: Undervaluing properties
Everyone loves having happy guests and don’t want to upset them by charging too much. Pricing often comes secondary to guest experience and whatsmore, hoteliers and property managers are often hesitant to increase prices even when they easily can, worrying about the guest’s reaction.
This is often a shame as the hosts do not receive the value they deserve for their properties.
There are two clear indicators that you are charging too little.
- You often fill up well before the arrival date, indicating a lot of demand for your properties that goes to waste, because you have no rooms left to sell.
- Your value-for-money score. You don’t want this to be as high as your overall review score. If it is, you could very likely charge more.
By ignoring these indicators, hosts and hoteliers often don’t realise the true value of their offering and therefore miss out on additional revenue. An automated system can help by increasing prices as you fill up, empowering you to charge more.
Mistake 2: A ‘set-and-forget’ strategy instead of dynamic pricing
A good pricing strategy will react to changing demand information. It’s common for hotels and property managers to initially set prices and let them stay stagnant until the final week before specific dates where they lower them in hopes of attracting last-minute bookings.
The challenge is that market trends are so dynamic and the environment changes so rapidly that if properties fill up quickly, you can easily push prices up and still maximize bookings. However, if things are slow, you need to reduce early instead of waiting until competitors reduce prices, or risk ending up with empty units.
An automated solution understands that things change and while initial prices may have been wrong, the system is able to make adjustments and correct course.
Mistake 3: Setting the prices wrong in the first place
Property managers and hotels alike set prices in a variety of ways and some of the most common areas for improvement are:
- Not having a day-of-the week cycle
Ask yourself, who are your guests and which days of the week do they travel? If your properties cater mainly to business guests then you will have more reservations on weekdays, specifically Tuesday and Wednesday, as opposed to leisure guests who tend to travel on weekends.
Knowing your different guest segments is crucial to good pricing.
- Lack of seasonal pricing
Some months are less popular than others, but do you know which? If so, adjust pricing accordingly? Many properties keep the same rate month to month, and even week to week without making crucial adjustments. For instance, the first half of December could be difficult to sell but due to the holidays in the second half, it’s often the best period in the whole year for many property managers! You certainly don’t want to miss that.
- Missing local event opportunities
Concerts, sport matches, festivals, trade shows, expos, fairs, school holidays… the list goes on, and all of these events influence the demand and consequently your prices (and they will continue to do so once COVID-19 is a thing of the past). However, many hoteliers and hosts are not paying attention to these and notice far too late, if at all.
How many times have you sold out your rooms long in advance at a price far too low simply because you missed out on an event?
Good revenue management systems are aware of what’s going on in your area and anticipate the demand before it’s too late.
The importance of dynamic pricing
Today people book accommodation on a platform that compares your property to potentially hundreds of others. If your price isn’t competitive, you won’t get the client and alternatively if it’s too cheap you won’t earn the revenue your work deserves. As dynamic pricing becomes more popular, competitors will start beating you on price more often than not. What wasn’t possible before is now simple to achieve in 15 minutes a week, and can make a huge difference in your bottom line.
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