Stop with the ‘curtain twitching’ rate strategy…
So we have all seen them… you know… the curtain twitching neighbours who are more interested in what is happening in their neighbours living rooms than they are about how their own life is shaping up. But are some of us hoteliers just as bad? Aren’t some of us living and dying by how our competitors are doing business instead of keeping our own house in order?
What I struggle to understand is why. Why on earth do so many of us base some of our most important decision making i.e. what rate we want to sell at, purely on what the guy down the street is doing?
Firstly, the Revenue Manager in that neighbouring hotel might well be an idiot! Plain and simple. Revenue Managers are human and humans often make mistakes or more likely, the person who usually makes the revenue decisions is off on leave or just hasn’t got around to changing rates. Do you really want to risk your profitability in that scenario?
Just this morning, I checked rates in a hotel in the city centre which has a dedicated Revenue Manager. Their rates for a night next week were sitting at £79.50 room only and £74.50 with breakfast, with exactly the same restrictions. So for £5.00 less you could have a full cooked to order breakfast. So if you were using one of these rates to benchmark against, you would be way off.
Secondly, you have no idea what is actually happening operationally within that hotel. They might have just picked up a large group so have increased rates. This business may never impact you as the city has low demand for that date anyway, so why would you risk increasing your rate just to follow their lead?
Of course the opposite could happen and your neighbour may have dropped their rate. Maybe they just lost a group? But do you need to drop your rates if your business is strong? I doubt it.
So what should you be doing? Analysing your own business of course. If you don’t have a revenue system to do it for you then make sure you know your trends.
- what is your current Business on the Books?
- what is your expected pick-up by market segment?
- are you ahead or behind on your usual trends for that day?
- how are you sitting compared to your budget and/or forecast?
- what pick-up do you need to make your budget or forecast
- if for example you need to pick-up £6000 that day to make your budget and you feel you will pick-up 50 rooms between now and your arrival date, then the minimum selling price needs to be £75.50. Isn’t that a better strategy to work out your rate strategy rather than totally relying on what your competitor is charging?
Focus on your guests and not your competitors. Look at your historical trends and understand how your business materialises. Then look at where you currently are and what you need to do to achieve your goals.
Always evaluate your own demand and watch for business changes and spikes. Your market changes constantly and you need to ensure that you are on top of business changes and what dates might be spiking. Be ready to re-act with rate and availability changes. Do you need to increase rates or perhaps close your OTA’s? Remember those commission cheques impact profitability, so ensure you managing costly distribution channels early.
On the subject of distribution channels. you need to understand not only when guests ‘check-in’ but also when these channels book. Almost all distribution channels will have different booking patterns and if you analyse, you will see when one channel is more popular than others. This should help you understand when to release or restrict inventory.
Finally, invest in technology. And this is not a push for Right Revenue but no matter if you consider a CRM, a Revenue Management system or a Channel Manager, then consider something. There is no way that anyone in your team has the time or the capacity to analyse hundreds of lines of data, so invest in tech and work smarter.
Finally, even with all of that said, understanding your competitors rate strategy is important and can be critical if you are in a busy, over-saturated market but it shouldn’t be the corner stone of your rate decisions. Your business should be.
Stop being a sheep and following the crowd. Be a leader and let the others twitch their curtains watching you 🙂
Best of luck and for all things revenue (email@example.com)