When a hotel sees fewer bookings than expected for certain dates, one of the first reactions is usually to cut the price.
But before doing so, it is worth answering one question:
Do we really know why bookings are not coming in?
Price may be one of the reasons, but not necessarily the only one.
Before changing a rate, we should analyse several factors.
How is the market performing?
The first step is to observe what is happening in our destination.
If our hotel has low occupancy but competitors also show high availability, there may simply be less demand for those dates.
However, if other properties are raising prices or selling out certain categories while we still have plenty of availability, there may be an opportunity or a positioning problem.
Does our hotel have enough visibility?
We also need to analyse our distribution channels.
We may have a competitive rate, but if our availability does not appear correctly on the main channels or our property has little visibility, lowering the price may not solve the problem.
Are we comparing our prices correctly?
Being competitive does not necessarily mean being the cheapest hotel.
We should compare similar properties, taking into account:
- location;
- category;
- services;
- room type;
- board basis;
- cancellation policy;
- online reputation.
A hotel can charge more than another when its value proposition is also stronger.
How is our pick-up evolving?
Pick-up shows how our bookings are growing over a given period.
For example, if three days ago we had 30 rooms booked for a Saturday and today we have 38, we have received eight new bookings.
Analysing this trend tells us whether demand is accelerating or slowing down.
And that information can completely change our decision.
We may have apparently low occupancy, but still be several weeks out, with bookings coming in faster than last year.
In that scenario, lowering prices too early could mean we end up selling rooms below what the market was willing to pay.
That is why a good Revenue Management strategy always follows the same principle:
analyse first, act afterwards.
Rates should respond to the behaviour of demand, not to the fear of empty rooms.