Jun
22
We work in an industry that seems to be obsessed with price.
There are automated tools that allow you, as a hotelier, to compare your prices across "competitive sets" that can be made up from local hotels, regional hotels or even hotels in other countries. You can compare yourself with whoever you like it seems.
As long as you only want to compare your price.
There are automated tools that allow you, as a hotelier, to compare your prices across "competitive sets" that can be made up from local hotels, regional hotels or even hotels in other countries. You can compare yourself with whoever you like it seems.
As long as you only want to compare your price.
Revenue management is the art (or is it now a science?) of identifying the "optimal" price at which you should be promoting your rooms. Every day.
It's complicated stuff because there are many factors, permutations and implications to consider. Software providers around the world will sell you systems that "automate" this laborious process. And very clever it is too.
I just wonder if sometimes they are missing what really matters?
Experience tells us that price is just one of a number of criteria a buyer will use to make a decision. But we don't find hoteliers so keen to look at those other considerations. Why not? Is it difficult? Or is it just that it's difficult to automate?
Price is just one factor. Unlike the other 4 or 7 "P's" of marketing, price is the only one that isn't unique. That's right - there's nothing unique about price. Every hotel business has one. And if you're using it as the sole basis of your selling proposition you'll be leaving money on the table. Every time.
Because inside the buyers' head there is one fundamental question you need to answer:
"What is in it for me?" (or if you prefer to think of it this way - "what do I get for my money?")
Think of your selling proposition as an equation:
(What we've got) x (how well we promote it) = price ("price" can be interpreted as "what the customer is prepared to pay")
All too often, and especially online, we see hotels who forget about the left hand side of the equation - and use their poor implementation of "Revenue Management" to focus on the right hand side. This is a pity, because your customers are focusing on the left hand side. But hey, that's ok - because hoteliers favourits subject is "what we've got"! What a relief! So hotels can not only talk about price - they can talk about themselves too! Hooray! The business is saved!
Except that it's not. Because the customer isn't really interested in what you've got. They will look at it, of course they will. They might even read about your curtains, floors, beds, trouser presses and other "facilities". But no end of waxing lyrical about mattresses and materials will convince them to book until you answer the question:
What is in it for me?
To do that, we need to think of our promotion using another equation:
[(What we've got) x (what it does for you) x (how you will feel)] / price = value
Value is what people buy. They don't buy a price from you. Even if you are the cheapest around, they're not buying a price from you. Instead, they're buying what you do for them and how they expect to feel.
When it comes to promoting your PRICE for what you do it's important (of course it is, otherwise revenue managers would have nothing to do) that your price has what's called "price proximity" to similar products. You need to decide for yourself where you are on a scale that goes from "cheapest" through to "dearest" for the things you offer.
But price isn't everything.
If you're not making it clear what you've got x what it does and how customers will feel then you will only be communicating price. That's what leads to your product becoming commoditised.
...and as we all know - it's not all about price. Is it?
Setting a price DOES NOT sell a room.
Price is just one aspect of the marketing preparation you need to do in order to engage with your prospects. There is also:
Product - what your hotel does (for me).
Place - Where your hotel is.
Promotion - How you will reach your prospects.
then there's;
People - You are a service business. Your customers will meet some of your people. What do they do?
Process - How do things happen in your hotel? Do you pamper or do customers fend for themselves?
Physical evidence - Promoting a service is a very subjective thing. Can you prove what you say? Nice pictures, testimonials, happy customers?
Take careful note. Price is but one part of this.
It's complicated stuff because there are many factors, permutations and implications to consider. Software providers around the world will sell you systems that "automate" this laborious process. And very clever it is too.
I just wonder if sometimes they are missing what really matters?
Experience tells us that price is just one of a number of criteria a buyer will use to make a decision. But we don't find hoteliers so keen to look at those other considerations. Why not? Is it difficult? Or is it just that it's difficult to automate?
Price is just one factor. Unlike the other 4 or 7 "P's" of marketing, price is the only one that isn't unique. That's right - there's nothing unique about price. Every hotel business has one. And if you're using it as the sole basis of your selling proposition you'll be leaving money on the table. Every time.
Because inside the buyers' head there is one fundamental question you need to answer:
"What is in it for me?" (or if you prefer to think of it this way - "what do I get for my money?")
Think of your selling proposition as an equation:
(What we've got) x (how well we promote it) = price ("price" can be interpreted as "what the customer is prepared to pay")
All too often, and especially online, we see hotels who forget about the left hand side of the equation - and use their poor implementation of "Revenue Management" to focus on the right hand side. This is a pity, because your customers are focusing on the left hand side. But hey, that's ok - because hoteliers favourits subject is "what we've got"! What a relief! So hotels can not only talk about price - they can talk about themselves too! Hooray! The business is saved!
Except that it's not. Because the customer isn't really interested in what you've got. They will look at it, of course they will. They might even read about your curtains, floors, beds, trouser presses and other "facilities". But no end of waxing lyrical about mattresses and materials will convince them to book until you answer the question:
What is in it for me?
To do that, we need to think of our promotion using another equation:
[(What we've got) x (what it does for you) x (how you will feel)] / price = value
Value is what people buy. They don't buy a price from you. Even if you are the cheapest around, they're not buying a price from you. Instead, they're buying what you do for them and how they expect to feel.
When it comes to promoting your PRICE for what you do it's important (of course it is, otherwise revenue managers would have nothing to do) that your price has what's called "price proximity" to similar products. You need to decide for yourself where you are on a scale that goes from "cheapest" through to "dearest" for the things you offer.
But price isn't everything.
If you're not making it clear what you've got x what it does and how customers will feel then you will only be communicating price. That's what leads to your product becoming commoditised.
...and as we all know - it's not all about price. Is it?
Setting a price DOES NOT sell a room.
Price is just one aspect of the marketing preparation you need to do in order to engage with your prospects. There is also:
Product - what your hotel does (for me).
Place - Where your hotel is.
Promotion - How you will reach your prospects.
then there's;
People - You are a service business. Your customers will meet some of your people. What do they do?
Process - How do things happen in your hotel? Do you pamper or do customers fend for themselves?
Physical evidence - Promoting a service is a very subjective thing. Can you prove what you say? Nice pictures, testimonials, happy customers?
Take careful note. Price is but one part of this.
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