Location-Based Pricing Can Drive Revenue – Duetto

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Via Duetto Research

As I discussed in my last post, every day seems to present a new challenge to countries around Europe, and the hospitality industry is one of the first to feel the effects. Whether it’s recent terrorist attacks, Brexit, government-issued travel warnings or other events, European consumers are changing the way they think about travel.

[Editor’s note: This is the second of a two-part series, “Driving Revenue in an Era of Uncertainty,” in which Duetto Senior Global Solutions Engineer Nathaniel E. Green offers solutions for improving hotel forecasting and optimizing rate strategies in the wake of a global travel shakeup. Read Part 1 here.]

As we enter this era of uncertainty, hotel revenue managers will need to work closely with their e-commerce, distribution and sales and marketing teams to pull the right pricing levers and monitor the results, adapting as necessary. With everything happening in the European marketplace, I believe there is an opportunity for creative revenue managers to capitalize on the uncertainty in the region.

One way to do so is through location-based pricing techniques. Coupled with Open Pricing — the practice of yielding room offers, segments and room types independent of each other — location-based pricing adds another layer to a hotel’s detailed and targeted pricing strategy. As inconsistent demand plagues markets, hoteliers need to think about capitalizing on the most profitable customers per country.

There are a few best practices that will help position your hotel during uncertain market conditions: 

1. Set your base business. Hotels in major city markets can almost always assume there will be corporate demand. Don’t be over reliant on corporate contracted business, but know how much market share you can make up from the loss of transient demand and have a strategy to shift back to transient when the market returns to health.

If your hotel is in a smaller market or the nation your hotel is in finds itself dealing with economic sanctions, you may be at a loss with corporate business and need to find alternative options, such as group or wholesale business.

2. Look to wholesalers. An easy way to leverage source markets not deterred by uncertainty is to take advantage of wholesalers – especially those that may allow you to yield rates within the contract. Wholesale demand for certain markets is pretty consistent and while it may be temporarily depressed due to uncertainty, it’s still a reliable way to maintain demand while public transient demand is down.

During periods of uncertainty between 2009 and 2014, hotels in Bangkok saw that they could leverage wholesale customers from Middle Eastern countries during the periods of political unrest while other regions such as the United States and Europe pulled back travel there significantly.

If you have the ability to offer different pricing by wholesalers from different countries, capitalize on that by optimizing rates for geo-local demand. Again, consider the right mix of wholesale business for your property so that you don’t become over-reliant and can shift your strategy back to yielding transient business when demand returns.

3. Price by IP address. A more complex strategy involves utilizing booking engines (and OTAs) that have the ability to manage pricing based on registered IP addresses. This enables hotels to price based on the geo-location of the consumer. The practice is already popular within airline and technology spaces, where you see different prices for an airplane ticket or even to purchase a new laptop online, depending on where you are when you click “purchase.”

In Europe, hotels can separate out U.K. customers and, similarly, start charging on perceived value or willingness to pay. Central to this will be data analytics, which give hoteliers an overview of how their hotel is performing, how the market is trending and what their guest demographics are, including geographic location.

For example, if we start to see on the booking engine that 1 in 20 Romanian customers book at a certain rate, but 15 in 20 bookings for that same rate are from the U.K., we know that we have more rate yielding abilities from the U.K. customers. Creative revenue managers would leave the same rate for Romanian customers but yield up rate to U.K. customers on their direct and OTA booking channels.

The ability to yield offers independent of each other is the way forward. It provides the flexibility to adjust to the market and to the customer. Using new data sources as a backbone for decisions made by all departments, including geographic location through booking engine traffic, hotels can capitalize on opportunities throughout this period of uncertainty.

See original article at http://duettoresearch.com/driving-revenue-era-uncertainty-consider-location-based-pricing/

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Founded by two travel and technology professionals with years of experience in Asia, Representasia specialises in sales & marketing representation throughout Southeast Asia for travel/hospitality technology providers and travel-related startups, as well as providing marketing consultancy services for hotels and travel businesses in the region.

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