We all know price matters, but how should it be done properly? Here are a few things to keep in mind:
- In order to change prices on a regular basis you’ll need a tool which allows you to do it across all the sites which you sell your property through. The most common way to do it is to keep your bookings in a tool called a property management system which is denoted by the rather unfortunate acronym, PMS. A PMS will transmit your price changes in near real time to the partners you work with via an interface called a “Channel Manager”. It doesn’t really matter what it’s called; it does the job. Whilst choosing your PMS make sure their channel manager connects to the agent websites you want to work with!
- When setting up your property to work with the channel manager it helps if you use the same “property types” with each agent. For example if you have a “deluxe” apartment type on Booking.com in order to capture affluent guests, it helps if you also have the exact same type on Expedia and Lastminute.com. When it’s not the same everywhere you’ll need to tell the channel manager how each site differs and that is a pain.
Once you are set up you’ll need to make a strategy for setting prices. Here are a few tips:
- If you have a log of last year’s asking prices, start with those, adjusting the dates of events and weekends as appropriate.
- If you don’t have a log, then it helps to compare yourself to a few competitors and then mirror their price action for the coming few months. The competition price is called the “compset” and is used widely in the hotel industry. Determine what percentage your property price should be as a percentage of theirs. For example if you think your property should sell for 120% of the price of a standard room in the Grand Hotel this takes the guesswork out of pricing each day.
- If you compare 3 competitors and you see one with a price so high it’s off the charts, ignore it. Their price is either an error or they may already be full for those dates.
- If you sell through a hotel website create extra categories for the same unit. By creating a “luxury” category you capture the affluent guest who is not shopping around.
- Once you have set your pricing you should monitor the bookings and inquiries you get for each date. If you have multiple properties this makes it easier. If you find you are selling out on a specific date then raise the price for the remaining properties. Do not underestimate the price you can get for special events. When there is a shortage of accommodation prices can easily double or triple. If you find you are getting a lot of inquiries for a date but not enough sales, then drop the price. I like to use bigger price changes (10% +) further out in time and smaller price changes closer to arrival.
- Prices fall as the arrival date approaches. You will need to make more frequent price changes (normally price drops) closer to the arrival time as your property is falling in value each day, starting about 4 weeks to arrival. Remember also that larger properties tend to sell out earlier because they are booked by groups who need to plan better, so you will want to start discounting them a little earlier than smaller properties which are suitable for 2-4 guests.
- Know your market. When do bookings normally come in? If they come in far in advance you should be most active in adjusting prices at this point in the future. If bookings tend to come in last minute then don’t drop your prices too early.
- What should you target? High prices or high occupancy? It’s best to target a highish occupancy at good to acceptable prices. Even though it’s not good to be empty if you drop prices very low last minute just to fill up you may regret they type of customer you attract. Lowball customers tend also to be the most unpleasant and demanding.
- Try offering different prices to different agents. It may be you can get a better price through a specialist vacation rental website than you can selling on Booking.com where guests are only looking for a deal.
Of course there is more to think about but this is more than enough to be getting started with. If you liked this post don’t forget to “like” us and subscribe to the newsletter below. Thanks for reading.