David Collins, columnist and Co-Founder & Chief Operating Officer at Great National Hotels and Resorts Group discusses how a healthy respect for what your customers can and will pay is a very good starting point in deciding pricing strategy, particularly in these post-Millennial times.
So imagine you had an event on in your hotel, say a Valentine’s Residential Programme including dinner, bed, breakfast, champagne on arrival, etc. And say you advertised that the programme would be available to book from say 1st February at 9am. What’s more you’ve no specific package rate to price position it for your customers, just a price range of somewhere between £150 and £250.
You’re a very popular hotel and the package has a history of selling well so you continue to ramp up PR around the event and lo and behold your client set is getting more and more excited. You know this because social media commentary is more than enthusiastic.
So the 1st February arrives and the clock strikes 9am and next thing you know your website is hammered with traffic and folks trying to book. And some do. But what most people don’t know is that a lot of the availability has been placed at ‘market’ rates well above your own ‘published’ prices on a reseller site .. which incidentally happens to be 3rd party site that you own and control.
Furthermore folks wishing to use this 3rd party site must also pay upwards of 25% of a booking fee on top of the already inflated package price.
Of course you’re happy, your Valentine’s programme sold out in 6 minutes flat plus you made a killing on 3rd party sales so the only challenge now is to deliver an event which justifies the price and in so doing enable your reputation further for subsequent events.
The one problem you have however is that by taking a ‘multi-layered’ approached to distribution and pricing, a great many of your clients whilst having made a reservation, did so under protest and are left feeling aggrieved and taken advantage of having paid an inflated price.
This is to all intents and purposes a hypothetical case in that I’ve yet to come across a hotel which would be so flagrant as to do this to their clients – yes we actively distribute through 3rd party channels as an industry but price parity is an accepted standard practice and at the very least you’ll typically find best availability and value by booking direct.
Yet this appears to have happened when U2 launched their latest world tour and opened for sales via an ‘official’ ticketing platform on Monday 16th January just gone: as if by military precision, normal priced tickets were sold out almost immediately on this platform with availability appearing instantaneously on ‘resale’ platforms at between two and four times the cover price. Plus booking fee.
Whatever about the integrity of the sales strategy, this was nevertheless widely anticipated as it has become common practice with high demand sports and musical events. The question is why this apparent institutionalized scalping is permitted and in fact could it sneak its way into hotel pricing. Furthermore at what point do consumers become less intolerant to being taken for a proverbial ride, projecting the same skepticism about pricing transparency onto Brand Inc.?
Hotels are not entirely immune by the way from taking advantage of high demand: case in point it’s since been reported that one property in Dublin is charging €1,000 for the overnight of the concert (22 July 2017) in question; the problem is that this creates bad press for other hotels as well as client mistrust when it comes to pricing and this is something our industry can frankly do without.
By all means, charge a rate for your room that makes commercial sense, one that covers your costs, delivers a profit and reaffirms your hotel’s position amongst your competitive set. And by all means yield this across your various distribution channels. But beware of taking advantage of customers’ eagerness to secure a room at any cost: there are 365 nights in the year and for a hotel to optimize its capacity, a healthy respect for what your customers can and will pay is a very good starting point in deciding pricing strategy, particularly in these post-Millennial times.