How to factor package holidays into your revenue management strategy

Despite all the changes that have occurred in the accommodation industry in the past two decades (think the plethora of online distribution channels and disruptors like Airbnb), one constant remains: hotel packages are still a solid way for hotels to drive demand. In fact, package rate strategies allow hoteliers to tap into one of the most profitable holiday segments to date, with revenue in the package holiday segment amounting to US $205.504M in 2019, and expectations to grow to $241.035M by 2023. This is due to the comparably high prices of the services included in a holiday package, such as travel and full accommodation, in contrast to other segments.

Tourists are increasingly turning to packages to meet all of their holiday needs - including hotel airfare transfers, tours and activities, for one inclusive price. Yet there continues to be a lack of information around how hotels can manage this demand. In this article, we’ll discuss why you should be taking advantage of package holidays, what kinds of packages you can offer, and how you can price them.

Why should hotels participate in holiday packages?

For hoteliers, package holidays are lucrative because they are typically booked when going on vacation for a longer time, for a destination far away from home. This means longer hotel stays, minimal cancellations, and more lead time to upsell or cross-sell guests:

• It’s the perfect time to upsell because your guest already has the perception that they are getting a deal by booking a package.
• It’s also the perfect time to cross-sell because your lead time is longer. Consider cross-selling shuttle transfers or activities.
• As an added bonus, you’re more likely to gain ancillary revenue (think revenue from your bar, spa, or restaurant), as guests tend to stay longer.

What kinds of hotel packages can you offer?

Besides partnering with distribution channels like online travel agencies (OTAs) to be included in their packages, you can also develop your own packages with complementary tourism partners. That way, you can stimulate demand and add value without having to discount.

In terms of types of packages to offer, target niche markets effectively - this will depend on your specific area and what it’s known for. For example, if you are near the ocean, you could have a diving or snorkelling package. If you have a golf course nearby, you could offer a golfing holiday package. If you have wineries nearby, you could offer a food and wine tasting holiday package. If you have a great venue, you could create a wedding package. 

Then you can include additional items, services or products that may feature in a package deal. For example, meals, bicycles, access to complimentary venues (golf course or winery), and equipment (scuba diving or snorkelling equipment).

What should your package rates be?

In general, you shouldn’t need to offer discounts for your holiday packages. So don’t play the lowest price war, even if it’s an attempt to drive revenue during low season - many a hotel has failed because not enough cash flow can be generated to make it a sustainable pricing strategy. 

Packages can be offered with either disguised or visible pricing:

• Disguised pricing hides the exact cost of individual components and the extent of the discount provided by contributing operators. This kind of pricing is usually what is used for a hotel’s own packages.
• Visible pricing gives the guest the flexibility to select preferred package components according to travel preferences and budgets. This kind of pricing is often seen on OTAs.

How should you adjust your package rates?

When it comes to adjusting your package rates, you will need to track your competitors’ package rate strategies so that you can compete effectively. Without visibility how will you know where you can improve and how? 

A rate shopping tool will allow you to compare your package pricing against competitors, uncovering discounting practices hidden within a competitor’s holiday packages. This is particularly useful if you are dependent on the leisure segment and sell a huge proportion of rooms as part of all-inclusive packages. Some advantages of investing in a tool for these insights are access to built-in features, like:

• Report-based updates for tracking and monitoring package offerings against competitors;
• Pricing breakdowns of room-only and package rates, so you can identify their discount strategies; and
• An Intelligent Package Discount Benchmark so you can plot your success over time and fine-tune your strategy.

If you would like to learn more about how Rate Insight can help you gain a competitive advantage, contact us. You can also request a free trial to see it in action.