24 July 2019 | Pricing strategy, Revenue management
What determines how revenue managers set and adjust their prices?
It’s a common question with a seemingly obvious answer: many factors. Most of them relate to supply and demand, an important indicator being your competitors’ pricing.
But how do you know you’re comparing apples with apples when looking at your competitors’ prices?
Comparisons must be meaningful to have any value. Are you all including breakfast? What about the size and spec of the rooms themselves? The cancellation policy? These are all important aspects to incorporate into your analysis.
One area that can be particularly tricky to weigh up when looking at the competition is length-of-stay discounting, a strategy that can help drive up occupancy during periods of low demand.
So, how common a practice is it and what can we say about the way hotels discount by LOS?
To find out, we analysed the rates of over 50,000 hotels around the world and released this global length-of-stay strategy report earlier this year.
We soon realised that by drilling down further into the data, variations from one global region to the next emerged. So over the course of the next couple of months, we’re releasing a series of regional LOS reports.
Our LOS Australia and New Zealand report uses the same methodology: comparing three consecutive one-night prices with the price for a length of stay of three nights across a selection of hotels.
From our data on 1,801 hotels at 15 global chains operating in the region, we investigated: the proportion of hotels that apply some sort of LOS discount; how often they are applied; how high those discounts are; and what we know about the types of hotels that deploy this strategy.
The results were eye-opening. One of the most surprising findings is that a full 72% of this region’s properties in the study applied no LOS discounting whatsoever for the period in question. This compares to 63% globally. And of the 28% of the market we tracked that do offer these discounts, only 74% appear to have a properly defined strategy, as described in the report. That’s just 22% of the total hotel count for the region.
Our regional report breaks down our other findings in Australia and New Zealand, with highlights including:
As an academic exercise, this report will be interesting if you’ve ever tried to compare rates in this way. But you’ll also know how time-consuming it can be switching back and forth between:
And this is before you look at all the other variables that can affect your and your competitors’ prices, such as:
How can you manage these analyses as part of your day-to-day rate shopping and not be driven to distraction with all the to-ing fro-ing?
It comes down to how sophisticated your rate shopper is. When a user selects one of these options from a rate shopper that provides this level of granularity, additional data comes into view. This data would be the percentage differences both for your property and for your competitors’ for all the dates in view.
With lowest rate, for example, the number might be “-10%”, meaning that your lowest rate is 10% less than the rate for the best flex rate, which remains in view; similar percentages are shown for your competitors.
Of course, rate shoppers often offer some of this information but compiling it yourself without access to “compare to” functionality would be very time-consuming.
What would the data in this report look like if everyone had access to our rate shopper? It’s a question we can’t yet answer but you can request a trial to start refining your own strategy. Don’t forget to download the report. And look out for our other regional reports over the coming weeks and months.
Download the report so you can benchmark its data against your own and see how your hotel compares to the competition.
Who do we serve?
OTA Insight is proud to partner with: