Secrets to Boost Your Hotel’s Revenue: Pricing Strategies You Need to Know

I always get thrilled by how much money hospitality leaders or successful businessmen make. No doubt, the exact numbers would be overwhelming. But the efforts that go behind it are no less.

To reach such heights in terms of profit or revenue generation one needs to have immense knowledge of the hospitality industry and its marketplace. (As knowledge alone creates all the difference.)

This is why every hotel owner puts a lot into serving its guests but only a few get an impressive revenue collection. 

Most of the time, this happens because of the fragile pricing strategies hoteliers set up without analyzing guests’ behavior and insights into the latest marketing techniques.

In one of our old blogs, we previously discussed various pricing strategies that hotels should be aware of. But in this article, I aim to expand upon that list and delve into some more unique pricing strategies to help you level up your revenue generation game.

So get ready and follow along if you want to attain excellence in the revenue department of your hotel.

Why Is It Important to Set Pricing Strategies?

The sole purpose of any pricing strategy is to optimize your revenue.

Let me be clear that setting prices on your rooms and services doesn’t count as a pricing strategy. It is how you mold and manipulate your prices according to the market scenario and your guests.

Let’s examine this with a scenario:  

All the hotels near your property are struggling through the shoulder season. To stay afloat and drive more bookings, they cut down their prices, whereas you kept them intact. Turns out, they came out well and you experienced a great loss.

Therefore, you cannot just put up the prices and let it be. It is a process that needs constant revision. You must have a great sense of the current market and ongoing trends in price modulation to do so.

 But I’ve got it all covered in the next section Let’s hop in, shall we?

Pricing Strategies to Optimize Your Hotel Revenue

Hotel revenue management is a tricky affair and there’s no single magic formula to optimize it. You require a blend of various strategies to ripe out the maximum benefits.

This is why I am mentioning some unique tactics for you to skyrocket your hotel revenue. 

1. Value-based pricing

The simplest pricing strategy is value-based. It is the cost that your service must get in return.

For example, a smoking room will have more price than a non-smoking room because it has an additional service that tops up its value. Same way, beach-facing rooms will have more value and thus more price.

So, what you are providing to your guests, how much that particular service costs you, or its value range across the market decides this type of pricing.

Value-based pricing is never negotiable. Because it drives you the minimum profit your rooms & services deserve.

2. Package pricing

Nowadays travelers lookout for good packages instead of arranging things separately. So it is important to build your packages and let your guests avail them at the right prices.

By including taxi/cab rides, complimentary meals, a local guide or tour, co-working spaces, a spa, laundry facilities, and much more in a package, you can make comparatively high revenue.

What you do is: keep a room booking, let's say at ₹8,457 for a week (high from its usual value), and a package with all the facilities at ₹9,849. Your guest will perceive that within a minor difference, they’re getting so many things.

Most of the time, they do not require all of these facilities but still tend to get overwhelmed by them and sign up willingly.

Even if they use them all, it is anyway beneficial for you. Because it helps in upselling your services.

3. Captive product pricing

Captive product pricing is to set a combined price for two or more services that are co-dependent.

For example, an ordinary room costs ₹5,000, and using the swimming pool has an additional charge of ₹800 which makes the total ₹5,800. However, if you choose a poolside room that costs ₹5,600 then there are no additional charges for using the pool.

This is how you can increase the sales of your poolside rooms. So every person who wishes to swim will ultimately buy your poolside room that costs high.

This pricing helps you increase the sales of your best rooms by adding a complementary thing to them.

4. Market-penetration pricing

When you introduce a new service or upgrade your hospitality, it is important to make it popular and known among your guests. This is the only way to make it win its place in the market.

To give this new service optimum exposure, you need a market-penetration pricing strategy according to which, you must keep it partially free at the start and increase the price with time.

If you have opened an in-house restaurant at your hotel, you can keep the first meal free for all your guests. This will market your restaurant effectively and its sales will increase fast.

5. Psychological pricing

A psychological pricing strategy is important for attracting your guests. It makes your price look good and affordable.

This price plays with your guests' psychology and convinces them that it is reasonable. The basic example is putting ₹999 for the swimming pool charges instead of ₹1000. This difference of one number somehow creates a lot of differences in the human brain.

Besides this, promoting offers and discounts is also a psychological game that excites your guests. They give in quickly if you showcase that a ₹9,899 package is available at only ₹7,599 if they book within a day. Note: This is how you make sales in your shoulder season.

Learn more about aligning your marketing strategies with your guest’s psychological responses below.

Psychological Principles for Better Hotel Marketing

6. Promotional Pricing

This is the average and the comparatively lowest price you use to promote your hotel. It helps attract your guests to your website. With this, they explore other things you offer and increase your chances of getting bookings.

So if the lowest room or package that is available at your hotel is ₹1,899 and the highest package is ₹10,899 then your promotional price must be the former one that is lowest.

It will amaze your guests that your packages are starting at such affordable prices and thus, they will visit your website. This will drive more traffic to your website and will increase your bookings and revenue altogether.

 Promotional pieces are mostly the one that highlights the least starting prices of your rooms.

Dynamic Pricing to Ace Your Strategic Game

All the strategies I discussed above are proven for optimizing your revenue.

But what is the real foundation for them?

Dynamic pricing!

The marketplace is ever-changing. What is selling out this week might not get any attention in the upcoming weeks. Therefore, you need to change every instant. (I am not exaggerating)

Recently when I was planning to book a homestay through an OTA platform, I was amazed at how quickly the price was fluctuating.

When I visited this XYZ property many times, its price went up within hours because they tracked that I am interested in it and will book eventually. After that, I started exploring other properties for a couple of days. Guess what! The rate of that XYZ property dropped again.

A dynamic pricing strategy analyzes every aspect of the marketplace and sets an ideal price for your services. It keeps fidgeting rooms’ prices across all your online profiles. This fluctuation in price ensures maximum profit at any given time.

But making all these calculations and analyzing the prices manually is NOT easy. You need a perfect revenue management system to do so. You can check out eZee Mint which streamlines the process of setting intelligent pricing strategies at the right time to optimize your revenue.