Question

Some hotels make money with dynamic pricing daily. Please list and describe three strategies for increasing room revenue.

Answer 1

Following are the three strategies for increasing hotel room revenue :

1) Occupancy-Based Dynamic Pricing

Occupancy-Based dynamic strategy in a hotel is a great way to increase room revenue. Make sure that you are pricing your rooms based on supply and demand. The hotel's must increase their room rates when demand exceeds supply. For example - if 90 out of 100 rooms are occupied,they can charge more for the remaining 10 rooms. This approach will increase your average daily rate ADR (ADR = Room revenue / Rooms sold) and revenue per room available(RevPAR). RevPAR is calculated by multiplying a hotel's ADR by its Occupancy rate. Additionally, at low demand seasons, when your Occupancy is low, you can charge less for your roomvto attract bookings.

2) Forecasting-Based Pricing

It is all about tweaking hotel room price while Forecasting the number of rooms that would be available for future dates. For this, hoteliers should have a clear understanding of theirs hotel's historical data.- Occupancy data for the last couple of months and for the same period during the previous year. This would give the hotel's an idea on how the Occupancy might look on a given date. That's how a proper Forecasting would allow them to make necessary changes in your room rates, based on demand and expected Occupancy. Most importantly, forecast would also depend on the increase or decrease in travelers coming to your locality or an increase or decrease in your competitiors in your segment.

3) Length of Stay Based Pricing

This is also referred to as Best Available Rate by Length of Stay. Under this hotel pricing strategy, Hotel can make changes in their room rates based on both the arrival date and the total duration of a guest's stay. To come up with the right pricing, hotels need to demand, forecast, business on the books and even the price sensitivity. Room pricing should be modified either based on maximum length of stay or minimum length of stay to enhance Occupancy. The most important thing here is that guests get to pay one rate for their entire stay.