Pricing Strategy

Revenue management involves selling the right product to the right customer at the right time and price. But how can a hotel determine what the "right price" is?

Setting the "right price" is a continuous and complex process essential for a hotel’s success. It requires rational, customer-friendly pricing that accounts for variations in demand, market segments, hotel types, and seasonal trends. A good pricing strategy not only maximizes revenue but also builds customer loyalty by offering value for money.

A well-crafted pricing strategy helps increase revenue, making it a core component of revenue management alongside Inventory Allocation and Selling Strategy. Effective pricing provides a variety of rates, enabling hotels to earn more than they would with a single rate for all guests.

Ultimately, hotels must strike a balance between short-term revenue maximization and long-term customer relationship building. Pricing decisions should align with financial goals while fostering brand equity and customer trust.

Pricing: An Interpretive Process

Developing a pricing strategy is not an exact science. It involves balancing internal factors—such as financial objectives and historical data—with external factors, including market demand, competitive behavior, product strength, and customer feedback.

A hotel's pricing process consists of two key components:

1.      Pricing Structure: The number of rates offered, along with rules determining when and under what conditions each rate is available.

2.      Pricing Level: 

Establishing the main price point for the property. A critical element here is determining the Benchmark Rate,  

 which serves as the foundation for pricing decisions.

Hotels must create tailored pricing strategies for both transient and group business. While the benchmark rate guides transient pricing, group rates depend on different criteria and vary between bookings, as explained in the Standards section.

Rational Pricing: A Cornerstone Strategy

Rational pricing is the foundation of Marriott's pricing philosophy. To fully grasp this concept, it’s essential to understand the key elements of rational pricing:

·   Market-aligned benchmark rate: 

A rate reflecting customers' willingness to pay and positioned appropriately within the market.

·         Logical rate structure: Each rate has a defined, rational purpose.

·         Menu quoting: Reservation agents can quote all available room types and rates.

·         Seasonal pricing: Rates vary based on the season to match demand fluctuations.

·         Elimination of non-qualified discounts: Only qualified, fenced discounts are offered.

·         Volume discounts: Discounts based on booking patterns that drive incremental revenue.

·         Time-based discounts: Restrictions or yield-managed discounts based on the time of booking and arrival.