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Boost Revenue Practicing Dynamic Pricing for your Hotel


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How to Boost Villa Marina Lodge Revenue Practising Dynamic Pricing ?
This document was elaborated by Hopinoer Florie Thielin for the Villa Marina Lodge, Panama, in a serie of works and studies allowing tourism professional to make their activity more sustainable.

Published in: Marketing

Boost Revenue Practicing Dynamic Pricing for your Hotel

  1. 1. Become Hopinoer Spread the awareness, get together and act for a responsible tourism. Hopineo for Villa Marina Lodge – November 2014
  2. 2. Become Hopinoer Dynamic Pricing Strategy, called as well “Yielding”, is the main lever of Revenue Management. Nowadays all hotel chains are using these principles in order to: → Increase their incomes by pushing up:  Occupancy in low season.  ADR (Average Daily Rate) in high season.  The main KPI (Key Performance Indicator) to watch out is the Hotel RevPar (Revenue per Room Available): 2 Occupancy % Average Daily Rate $ RevPar $
  3. 3. Become Hopinoer 3 1. Why to practice dynamic pricing? 2. How are you going to do it? 3. A few examples for Villa Marina Lodge
  4. 4. Become Hopinoer 4 •Strong hotel competition in your destination. •Selling through rates comparison booking engine (OTA). •Be competitive to gain market share if you need to fill up. •What you don’t sell tonight, you can’t sell it tomorrow, it’s revenue lost forever. •Better sell a room cheaper than nothing at all. •On busy dates, you’d love to have more rooms to sell? •Sell at higher rates: fill in slower but better (rates & LOS) •Whatever your hotel specificities, you’ll always gain to implement the most basic revenue management principles. Adapt your strategy smartly.
  5. 5. Become Hopinoer 5 • Competitors positioning: rates, guests reviews, location, OTAs ? • Clients market segmentation: who, when, how much ? • Market seasonality, events, bank holidays, school holidays ? • Historical : daily calendar of past occupancy, rates, groups. • Booking patterns for each market segment: length of stay (LOS), lead time, occupancy per day of the week, cancellation ratio, total revenue per client, nationalities, sales by channel (direct, indirect, TO, walk-in). • Non yieldable market segments: bookings that you have to accept because you signed a contract (tour operators allotments, corporate contracts, last room availability (LRA)). →
  6. 6. Become Hopinoer 6 The “Pick-up” is the total of new reservations that you received between two dates: → Daily pick-up: between yesterday and today. → Weekly pick-up: between today and last Monday. The pick-up report calendar helps you to take smart decisions whether to change rates or not, add a length of stay restriction or not in order to enhance your RevPar (Occupancy and Average Daily Rate). Build up an automatic dashboard on excel which allows you to get a quick overview of your pick- up by an easy copy-paste of your future reservations (=“on-the-book”) from the data exported out of your PMS. Add also the pertinent external and internal data that you collected previously (cf. previous slide) in order to get everything together in one unique calendar document. →
  7. 7. Become Hopinoer 7 The Booking Pace is the speed at which you are taking new reservation for a coming given date: → “Hot” dates: quick booking pace as you fill them in quickly, → “Cold” dates: slow booking pace as it is difficult to fill them in. By starting watching out your pick-up, you’re going to get more and more “feeling” about how guests tend to book for your destination. Ask yourself pertinent questions such as: → How far in advance do people start to book? → When does the booking pace usually increase? → Are we ahead or behind on last years or last months trend? →
  8. 8. Become Hopinoer 8 → Different “kind of” guests are willing to pay different “kind of” rates depending of their specific needs and expectations. It can be interesting to make the most of this opportunity by building different “products” to target these different types of clients. Build up a clear Pricing Grid with:  Physical Fences: - Room categories: superior room vs. deluxe with sea view and private terrace. - Package Element with an extra services or amenities included on the rate: breakfast, bottle of wine in room, flowers welcome set up… be creative !  Non-Physical Fences: - Guaranty, cancellation and modification policy which is more or less flexible. - Minimum length of stay restriction and booking lead time at which the rate is available.
  9. 9. Become Hopinoer 9 → Start with rather low rates in order: - to be competitive when guests compare your rate with the ones of other hotels in your destination offering the same level of service. - to be sure that you’ll cover at least your fix operational expenses in very low periods. - to build up a solid occupancy base from which you can then start to yield: increase rates when you already reach a certain level of occupancy. Remember : → A room that you don’t sell tonight, you can’t sell it tomorrow. → It is revenue lost forever. → Better sell it cheap than to not sell it all!
  10. 10. Become Hopinoer 10 Static Pricing Dynamic Pricing + Promotions from 129$ + 10% CURRENT: Low & High Season  Agree on a: - Minimum : 95$ +10% - Maximum (= Rack) : 250$ +10%  Adapt your rates on a daily basis.  Publish only your rack rate.  Invite guests to check the best rate available depending of their requested dates using the booking button. RECOMMENDATION: Yielding →
  11. 11. Become Hopinoer 11 OTA # Hotel s OTA Playa Venao Hotel Resort El Sitio de Playa Venao Selina Beach Break Hotel & Surf Camp Eco Venao Villa Pelicano (Las Tablas) Posada Los Destilad eros (Pedasi) 1 6 n/a 26 r 109$ 45 r 96$ 30 r 80$ 34 r 150$ 45 r 120$ 14 r 2 3 180$ 11 r 99$ n/a 12$ new 3 2 140$ 74$ 4 2 180$ 90$ Direct Booking - 90$ *Rates for Double Room on Sun. 8th Feb 2015. →
  12. 12. Become Hopinoer Offer two different room categories:  Superior : double and twin rooms (rooms 1,2, 3, 4)  +30$ for Deluxe : with private terace and sea view (rooms 5, 6, 7, 8, 9) 12 Rate Code Price relation- ship Package Element Lead Time Length of Stay Guarantee policy Cancellation policy Modification allowed BARBB Breakfast No No Credit Card J-15 free of charge Otherwise 50% Yes LOS -30% Breakfast No 6 Credit Card No GROUP -10% Breakfast 15 days 2 Credit Card No EARLY -30% Breakfast 30 days 2 Charge directly No-refundable No- modification →
  13. 13. Become Hopinoer  Once you’ve got a solid base of occupancy, you can start to increase rates: to push-up your ADR (Average Daily Rate), but be careful and increase rates in baby steps, and keep watching out your booking pace and competitors rates.  New special event (example wedding 10 january)  If the hotel is almost full on one specific date: in case of pic of occupancy.  For special event dates: better fill in slowly but at higher rates! Make your booking with special cancelation policy and set up nice LOS restriction.  Put LOS 2 nights on each Saturday, and then one or two weeks before take it off if you did not fill in. 13 → ↗
  14. 14. Become Hopinoer  You might decrease rates on last minute (day of arrival, or a few days before) until you get a 100% occupancy.  If you set up initial rates too high and that you’re not taking any new booking.  If the hotel is almost full on one specific date: in case of pic of occupancy. 14 → ↘
  15. 15. Become Hopinoer If you still have rooms available and walk-in guests are coming:  Listen to their need and budget carefully: how many nights do they plan to stay? How much would they be willing to pay? Which kind of hotels are they looking for?  Try your best to negotiate well and make them staying;  Remember, it’s always better to sell a room cheap than no revenue at all ! Example with 90$ budget ? Until 80$ without breakfast ? 15 →
  16. 16. Become Hopinoer  Is it an « interesting » request ?  Don’t necesarly lower the rates if you know that you could fill in anyway on those dates.  If only one night: is it really an interesting business? It can be difficult to fill the nights of before and after… and then you loose revenue.  Be very careful with guarantee and cancelation policy ! 16 →
  17. 17. Become Hopinoer 17 # rooms : 9 Occ % ADR $ RevPar $ Monthly Rev $ Optimistic 40% 140$ 56$ 15 120$ Normal 30% 125$ 38$ 10 125$ Pessimistic 20% 115$ 23$ 6 210$ Projection →
  18. 18. Become Hopinoer Now you’ve implemented a dynamic pricing strategy, start thinking as well about upselling opportunities:  At each new booking received, send an email back with offer for one more night.  Offer to guests on arrival to get an upgrade for only 20$ more (if avail).  Offer clearly set of activities and restaurant food & beverage. 18 …
  19. 19. Become Hopinoer 19 Contact : Florie Thielin This document was elaborated for the Villa Marina Lodge, Panama, in a serie of works and studies allowing tourism professional to make their activity more sustainable. What is missing? Which improvments could be done? Please, feel to free to share with us your feedback to continue building together a better future for Hopineo, its partners, and more globally for a more responsible tourism. « The recognition of tourism as an economic powerhouse and contributor to all three pillars of sustainable development – economic, environmental and social – underlined the enduring relevance of UNWTO’s mission to promote responsible, sustainable and universally accessible tourism. » World Tourism Organization, 2013