How to Build a Smart Rate Plan and Pricing Strategy: 11 Questions for Independent Hoteliers
This blog post could be another boring list about the types of rates plans you should have and how to go about working out how to set your prices, but it is not going to be that. At all.
I am all about disrupting how you think about marketing your property and asking questions that can sometimes feel uncomfortable.
Deciding on your rates plans is multi-dimensional. You cannot copy what someone else does or follow a “10 Rate Plans You Should Have” list that you find on Google.
Well, you can, but you won’t be successful if you do.
Setting your pricing and rate plans in an inherent part of your marketing strategy because whatever you create you have to sell. And you sell through marketing, right?
What makes your marketing unique?
The message you put out there to the world about the value you offer. It really is that simple.
Why would someone choose your property over another? Because it resonates with them, right?
You are not just a hotel owner or manager; you are also a consumer. So, use that vast, deep, and messy experience that we all have as customers and relate that to everything you do in your marketing.
And that includes when creating (or reviewing) your rate plans and pricing too. I have come across many property owners who consider this work to be a “get it done and forget about it” job. This is quite simply the fastest way to destroy your business.
Making changes over time based on data about what works and what doesn’t is one of the weakest areas I see in independent hotels. I am talking about the ones where the owner is also possibly the manager, where there is no fancy yield or revenue management team to lean on. And that’s ok. You probably got into this industry because you love meeting and taking care of people, not because you want to sit at a desk studying the ROI of your actions.
However, it doesn’t have to be painful. All it takes is knowing where to get started, having the confidence to give something new a go, being brave enough to admit it hasn’t worked as well as you had hoped, crafting out the time and energy to make some changes, and then doing it all over again.
All carers of children know that when one falls off a bike we rub their bloodied knees, tell them they are doing great, and get them back on those two wheels as fast as humanly possible before they decide never to pedal anything ever again, right?
This is exactly the same. Just that adults utilise the “luxury” of procrastination to avoid doing the hard stuff.
This kind of tough love is often all we need to motivate us to look curiously at how we run our businesses.
So here are the 11 questions you should be asking yourself today to make sure you are doing the first right hard thing to stay on top of your post pandemic rate plan and pricing strategy.
Ready to go?
1. Do you know which of your current rate plans makes the most money?
Let’s get clear on what a rate plan is before you answer this.
Rate plans allow you to maximise your income, increase revenue with upsells and cross-sells, target specific audiences, and at specific times. They tend to fall into three categories:
Evergreen Rate Plans that are always available regardless of season or other variables such as length of stay of number of rooms booked etc. Examples are BAR (Best Available Rate) plans, Breakfast Included, and Advanced Purchase plans.
Promotional Rate Plans can be published or taken down at any time and can be seasonal or not. Examples are Combo Packages such as Adventure, Wellness, Events etc., special rates for students, families, armed forces etc. Membership rate plans (i.e. Member of RAC, or local golf club, or via a points programme), and Loyalty Rates (internal).
Dynamic Rate Plans for example LOS length of stay, Last minute, Stay 4 Pay 3.
Then the other layer is the policies that are added to these rate plans such as non-refundable etc and also geographical according to target market, or mobile, or business travellers can see these or not.
In order to be able to work out which sells the best, each needs to have a unique code, and / or a unique name that can be used to track it. And a structure to track it of course.
The best way is to take a quarterly overview based on the amount of money it brought into the business, this is not the same as the number of times it was sold.
2. Do you have a balanced rate plan structure?
Do you offer at least two each of the three rate plans from the list in question 1? If not, that number is a good place to start so you don't get overwhelmed.
Then if after a quarterly period, any of them generate less than 10% of your total revenue, ditch it, tweak it, and replace it.
You don’t have to be everything to everybody. Not all rate plans are for you.
3. When was the last time you checked the pricing and rate plans of your competitors?
Competitor pricing should influence your room pricing and rate plans, not determine them. While it may be a tedious job, it is important to shop their different rates in different seasons. This will give you intel on how often they change their promotions and packages, and when (and by how much) they change their rates.
It is also a useful activity to know when a competitor is full. Maybe they have an internal event that reduces availability in your area, meaning you could then sell your rooms at a premium. Fostering friendly working partnerships is a great way to generate last minute sales. Consider a WhatsApp group for your favourite competitors so you can quickly ask if there is availability when one of you is full.
4. Do you have an up-to-date calendar of local events and activities over the next 12 months?
This is a critical part of planning your rates and promotions and should also lead your content marketing plan too. Advance Booking or Early Bird promotions that run alongside generic promotions for any given event can help you to fill rooms ahead of time. You can also partner up to generate ancillary revenue too.
5. Do you understand the needs of your target audiences?
Fundamental to successful sales and marketing is knowing what your target audiences want from you. How do they envisage a “perfect” stay? What do they need to see included in your offer to incentivise them to click that Book Now button?
One way to humanise the hospitality industry is to build trust and connection by offering your target customers the ability to build their perfect stay by choosing from carefully selected add-ons. This only works well when you truly understand their needs, allowing you to craft the perfect balance of what they expect, and also what they didn’t even know what they were looking for.
This is easy to do when you do some work to understand what you are about as a business. What are your values? Who do you want to attract? and Who do you best serve. Then by learning how to pitch your messaging in a way that matches your business personality, you begin to attract only those who resonate with what you do, how you do it, and why you do it. And that results in higher spend per stay, an increase in positive reviews, and many more direct bookings through word-of-mouth recommendations.
This has proven to be an especially popular part of my Direct Bookings Compass course, so if you are interested in learning all the right tools to get bold and confident with the marketing messaging for your property, look for the link at the bottom of this blog.
6. Do you prioritise last minute sales?
Mobile bookings show no sign of slowing down, and many bookings via mobile are made last minute or on the same day of arrival. It is easy to set last minute rates up on your OTA profiles such as Booking and Expedia, but is there an option for customers to get a great deal on what would be an unsold room if they take a look at your brand website?
7. Do you prioritise maximising occupancy?
Especially in the low and shoulder seasons it is a valuable strategy to maximise occupancy by reducing room rates rather than maximising profit through higher rates. Unsold rooms make no money at all so investing time in creating a decision tree that guides front desk staff on the right discounts to offer based on the current occupancy of your whole property is a solid strategy. Technically, this is yield management, and you can probably set this up via your Booking Engine, but that does not help you with phone or email sales. Occupancy focused decision trees are a very helpful tool for all properties.
Having said this, I am a string supporter of values-driven sales meaning that you dedicate the time needed to understand what your target audiences need and want as detailed above, and then add that value to your offer rather than consistently relying on reducing room rates to win sales. Like everything in life, it is a balance.
8. Do you have a structured content marketing strategy?
Now, you are probably answering yes to this, of course we do. But is your content marketing strategy ad hoc or based on a defined balance of blogs and posts that are specifically created with a defined CTA in mind. What action do you want the person who sees or reads your blog or social media post to take?
Hotel marketing can seem complex when you think that you must engage people at different stages of their research and buying journeys, people who are in different countries, and who are travelling for different reasons and in diverse group types. This takes us right back to number 5 above – understanding your target audiences. This is crucial to producing solid content that resonates and appeals, but so is working to a structure that helps you reach more people because each blog or social media post is crafted to encourage a different - and specific - end result.
9. Do you use email marketing to its full potential?
Many hotel owners tell me that they really want to do more email marketing, but they lack the inspiration to create anything more exciting than a quarterly newsletter. The truth can sting I know, but no one wants to receive a hotel newsletter. It is probably going to land into the spam folder, your deliverability score will suffer, and the ROI for your invested time will be low.
However, just like content marketing, when email marketing is done correctly and created to an annual structure, it can generate more direct bookings, increased repeat customers, and yes, you guessed, it many more positive reviews. Which leads us onto the next question of…
10. Do you manage reviews properly and consistently?
I don’t mean, do you respond to all reviews received? While this is also of great importance, it is less so than a) generating great reviews through providing stellar experiences in the first place, b) encouraging happy customers to leave a review where you want them to, and c) showcasing your reviews where your browsing customers can find them.
This is something that the OTAs do really well. The rating score is always placed up front and central. Do you do the same on your website too? Do you have a strategy to manage your reviews specifically on Google? If not, you are hurting your possibilities of generating more direct bookings.
Also, an online retail store would never add a review for a red sweater they sell underneath a pair of elegant black trousers. Segmenting your reviews according to the products and packages you offer is really smart marketing. I am all about reducing brain calories in our online world. If I don’t find the information I am looking for in the place I expect it to be, I am out of there, I will click away and probably won’t come back. We live in a fast-paced world, there is no getting away from that, and we have to get proactive to harness the power of online buying psychology.
11. Do your cross-sells and promotions help support local businesses?
As mentioned in the answer to question 5, once you understand your own business values, you can really start to focus on who you want to support and why in your local area. This will allow you to not only build a solid business network you can rely on, but it also generates trust in your potential customers, not to mention reducing those brain calories they need to use to plan a holiday. No one goes on holiday to stay in their hotel room. Well, almost no one.
By honoring what you do well (i.e., providing and awesome and comfortable property to sleep and rest in) and selecting a small network of local businesses who provide other services such as transfers, activities, and evening entertainment for example, not only do you give your customers that feeling that you understand what they need and want, but you also help them to plan their trip quickly, and you get to create some great content for your marketing based on the stories of your partners.
I hope these questions have inspired you to take a deeper look at how you plan your rates, set your pricing, and generally how you run your hotel marketing.
If you are interested in digging deep and learning more about your business values and brand personality to help you clarify what messaging to use to resonate with your target audiences, sign up here to be invited to the next BOLD Hotel Messaging workshop.
Found inspiration here? Scroll right down to the bottom and leave a comment. If you would like to receive more helpful, relatable, and actionable content relevant to your business, click here to sign up to my email list. No spam, no bombarding you. Just really useful stuff. I look forward to having you onboard :)