Optimizing Your Hotel Pricing Through Segmentation

In the hotel industry, pricing strategies are critical for viability and optimal returns. There are many factors that affect your hotel bookings and during downtimes caused by any one factor or a combination of factors, the relevant pricing mechanism must be activated to maintain the viability of your hotel. You may choose to segment your customer base or your room prices, or both.

Sara Nicoli shares an article on Hotelbrand, which gives a clear view of how to segment room prices to improve your hotel’s profitability. This can be accomplished in several ways, considering time, target, and price differentiation. With the time factor, consider how far away the days or weeks are from the date for which you want to establish the segmented prices. As the target date approaches and as the number of available rooms decreases, more and more people will be willing to pay a higher price for a room at your property. This will particularly be the case in the peak of a high season or during other special occasions when bookings are likely to increase. Take advantage of setting the lowest prices for those who book early and filling as many rooms as possible at those prices, while you reserve the higher prices for customers who will gladly pay more later.

To segment your prices based on target groups, you should ascertain the diverse segments of your target market and tailor an attractive price for each segment. You can easily categorize your target market by grouping them based on their reason for staying at your property. One approach is to determine those staying for leisure versus those staying for business. Your business guests will usually be willing to pay more. Another approach is to consider the booking channel, whether directly by telephone or email, etc., or indirectly via travel agencies, tour operators, or Online Travel Agencies (OTAs). You will then determine a different attractive price for each channel based on an analysis of various factors.

eCornell offers a program in Advanced Hospitality Revenue Management: Pricing and Demand Strategies, which will equip you to effectively optimize your prices through market segmentation.

eCornell courses are approved by SkillsFuture Singapore for SkillsFuture Credit as well as by HRDF Malaysia under its SBL Scheme.