In this article, we will explore the challenges of hotel pricing today and why they are particularly profound as well as looking at the importance of RMS software to help increase your revenue and profits. It goes without saying that the hospitality market is ultra-competitive, particularly in periods of low demand, and when bookings can come from a plethora of channels rather than direct, it is crucial that the right tools are in place to keep your business thriving.
Cracking down on buying behaviour
We all know money makes the world go round, and in the hotel industry, rooms must be reasonably priced to secure bookings that inevitably drive profit. Room rates need to take into account multiple factors including, current occupancy, demand forecast, market demand, reputation, events, elasticity, operational costs and competition. Prices set too high don’t secure enough bookings and pricing your rooms too low will make you struggle to cover operating and staffing costs and ultimately make a profit.
However, the buying behaviours of travellers are evolving more as they seek the best deals across a multitude of booking channels, as well as dozens of price comparison and metasearch tools to find the perfect hotel experience.
And then we need to ask the age-old question of value versus price; what is considered to be good value for travellers nowadays? Today, it's all about the benefits that a customer will experience for the price they pay which could be based on anything stemming from brand, reputation, location, experience sought and how they gauge that in monetary value. Retail can also share lessons on this by using technology, data and automation to optimise pricing and see an increase in profits and revenue.
Stay ahead by holding a dynamically strong rate position
Maintaining a strong RevPAR is an absolute must for independent properties as it’s an indicator of performance, profitability and financial health. Hotels still working with fixed rates rather than dynamic pricing strategies are likely suffering, as these prices do not reflect the current market behaviour, competition, demand or occupancy levels.
It’s understandable that smaller businesses are simply unable to employ people with the vast array of skills and experience of larger hotel brands, especially in revenue management. For many, having the time to calculate and manage rates while serving guests and operating a hotel is not feasible so it is a necessity that RMS software is implemented to deal with the pricing demands of the business.
How revenue management changed with dynamic pricing
It’s never been more important for independent hotels to remain competitive, grab market share and secure long-term profitability. Hotel pricing has evolved profoundly, and it is clear to see over the last few years.
The move towards dynamic pricing has been a game-changer as it is reported that hotels that do not use dynamic pricing models miss out on an average increase in revenue of 7-10%. By implementing dynamic pricing strategies, hotels will be able to increase their RevPAR by 15-20% based on guest segmentation.
The rapid advancement of technology is the underlying shift that has taken place in revenue management. Systems that capture data and insights identify market opportunities, while automation, increasingly supported by AI, is enabling hotels to rapidly deploy new pricing strategies. This helps hotels focus on pricing that is fully informed by data-driven insights and pricing trends, rather than making irrational decisions to drop rates.
How independent hotels can now profit from RMS software
Revenue Management Systems (RMS) support hotels in managing rates in a constantly changing market. Data from SHR shows that an RMS can save up to 20 hours per week by automating mundane revenue management tasks, which equates to 1,040 hours per year. The automated, dynamic pricing that a RMS brings can also achieve revenue growth of 10-15%.
In the early days of RMS, it was the larger hotels and chains that took advantage of this technology. Affordability, complex integration and lack of specialist skillsets were all issues for smaller properties, but times have changed.
Small and independent hotels can now afford, implement and easily manage an RMS and provide them with an immediate ROI. The fees for buying in such technology are quickly covered by improved revenue, and intuitive design and functionality mean specialist skills aren’t necessary for managing these systems. While an RMS can be a trusty assistant for existing revenue managers, hotels that do not employ specialist revenue staff can confidently manage an RMS too.
Manual pricing and forecasting are time-consuming and prone to errors. The risk of human error disappears with automated RMS software, which adds another layer of comfort for independent hotels, meaning significant revenue cannot be lost due to pricing errors.
With the opportunity to integrate with the Property Management System (PMS) and gaining more external support from the RMS tech provider, hotels essentially outsource niche expertise. This takes the pressure off overstretched teams and less experienced revenue managers, marking a more strategic approach to streamline hotel operations.
A smart assistant for pricing
In a competitive market and an expensive operational context, technology is a fundamental enabler for hotels. And if the make or break of any hotel ultimately comes down to the right price for the product based on the market, brand, service and location, then hoteliers must look towards the technology that will help maximise profits and revenue potential.
An affordable AI-powered RMS like Guestline RMS is a smart assistant for your hotel’s pricing. It looks at booking patterns and local events, plus unexpected situations such as a big event being cancelled, or a competitor lowering its price. It combines this market insight with hotel historical data, availability, pickup reservations, cancellations and group reservations along with competitor prices and reputation scores. In using multiple AI models in price forecasting, our Guestline RMS automatically adjusts room rates to get you the most RevPAR revenue possible. It takes away tedious number-crunching but keeps you in the driving seat to help fill more rooms at the best price.
With a clear visibility of revenue performance, insights into segment behaviour and full reports can be shared with all stakeholders as our RMS software provides real-time data on your hotel revenue and profitability. It also means independent hotels can constantly react to changing market conditions to sell more rooms at the right price.
Ready to optimise your pricing with RMS solutions?
While the fully integrated automated RMS is working behind the scenes, general managers and hotel staff can focus on delivering great in-person hospitality. Hotels whether they are big or small can maximise their rate opportunity with more competitive prices, bringing the potential to improve revenue and make significant time savings.
In this article, we have explored the importance of buying behaviours and how technology has impacted the hotel industry with smart software solutions like RMS platforms paving the way to dynamic and real-time pricing. With Guestline’s RMS software solution, you can take control of your revenue with the right technology so that the guesswork is gone, and the price is always right. Isn’t that something every hotelier dreams of?
Want to find out more? Discover more about Guestline’s integrated RMS and our other hotel software solutions to streamline your operations today.