PRICING STRATEGY AND REVENUE OPTIMIZATION

This strategic choice depends on some factors, such as the type of accommodation we have, type of property, offered services, business goals, competitors and other factors discussed below.

What is pricing?

It is the practice or set of practices adopted by a company in a more or less procedural way with the purpose of defining its selling price. It usually depends on multiple factors and goals of the company. There are different pricing methods and strategies that take into account several factors[1], such as:

-Ease of calculation

-Estimation and evaluation of costs

-Market competitive analysis

These are the most used factors to choose a method of calculation, however with the development of new revenue management tools (RMS) it is possible to be more dynamically adaptable to the market and with a greater degree of customization to the client and his needs in a much more effective way. The approach to the calculation methods will be made in a next opportunity. In this article the focus will be to know the different pricing strategies and factors to be taken into account for an effective revenue creation strategy.

1. The implementation of an effective pricing strategy

In general, we can say that for the development of a good pricing strategy, the hotel has to carry out a multidisciplinary analysis, appealing to all the departments of the organization. In this way, six organizational skills are identified that are essential for establishing a highly effective and successful pricing strategy.

Essential Skills:

1. Price execution (policies and procedures)
2. Pricing strategy
3. Advanced analysis and pricing
4. Organizational and management alignment
5. Technology and data management
6. Taxes and regulatory efficiency

In these specific points all the properties must carry out a benchmarking exercise with the best competitors of the industry for their type of business, this practice has the main goal of identifying in which pillars we can have room to improve and where we should focus our attention as a priority. These are the generic pillars, however there are factors such as, category, quality / value, image, product life cycle stage, additional services, competition, sales volume, demand, elasticity of the demand, affiliation in a chain, distribution power, marketing strategy, organizational structure, taxes policy and costs, which will decisively influence our pricing strategy.