Like a first-class seat on an airplane, dynamically optimizing upgraded room classes can unlock significant revenue potential. As an industry what best practices could be applied to maximize the RevPAR growth opportunity this presents?
I recently brought this question to the HSMAI Revenue Optimization Rising Leader Council for collaboration. Here were our key discussion points and findings:
Three Best Practices
1. Capitalize on Differences in Inventory
By pairing technology with some creativity, hotels with varied inventory, such as penthouse suites and interconnecting rooms, can take advantage of dynamic pricing to cater to a wider segment of guests. Dynamically price each premium category based on their individual demand levels instead of using static increments, or by per-person or as a event space. Similarly, common setups like queen rooms interconnecting with twin rooms can be sold as a family room, catering to family markets.
2. Incorporate Technology Upgrades and Loyalty Programs
To compete with the loyalty programs of larger hotel enterprises, many hotels would need to invest in technology upgrades to level the playing field. It helps to simplify the process, as the system can automatically adjust pricing and inventory strategy based on real-time demand. Another great way to drive revenue is through loyalty program offerings. The program provides an opportunity to identify guests who frequently stay with your property and offer them an offer that makes guests feel appreciated while only offering the minimum discount required to confirm the booking.
3. Partnering with Luxury Travel Agents, Airbnb and Global Distribution Systems (GDS) partners
Finally, luxury travel agents, GDS consortia and online marketplaces like Airbnb can be excellent partners to drive demand for premium rooms. Luxury travel agents have clients who often seek the best accommodations, while Airbnb partners with unique accommodations that cater to a different market segment than traditional hotels. Partnering with them also enables hotels to leverage their marketing capabilities at a lower risk.
1. Balancing Occupancy and Exclusivity
Hotels with a significant number of room types may need to consider upgrades to optimize occupancy rates. However, multi-bedroom units, often considered premium options, tend to be harder to sell. This may result in lower occupancy rates for super premium rooms, creating the need to strike a balance between exclusivity and maximizing revenue. The solution lies in reducing unnecessary upgrades with precision pricing and flexible inventory controls.
2. Navigating Suites and Premium Rooms
While traditional rooms may be easier to sell, suites in bed and breakfast (B&B) establishments often present challenges. To overcome this, partnerships can be formed with regular room categories, offering deals to encourage guests to choose suites. These deals may include either pricing per-person or waiving additional fees for three or four occupants.
3. Effective Communication
To ensure the success of dynamic inventory optimization strategies, effective communication is crucial. The strategy should be communicated to all relevant parties, including the sales team, who play a key role in understanding the value proposition and effectively conveying it to clients.
4. Measuring Success and Incentivizing Performance
Measuring the effectiveness of dynamic inventory optimization requires tracking key performance indicators (KPIs) and obtaining feedback from the sales team. Incentive plans that reward sales and front desk staff for upselling premium rooms or achieving higher revenue targets can be highly effective in driving performance and revenue growth. This aligns incentives and encourages the team to focus on selling the most profitable room types.
To find out more about dynamic pricing, look at the resources below.
- Learn How to Maximize Your Premium Hotel Room Revenue (revfine.com)
- (1) How to Sell Suites – Chapter 2. Pretend you have a second General Manager | LinkedIn
Thinking about implementing a dynamic pricing strategy, but unsure how to start? Use the questions below to start looking into where to start to implement it.
Questions to Consider:
- As a revenue leader, what involvement do you have in the post-booking upsell pricing and availability? Has your team found success with upsell technology platforms such as Oaky or Nor1?
- How can we leverage sales and marketing to influence demand and booking curves for premium inventory?
- What stands out in your booking velocity and stay patterns by room class in different distribution channels (Examples: Direct vs OTA vs Airbnb vs Suiteness)? How can we capitalize for our premium inventory?
Anthony Rose, Director of Sales at IDeaS Revenue Solutions, HSMAI Revenue Optimization Rising Leader Council Member. Connect with Anthony on LinkedIn.
This article originally appeared on HSMAI.