7 Most Effective Hotel Pricing Strategies in 2024

When it comes to maximizing hotel revenue, room prices play a fundamental role in it. To get success in the hospitality industry, there needs to be a proper pricing strategy that can fit all. Bitter truth! However, here's the catch! It's the hoteliers who must consider several things to maintain a sustainable hotel business. You are one of those hotel owners who are on the lookout for one of the potent hotel pricing strategies that can help you dominate the market.

So, let's dive in and discuss the different hotel pricing strategies for hotels in 2024.

What is a Hotel Pricing Strategy?

Pricing strategies in the hotel industry refer to a methodological approach that involves long-term as well as short-term plans, emphasizing providing quality services to your guests and helping you reach your pre-setted profitability margin. Keeping room prices too high or too low can affect both your revenue and customers. So, it's better to consider price optimization methods that will help you maintain a profitable hotel business.

Importance of Hotel Pricing Strategy

• Improve the profitability of the hotel business
• Sustain in the market and grow with time
• Outshine competitors
• Secured room bookings all year round
• Cover operational costs
• Setting appropriate room rates as per the offerings
• Attract travelers and serve them the best
• Get adapted to the dynamic market conditions
• Adhere to local government regulations
• Provide ultimate customer satisfaction

How Does Hotel Pricing Strategy Work?

Hotel price strategies are more likely to change according to the demand and supply faced by the hotel industry. For example, during school holidays or peak seasons, demand for rooms remains high. This is the high time hotel owners need to employ price optimization techniques and charge a lot more than usual. On the other hand, during the off-season, when supply remains high with low demand, it's better to offer low room rates with additional perks. This way, travelers can easily be attracted to the deals.

Before implementing any pricing strategy, understand your target customers and their demand. Make a thorough analysis of the available data to come up with a proper pricing model for hotel rooms.

Hotel Pricing Compliance

Irrespective of multiple booking channels, your hotel room prices need to be consistent as well as accurate.

Be responsible enough to create your hotel room pricing to comply with the regulatory authorities.

Mention the currency with the displayed prices to avoid any future discrepancies.

The majority of online travel platforms sign a rate parity with the hoteliers to bypass underselling.

Your room rates must break down all the minute details and stay the same throughout the overall booking process.

How to Calculate Hotel Prices?

Answering this question makes it clear that there needs to be a universal approach to calculating hotel prices. How do you rate your hotel prices completely depends on important factors like:

• Your local rivals
• Your geographic location
• The size of your entire property and the number of rooms
• USP that can make your hotel stand out from others
• Your target audience

Keep all the information handy. Implement these considerations into your pricing strategies to make them effective.

For efficient revenue management, hoteliers need different pricing strategies for the year. Once you start adapting to the trends, there's no look back!

7 Best Pricing Strategies for Hotels with Examples

1. Dynamic Pricing

With such an ever-changing market, hotel businesses need to change their pricing strategies too. Hospitality industry goes through a lot of fluctuations due to seasonal changes, holiday demand, and environmental patterns. Therefore, it is best to constantly monitor the demand and supply of your hotel business and modify the hotel prices accordingly. If you want to touch profitability, rely on real-time records under hotel dynamic pricing,you can take help from channel manager.

Example:

• Beachside hotels, along with pools, will be in high demand throughout the summer season.
• Hilltop resorts or hotels can take advantage of the peak season or any holiday season.
• Best for hotels with unpredictable demand patterns and hotels with always high occupancy.

2. Psychology-Driven Pricing

To win your customers, you need to think ahead of them. Playing with guests’ psychology makes them feel valued. Surprisingly, this classical hotel pricing tactic still works! The strategy focuses on choosing prices or numbers that seem affordable at a glance and thus influence customers’ minds. Here, the price tag looks below the market rate and insists that customers purchase it. The irony is that they don’t detect that the price remains unchanged! This is how perceiving guest psychology ultimately triggers your sales and makes you the winner!

For Example:

• Setting room pricing at $199.99 seems appealing and cheaper to customers than $200.
• Best for: Wide variety of hotels, more specifically luxury hotels.

3. Length-of-Stay-Based Pricing

The brilliant hotel pricing strategy seems quite effective for most hoteliers out there. It involves encouraging guests for longer stays at discounted rates with attractive offerings. The best part of this hotel price optimization strategy is that guests are offered an aggregate rate based on total nights of reservations. No matter whether your hotel doesn't receive desirable bookings or not, you can modify your room pricing for maximum occupancy and increased revenue.

For example:

• Discounted rates for three-night stays
• Two-night minimum booking on weekends
• Discounted weekly room rates during peak time.

Best for Hotels with fewer rooms, hotels with constant high demand, hotels with huge differences in weekday and weekend booking, and hotels with the tendency of extended stays.

4. Competitor-Based Pricing

To maximize your hotel booking, the smartest way is to research and evaluate the local market. With an increased inclination for travel among the commons, there's always demand for hotels at competitive prices. Compare your room prices with your rivals’ and make an informed decision. Get real-time insights from up-to-date pricing tools and trends, and stay in market competition without devaluing your services. Consider factors like offers, promotional mediums, room rates, property types, and star grouping while implementing this reliable hotel pricing strategy and increasing profits.

For example,

• Monitor your rival’s prices and set your hotel pricing accordingly.
• Check up with your close competitor’s unique offerings and create similar packages for your loyal guests.
• Best for: budget hotels as well as luxury hotels, hotels in locations with high competition.

5. Market Segmentation Pricing

In the hotel industry, segment-based pricing is effective! Under this hotel pricing strategy, hoteliers sell the best-fitted rooms to the right people at the right price. This powerful hotel pricing refers to offering different room rates to different segments with ultimate satisfaction. Considering the volume of guests, varied willingness, cancellation ratio, and staying patterns, pricing varies. Here the prime motto is improving the overall occupancy and increasing ROI of your property.

For example:

• Offer several rooms to corporates or business travelers at discounted rates on weekdays.
• Give the same rooms to leisure travelers at higher rates on weekends.
• For large groups, allocate a few rooms at lower rates than regular ones.
• Best for Hotels with enough event spaces, hotels with corporate tie-ups, and hotels with a high frequency of guests.

6. Package Based Pricing

In the hotel industry, offering packages to guests has become the new normal. Along with a simplified booking procedure, it is best to create customized packages for guests that include offerings at affordable prices. This value-added pricing strategy excites modern travelers in such a way that they enjoy the bundle offer and facilities. Hotel businesses should install this pricing strategy for low-spending travelers during the off-season for extra revenue.

Example:

• Combining buffet breakfast or dining meal with an accommodation package
• Offering children’s complimentary meals, and additional perks for families
• Including spa services with room reservations

Best for hotels with low-budget travelers, hotels with less predictable occupancy, and hotels with lots of short stays.

7. Cancellation Policy-Based Pricing

At present, the cancellation policy-based hotel room pricing is one of the best revenue-generated pricing strategies for hotels.

Guests often book hotels months before for high demand but tend to cancel their hotel bookings for unavoidable uncertainties. Here comes the opportunity for the hoteliers! Hotel management must include a well-crafted non-refundable cancellation policy to cut down loss. If you are on the verge of increasing your hotel revenue, include this powerful pricing strategy and sell the canceled rooms again at a profitable end.

For example:

• Set the non-refundable cancellation policy during the high season
• Offer refunds up to a certain amount during the off-season
• Set lower room rates for booking with no refund (if canceled)

Best for: Small hotels, hotels with event spaces that may get a lot of cancellations, hotels aiming for group bookings.

Hotel Pricing Software

For optimizing pricing strategies for hotels, having accurate data is of utmost importance. Here comes the role of an integrated pricing platform! These customizable pricing analytics tools are quite effective in collecting competitors’ data and analyzing records & trends. Thus, helps hoteliers set more accurate room rates according to the situation. With zero risk of human error and reduced expenses, this real-time pricing software offers both convenience and profitability. Here are a few: Wheelhouse, PriceLabs, IDeaS, RoomPriceGenie, and more.

Hotel Pricing Trends

Take a look at some of the recent stats and trends:

• As per STR reports, demand for the rooms is aiming to break all records in 2024.
• The projected revenue of the Hotel market will reach US$426.40 billion worldwide by 2024.
• According to Skift, there’s a phenomenal increase in hotel prices in 2024 due to surging demand and constant supply of hotels as opposed to 2023.
• With a remarkable surge in online hotel booking, it's recommended to set exclusive rates for travelers who book through mobile devices or online platforms.
• In 2023, there’s a hike of 11% in the global average daily rate of hotel rooms.
• The global hotel market is expected to reach $1052.84 billion in 2025.

Keep hotel fares semi-flexible, i.e., combining traditional approaches (advance payment, non-refundable booking) with modern value-added facilities (late checkouts, room upgrades).

Conclusion

By now, it's clear that considering these clever hotel pricing strategies can not only help your hotel drive bookings but also maximize revenue.

Have you applied any of the above-mentioned pricing strategies for your hotel property? If so, we would like to know about your real experience. See you in the comments! 

Read More: How to maximise profits with a robust Property Management System