The Keys to Hotel Revenue: Reputation and Price Fairness
The global crisis we are experiencing as a result of the coronavirus pandemic has brought unprecedented challenges to the hospitality industry. We have no benchmarks to compare the current circumstances with, and hoteliers are forced to look for creative solutions to face the situation and come out stronger and better prepared when demand recovers.
The first challenge we face is how to respond efficiently to a changing and unpredictable environment. Hotel companies must be able to respond to unforeseen events immediately and for this, the implementation of new methodologies that facilitate a rapid reaction will be key.
Be sure that your competitors will be creative too as they also want to attract their share of the market demand. We need to keep an eye on them, with an up to date competitive analysis that includes aspects beyond their pricing strategies, such as expected quality or customer satisfaction, which will allow you to know the price each segment is willing to pay for the different products at any given moment.
In this situation, our efforts must focus on increasing our market share, attracting customers from all segments and providing an experience that encourages guest retention. Customer satisfaction is determined by the customer's expectations of our product, in terms of the quality of service offered. If the experience matches what the customer expects to receive, and the price is in line with what the customer is willing to pay, they will consider that price to be fair. This approach will also reduce the customer acquisition cost and enhance our reputation.
Identifying the fair price
Several studies identify five key factors that actually contribute to guest retention: room quality, service quality, cleanliness, brand image and most interestingly price fairness. Price fairness is the only factor that can’t be compensated by any other factor. It doesn’t matter how good your room quality is or how great your services: as soon as the guest doesn’t perceive the price that they paid as fair, they’re not coming back.
Price is considered fair when the quality of the service that you offer justifies the price that somebody is paying for it, considering the alternative products on the market. If we translate this into the hotel world, this means that we need to look at three factors:
- Objective quality of your hotel
- Online reputation, as a direct reflection of the satisfaction of your guests
- Competitors’s rates and quality, including objective and reputation
If we take these factors and combine them into one index that enables us to identify what a guest is willing to pay for the quality that you offer, considering the alternative products on the market, we can match the guest expectation of quality with the price that they pay, so that we maximize the probability of the guest perceiving this price as fair. Beonprice Hotel Quality Index (HQI™) is able to include this information into the algorithm, together with a lot of other factors to forecast demand and recommend pricing strategies.
Deliver a great experience and Communicate effectively
Price fairness has a lot to do with the quality of the guest experience. After all, when traveling, we are paying for an experience rather than an actual product and we judge the overall hotel stay in comparison to the amount of money we pay for it.
While a satisfactory guest experience and an open and honest communication strategy were important even before the pandemic, these factors now weigh more heavily than ever before. Hoteliers need to ensure that the accommodations and services they provide are not only good, but also safe. In the current context, travelers carry around a multitude of questions and concerns while traveling and trust is now a key factor that has the power to encourage a booking and enhance the guest experience. Stringent cleanliness and safety measures, along with live engagement and clear communication are bound to ensure a much-needed feeling of safety and security, one that has the potential to generate more revenue.
Make sure that the hotel staff is always available to answer questions, address concerns, and solve issues on the spot, in order to improve the guest stay, while keeping communications safe and contactless.
Manage your reputation effectively and learn from your guests feedback
The thorough analysis of guest feedback opens a gateway to a world of possibilities. Hoteliers who take the time to actually listen to what their guests have to say are able to get a clear overview and understanding of what works and what doesn’t at their hotel, as well as the constant changes in the traveler behavior and expectations. Feedback is the best catalyst to understand the current positioning of any hotel business and the very base on which smart business decisions can be made. If, for example, the feedback from guests suggest that the wifi connection is not the best, you, as a hotelier, will know exactly where to direct your investments. In time, with the right improvements that guests want and expect to see, you can adjust the pricing accordingly and get more out of your offerings. With quality comes quantity, but in order to move forward, you need to take a step back and look at previous guest experiences in order to analyze, understand, and adjust.
Nowadays, when historical data is not that useful anymore to predict the future, it is important to give more weight to the quality index. If you don’t identify what a guest is willing to pay for the quality that you offer, and therefore have a price that is perceived as fair by your guest, then all of your guest retention efforts later in the guest journey (in-stay, post-stay) will be based on a much more fertile ground and will be more effective.
When defining your overall strategy, make sure you pay attention to all the stages of the guest journey, from laying the foundations for a good experience on the pre-booking stage with good pricing decisions, to efficient reputation management and learning from the feedback received. We guarantee you that with these ideas in mind, the road to success will be much smoother.