Some hoteliers focus only on competitor-oriented pricing, thereby ignoring the consumers. Sometimes, they assign an arbitrary rate to their rooms that just barely turns into profit. Here, we show you how you can build a consumer-oriented pricing strategy while improving demand to gain a competitive foothold in the market: Rethink pricing strategy from the consumer perspective Ways to optimize your competition strategy: tutor2u, in its evaluation of Price Wars, says, “Price wars are nearly always bad news for the majority of businesses that get locked into them.” Consequently, a low-price winner might win that battle but can never win the war as it’s not a sustainable model. Moreover, due to price wars, you miss out on your chances to grow as it’s difficult to get out of cutting-price strategy. But what if it doesn’t shift at all or it reaches a saturation point? In this situation, you’ll not have a sustainable cost advantage as you give your customers a big discount and hurt your bottom line. A price cut can lead to a shift in market share which proves to be helpful for some time. Hoteliers start price wars to win market share, sometimes not as a result of careful analysis, but because of their competitive instinct kicking in. Competing only on price can hurt you in the long run Also, your guests might not like to come back to your hotel as a result of poor offerings and inferior customer service. Your employees are less likely to remain as productive and motivated. In both of these cases, you run the risk of hurting your business. The first thing that might come into your mind, as a hotelier, is to reduce benefits and wages for your employees or to cut down on quality services, like an impressive breakfast spread, for your guests. In such a situation, you might be forced to look out for ways to reduce costs. With such a small financial cushion, you’re more vulnerable with every slight increase in costs or unexpected costs, say emergency boiler replacement at your property. When competing on price, you tend to set low prices for your rooms which translates into earning narrow profit margins, which translates into less cash flowing around your company. Therefore, while setting rates, you should assess your own position within the market and consider linking competitive pricing strategy with some other pricing strategies. What’s the worst part of price war is that you’ll never be able to win loyal customers as low-price guests are usually loyal to prices than to hotels.
Value propositions are the core to growth for any brand, but pricing based solely on the competition can make you lose your value proposition.
Secondly, it makes you ignore your value proposition. Understandably, when your guests won’t find value for their money when they stay at your hotel, they’ll be more prone to leaving negative online reviews, thereby affecting your business and image. On the other hand, you might rate your rooms and services at a much higher rate than your offer, thereby indulging in price wars without offering anything substantially valuable to your guests. There are chances that you rate your rooms at a much lower price than what you offer, thereby facing revenue loss. Since you set your room rates based on your competitors’ rates, this leads to ignoring your own unique positioning. Let us tell you why.įirstly, competition-oriented pricing is based on the presumption that your competitors are priced correctly, thereby taking power completely out of your hands. While setting prices based on your competition can make you a strong contender in attracting price-sensitive customers setting your prices based only on this strategy can be risky for not only your business but also your reputation. You might lose your value propositionĪ competitive pricing strategy involves setting room rates based on competition rather than on guests. Here, we discuss why competing on price alone, is not a good strategy for hotels who want to win loyal, long-lasting guests. Thus, to ensure a maximum and sustainable competitive edge, other factors should be taken into consideration and should be adapted in parallel with your pricing. But competing on price alone is a risky proposition. After all, competing on price often feels like such a natural path to follow. When you’re trying to attract new guests to your property, it can be enticing to use price as an incentive.
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