Why you need to adapt your pricing strategy post-COVID

Why you need to adapt your pricing strategy post-COVID

23 July 2020Samantha Williams

Reporting suggests hotel pricing strategies for leisure hotels and resorts has shifted in the wake of heightened demand post-COVID – as the power goes back to hoteliers. So, using our insightful software, we’ve analysed the booking data of over 3,500 hotels using our live dashboard analysis tool.

The data has also indicated a shift in pricing strategies, following a huge spike in demand, suggesting hotels may be able to revert to a fixed pricing strategy. Setting prices using the rack rate, the maximum amount the hotel usually charges for a room when demand for rooms in the area is highest, hotels may start to see improvements on margins and profitability.

One of our clients, Port Lympne, a hotel and wild animal reserve in Kent, has seen a 387% increase in bookings compared to the same timeframe last year, following the reopening announcement. And whilst the number of bookings is up, the value of them has jumped even more, increasing by 469% – with much of this attributed to pricing differences.

A shift in power balance

In recent years, hotel rates have been determined by consumer demand. With hotels having to price attractively to beat the competition and entice guests, room rates were set based on a number of contributing factors, with the hotel needing to tempt prospective guests in order to drive demand. Now though, in the wake of COVID-19, we’re starting to see a shift in the power balance. With social distancing measures limiting hotel capacity, combined with high domestic demand due to travel restrictions, our data suggests that hotels are increasingly able to charge higher rates – with guests still willing to pay.

Rack rates may be a somewhat unfamiliar term to the modern day revenue manager, but it’s a term that, for the time being at least, could be coming back in vogue. Usually rack rates are set artificially high ahead of applying attractive discounts. Now, however, we’re seeing guests are willing to pay top rate, provided the hotel or wider brand is able to demonstrate sufficient safety measures and anti-COVID precautions.

Seize the opportunity

In recent years, our data has told us that ADR (average daily rate) is increasing year-on-year – particularly in the luxury market – yet, post lockdown, this increase has accelerated. Across our full data spectrum, we’re seeing that ADR is improving considerably, with a 56% increase compared with this time last year. This is something that, given the turbulence over the last few months, will be a welcome boost to hoteliers.

It is likely that this recent power shift is only temporary though, as guests prioritise safety, coupled with an enjoyable experience and value for their buck. Provided that’s the case, we’re seeing that they’re willing to pay even more than they usually would. As the market continues to reopen and as the risks associated with COVID diminish over time though, hoteliers will almost certainly have to revert to pricing more attractively. However, for now, it’s another indication of a change in behaviour that should serve to help the hospitality industry in the short term as it looks to rebuild.

Our live dashboard displays real-time hotel industry data, giving you the latest information on hotel trends. To find out how Profitroom can help you seize the current opportunity and maximise profits, just get in touch with us here.