Relation Between Room Pricing And Revenue

Success of a hotel depends, to a large extent on pricing, particularly of rooms. A welldesigned hotel pricing strategy can do wonders by giving a strong push to the hotel revenues. How you arrive at an appropriate pricing and what kind of strategy you use is an important issue. Appropriate pricing strategy is an important step towards hotel revenue maximization. To a consumer the price may be a plain number, which the hotel may quote differently at different times and to different people. But reality is different! Ashok Malkani, on delving deep into the hotels’ room pricing strategies, finds that the reality is not what the layman imagines. Though, of course, one aspect which almost everyone knows is that the most important factor is the demand and supply balance.

With the recent dispute between the Federation of Hotel & Restaurant Associations of India (FHRAI) and the Online Travel Aggregators (OTAs), MakeMyTrip and GoIbibo, about the discrepancies that they indulge in as far as room rates of their members are concerned, brings the focus on Hotel Room Rates which are the major source of revenue for these properties.

It has to be realised that though F&B contributes significantly to the revenue of the hotel, the room rent and occupancy formed the crux of the earning. Deciding on the price of the hotel rooms is an onerous task, especially for those who are not able to invest in specialist Revenue Managers and are bombarded with varying opinions from numerous sources.

Almost all revenue managers realize the importance of maximizing room revenue. So what would be the best strategy for increasing the revenue?

Sucheta Jadhao, Director of Revenue, Sofitel Mumbai BKC, iterates,” When it comes to profitability in the hotel service industry, the right pricing of rooms is directly collateral to increasing room revenue. Forecasting and analysis of past records is the first step to understand how the pricing of rooms has been fluctuating in the past accounting year. Post a detailed understanding of the room price trends over a period of time, appropriate strategies such as personalised and inclusive packages, encouraging longer stays, discounted rates for direct booking and segmented room pricing can be applied to optimize room pricing.