Posted by Setting competitive prices is crucial for success in the travel industry.
With so many online travel agencies (OTAs) and review sites allowing customers to easily compare prices, having an effective pricing strategy is key.
This article will provide travel companies with a framework for conducting pricing analysis to optimize their rates.
Understand Your Customers
The first step is understanding the target customer for each offering.
Factors like demographics, trip purpose (leisure vs. business), length of stay, seasonality, and more will impact customers’ price sensitivity and willingness to pay.
Conduct market research through surveys, interviews, and customer data analysis to create traveler personas. Identify value-based factors driving different segments’ purchase decisions.
Analyze the Competition
Research competitor’s prices across various channels to see where your pricing falls relative to the rest of the market.
Use paid tools like Rate Shopper to gather rate cards quickly, but also manually check rates on major OTAs like Expedia, Booking.com, and hotel brand sites.
Factor in competitors’ locations, star ratings, amenities, packages, deals, and overall traveler reviews. Look for patterns around competitors’ pricing strategies. Plot out price positioning maps to visualize where everyone stands.
Tracking competitors over time shows dynamic rate fluctuations.
Leverage Pricing APIs
Implementing pricing analytics is key to maximizing revenue in the competitive travel industry. Rather than spending hours manually gathering data and evaluating rates, smart hotels, airlines, and OTAs are turning to sophisticated pricing APIs.
Check out these travel APIs and choose the suitable one that taps into huge datasets on seasons, events, demand, and competitors to suggest optimal dynamic rates every single day.
By leveraging such algorithms specifically built for the volatility of travel, companies can yield substantial RevPAR and profitability gains. Intrigued by the power of pricing APIs?
We encourage you to research which specific flight, hotel, rental car, and vacation rental pricing APIs best fit your business needs.
Calculate Metrics for Evaluating Rates
Establish pricing rules and success metrics based on profitability targets. Common metrics include:
Occupancy Rate – Target at least 60-80%. Too low looks bad; too high risks losing high-paying customers. To check out how to increase occupancy rate click here.
Average Daily Rate (ADR) – Track changes versus last year. Goal varies by property type and season.
RevPAR (Revenue Per Available Room) – Total room revenue divided by total rooms, regardless of occupancy. Accounts for both occupancy percentage and ADR in one metric.
Set Optimal Rates by Room Category
Leverage the above metrics by room category rather than property-wide. Suite versus standard rooms attract different target travelers.
Dynamic pricing by room category and board type optimizes yield.
Review rate parity across packages and channels also. Consider floor locations, special views, room sizes, and bed configurations as value-adds to justify room rate differences.
Monitor Channel Performance
Today’s travel tech stack has many distribution channel options including brand dotcom, OTAs, metasearch engines, GDS, and travel agents.
Track net ADRs by channel along with volume and commission rates. Monitor for consistency across channels.
Use channel management software to quickly update availability and pricing across all sites as needed based on performance.
Conduct Competitor Rate Audits
While technology helps automate analysis, manually sampling competitor rates is still important.
Regular competitor audits reduce rate disparities and prevent pricing outliers before customers notice issues.
Confirm rate parity across channels also. Review last-minute deals as well to ensure maintaining rate integrity while balancing occupancy.
Incorporate Qualitative Feedback Too
Traveler’s willingness to pay ties closely with perceived value, not just comparison shopping rates.
Regularly monitor customer sentiment through post-stay surveys and online reviews.
Feedback may reveal rate anomalies not otherwise obvious from benchmarking competitors.
Guest commentary also gives context to sentiment around amenities, packages, and deals that affect price elasticity.
Pricing analysis takes continuous effort, but it enables travel companies to gain significant competitive advantage in the market.
Following this structured framework leads to optimizing occupancy, ADRs, and RevPAR performance over time.
And leveraging the latest pricing technologies via APIs makes implementing a smart pricing strategy much easier. With the right combination of data, tools, and metrics, travel brands can thrive even in increasingly competitive markets.
Conclusion:
Effective pricing analysis takes time, but it pays dividends in the travel industry’s competitive landscape.
By thoroughly understanding your customers, closely monitoring competitor rates, leveraging dynamic pricing tools, analyzing key rate metrics, and incorporating qualitative feedback, travel companies can implement data-backed pricing strategies.
Rates can be tailored by room category, board type, and channel to optimize revenue.
With the right combination of quantitative benchmarking and qualitative insights, hoteliers, OTAs, and airlines alike can maximize occupancy and average daily rates.
Savvy pricing leads to revenue growth and sometimes survival amidst market volatility.
Continually experimenting and analyzing pricing analytics paves the road for success.