In 2009, 60 percent of leisure travel and 40 percent of business was booked online, and recently, often via mobile devices. More than five billion people used mobile booking sites in 2010 and that number is only going up, so it makes sense that with the increased number of ways that consumers can book, a hotel's pricing strategy needs to become more sophisticated as well.

Published: 25 Feb 2011

In 2009, 60 percent of leisure travel and 40 percent of business was booked online, and recently, often via mobile devices. More than five billion people used mobile booking sites in 2010 and that number is only going up, so it makes sense that with the increased number of ways that consumers can book, a hotel's pricing strategy needs to become more sophisticated as well.

The newest technology, GPS-enabled mobile phones, allows consumers to take advantage of location-based services, which will locate a consumer's geographical coordinates using the phone's built-in GPS and will then offer targeted hotel choices nearby, all of which are able to be booked through a customer's mobile internet or a mobile app.

This technology enables customers to make fast decisions, causing a significant downwards shift in the booking window for hotel stays. A survey conducted by Hotelbook.com in November of 2010, revealed that 1 in 5 consumers are booking hotel reservations just five days before their visit. While flight reservations are often made in advance, hotel bookings are being delayed often until the last minute, sometimes even from the pavement outside of the property of their choice.

So, in order to be effective, hotel revenue managers must adapt by updating their pricing strategy to reflect this trend. Revenue managers that understand customer motivation and habits will recognize the value in matching customer expectations of what they want to spend with what they receive for their hotel stays. To remain competitive in an industry that has rapid technology changes, revenue managers require access to travel information that is quick, easy to transfer, and up-to-date.

To optimise a property's pricing strategy for mobile, hotel revenue managers should follow these four best practice methods.

Determine a favourable rate. Granted, this will take some adjustment in a real-world environment, but it is important to find a rate that will stimulate the almost instantaneous demand from the mobile customer, while keeping your ADR at an acceptable level. One potential starting point is your traditional OTA strategy. If you're familiar with the rise of OTAs (and we certainly hope that you are, or else you're losing out on a valuable revenue channel), you understand and have adapted to a dramatically shrinking booking window. Take whatever has worked for your particular property in the past and update it to suit an even slimmer booking window.

Stay on top of your competition: manage your rate, constantly. It's a daunting task, but considering that the new mobile customer has the potential to book a stay while standing on the pavement between you and your competition, it is a business imperative to always be actively managing your rate. Pay close attention to your primary competitors' rates and be ready to counter. Make this process easier by attempting to understand variables that motivate your mobile consumers. Understanding these variables will help you with timing: you'll know the peak times at which you need to be actively monitoring and adjusting your rates in order to pull mobile customers away from your competition.

Mimic financial/stock market valuations. Just as spontaneous fluxes in volume and prices stimulate buying in the stock market, there are variables and fluxes that spontaneously stimulate the hotel industry. Once again, the trick is to find the variables that influence your potential mobile customers. Use your historical pricing model to set rates initially, and then make on-the-fly adjustments based on current variables. Create your own current variables such as occupancy, market conditions, weather, events, etc. Don't get too complicated¾similar to stock market valuations¾the more variables you incorporate, the greater the room for error. The point here is to: 1) create a record; 2) create a measurable blueprint; and 3) keep a wide range of adjustment between your historical rate and your favorable rate. This way, you'll know your limitations and what quick adjustments are necessary to bring in the mobile customer.

Manage your channels. The simultaneous nature of mobile booking means that there are any of a number of channels that the mobile consumer is using. That same customer standing on the pavement between you and your competition, ready to book - is he looking at your website or is he comparing prices through an OTA? Is he using a mobile app instead of a browser to access your own booking engine? The point is, you'll never really know, so it's important that once you've made a pricing decision, implement it through every channel available, continuously and in real-time (because as we all know, the market is constantly changing).

With the rise in mobile booking options for the customer, hotel booking decisions are made more quickly and more closely to the travel date. In order to stay on top of this trend, it is important for revenue managers to not only improve the normal day-to-day pricing procedures, but to experiment with, and integrate new ideas and practices to capture this challenging market.

It's a true feat of multitasking, but as a talented revenue manager, you're used to that, right?

(Contributed by Jean Francois Mourier, CEO & Founder of RevPar Guru)