TDS N. America 2016

October 2016, Las Vegas

Hyatt on how to get your pricing staples right

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Getting hotel rates straight sounds complicated but for Hyatt it’s about keeping it simple from the get go. Pamela Whitby reports

Like all the big chains, Hyatt Hotels has the budget and the human resources to keep up and continue innovating in revenue management. According to Christen Garb, the company’s VP of RM, the group is constantly looking to improve how they integrate revenue management (RM) into the company culture.

And by so-called ‘integrated RM’ she means ensuring that revenue managers are working closely with operations, sales, food & beverage, marketing and more at the property, regional and corporate levels. A big part in making this succeed has been high-level training on the group’s sophisticated RM systems, but the work is ongoing.

Also, like most of the big chains, driving direct bookings is a well-documented top priority, but Garb doesn’t think of it as ‘trying to beat the OTAs’. Rather it’s about finding ways to be “great partners” while also building relationships with customers so they “come and book directly with us”. And, crucially, part of this process is getting pricing right.

This is something that hotels really seem to struggle with as we heard at EyeforTravel’s European Summit earlier this year. Here Citizen M COO Lennert de Jong pointed to the worrying practice of hotels with low occupancy discounting heavily at the last minute. Many hotels will acknowledge that one of the biggest challenges is to sell empty rooms in the last month – hence, or perhaps because of, the rise of firms like hotels.com and hoteltonight.com.  

See the slide below from OTA Insight's rate intelligence dashboard. 

However, there is a growing view that one of the biggest mistakes hotels can make is to over price from the outset. This can happen for a number of reasons including:

  • They operate in a high demand market so think they can

  • Are so proud of the product they think it is worth it

  • Want to ensure that when they are discounting at the last minute the rates aren’t too low

But it does not have to be this way and is increasingly viewed as a dated approach. Garb sees the practice of increasing the rack rate so that discounted promotions in the last month don’t hurt so much as “so backwards, and a thought process than needs to change”.

Instead she argues that the focus should be on pricing the rack rate – be that the best available, standard or flexible rate  - so that it will actually sell, and aiming the product at the market segment that delivers the most volume.

“If you price your hotels to sell from the get go then you won’t need promotions,” she says.

So easier said than done? No, says Garb, its just about getting your pricing staples right from the outset.

4 recommendations:

  1. Understand your market: It is important to understand who your competitors are and how they are pricing themselves in your market. This can be achieved by using rate shopping tools like RateTiger, Rate360 from Travel Click, RateGain and the list goes on.

  2. Position yourself carefully: You don’t have to undercut competitors completely. Instead define what value your hotel offers versus the value your competitors offer and position accordingly.

  3. Measure, measure, measure: All the big chains are using market segmentation reporting tools but some of the smaller ones or independent hotels may not be.

  4. Code every rate to a market segment: Garb cannot stress enough that “if you are you are coding every rate that ever gets booked into your hotel to a specific market segment, then you will be able to track the percentage of my rack market segment against my hotel”.

At Hyatt hotels, rack rate sales sit anywhere between 15% and 30% and Garb argues the more rack rate business is booked, the more profitable the hotel will be.

Why?

“Because it is not a discounted rate,” says Garb, adding that, “we also find that sometimes lowering your rack rate will help it sell more”.

The result of this is that the overall ADR [average daily rate] actually goes up because more rack-rated business was booked, rather than having to rely on a heavily discounted segment.

“That is the core of our philosophy at Hyatt and should be a staple strategy within every hotel,” she concludes.

Watch out for more insights from Garb in an upcoming piece on managing wholesalers or join us at TDS North America in Las Vegas (Oct 6-7) to hear more from big brands like Hyatt, Commune Hotels & Resorts, Alaska Airlines and more

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