Pricing and promotions: being targeted and transparent is essential
Deals and promotions are crucial during certain periods and, if used wisely, can help to maximise revenue and profits. They can also be beneficial for customers. However, to achieve maximum benefit, any promotion must be tailored to the needs of both the customer and the hotel.
When it comes to the luxury market, deals and promotions need to be folded appropriately into the overall hotel’s pricing strategy, says Freya Duncker, director of revenue management, Emirates Palace Hotel in Abu Dhabi. She adds that the initiatives have to be taken without undermining the clear position statement of a hotel like Emirates Palace “that is unlike any other in the market”.
So first a hotel needs to understand whenpromotions are necessary and then design these carefully in line with customer requirements. “We find that our customers know what they want, and which channels to use to get that, so they are not spending time shopping around across multiple platforms,” she says.
EyeforTravel’s Ritesh Gupta found out more.
EFT: The travel industry is competitive and behaviour of travellers is difficult to understand. How do you think deals and other promotions add value?
FD: The buying behaviour of travellers has changed quite significantly in the past ten to15 years. Accepting just one quoted rate and confirming is no longer common practice and customers shop around to get the best deals and offerings.
Deals and promotions certainly add value to the customers; however too many offers make the travel industry’s pricing less transparent and more opaque than it used to be. We promote our best rates on Kempinski.com so that our customers know they can come to our website and find all of our best packages and rates in one place without the fear of missing out on deals from different channels.
EFT: How should RM professionals work on offering deals and other promotions?
FD: When offering deals and promotions it is important that the difference between certain products is clear for the booker, for example in terms of price point as well as inclusions and restrictions. Also not too many offers should be available at the same time.
A ‘best available rate’ without breakfast for example should not be more expensive than a ‘weekend rate’ with breakfast.
EFT: How do you plan for your promotions and decide on pricing strategy?
FD: Promotions should always be designed to coincide with the usual booking windows of the customer. Promotions for rooms, food & beverage and the spa should be used strategically to help meet targets.
The pricing always needs to be clearly distinguished from non-promotional products, whether with added value or with a distinct price point in order to help non-determined customers to make the right choice which benefits both – the guest as well as the hotel.
Promotional initiatives should never be contracted for a long period, such as in year-long wholesale contracts. This is because at a later stage there may be no need for a certain promotion, or a change in seasonality may require promotions in a period that would usually not be considered for special deals.
At Emirates Palace we analyse and forecast the demand for approximately 550 days in the future. Once we anticipate that a certain period requires a special deal or promotion we design packages for specific revenue streams. To maintain a base of business standard deals such as ‘early booker’ promotions can be quite productive.
EFT: What are the dos and don’ts for promotions?
- evaluate need periods early to define when promotions are required.
- consider day-of-week patterns and which rooms need to be pushed; deals do not always have to be at the entry level.
- build in added value, such as food & beverage and spa that also require revenue generation.
- Add restrictions
- undercut your Best Available offers.
- offer too many similar products at the same time.
- overcomplicate it!
- offer promotions and deals in high season.
- undermine your hotel’s overall pricing strategy.
EFT: It is recommended that RM should adhere to a rational pricing philosophy. Where do initiatives like deals and other promotions fit in the overall strategy?
FD: While a rational pricing philosophy can certainly include deals and promotions in need periods, the key element is transparent pricing.
A concise list of promotions, as opposed to a list of 15 to 20 options, offers customers plenty of choice without being overwhelming.
We make sure that our ‘best available rates’ are found on our website and that this is clearly communicated to our customers.