This article has been written by Beonprice for Upstay
The global crisis we are experiencing as a result of the coronavirus pandemic has presented an unprecedented challenge to the hospitality industry. We have no benchmarks to compare current circumstances with, and hoteliers are forced to look for creative solutions to cope with the situation and emerge stronger and better prepared when demand recovers.
At Beonprice, we have identified three main challenges facing the tourism sector at this time:
- The first challenge we face is how to respond effectively to a changing and unpredictable environment. Hotel companies must be able to respond to unforeseen events immediately and the implementation of new methodologies that facilitate a quick reaction will be key.
- Keep in mind that your competitors will also be creative, as they also want to attract their share of market demand. Keep an eye on them, with an up-to-date competitive analysis that includes aspects beyond your pricing strategies, such as expected quality or customer satisfaction, which will allow you to know the price that each segment is willing to pay for the different products at any given moment.
- In this situation, our efforts should focus on increasing our market share, attracting customers from all segments and offering an experience that encourages customer retention. Customer satisfaction is determined by the customer’s expectations of our product, in terms of the quality of service offered. If the experience matches what the customer expects to receive, and the price matches what the customer is willing to pay, they will consider that price to be fair. This approach will also reduce the cost of customer acquisition and enhance our reputation.
Identifying the right price
Several studies identify five key factors that actually contribute to guest retention: quality of rooms, quality of service, cleanliness, brand image and, most interestingly, price appropriateness. The right price is the one factor that cannot be compensated by any other. No matter how good the quality of the room or the quality of the services: as soon as the customer does not perceive that the price he has paid is fair, he will not come back.
The price is considered fair when the quality of the service you offer justifies the price someone pays for it, taking into account the alternative products on the market. If we translate this to the world of hospitality, this means that we have to look at three factors:
- Objective quality of your hotel.
- The online reputation, as a direct reflection of your guests’ satisfaction.
- The rates and quality of competitors, including objective quality and reputation.
If we take these factors and combine them into an index that allows us to identify what a guest is willing to pay for the quality you offer, taking into account the alternative products on the market, we can match the guest’s expectation of quality with the price they pay, so that we maximise the likelihood that the guest will perceive this price as fair. Beonprice’s Hotel Quality Index (HQI™) is able to include this information in the algorithm, along with many other factors to forecast demand and recommend pricing strategies.
Today, when historical data is no longer as useful in predicting the future, it is important to give more weight to the quality index. If you do identify what a guest is willing to pay for the quality you offer, and therefore have a price that is perceived as fair by your guest, then all your guest retention efforts later in the guest journey (during and after the stay) will have a much more fertile ground and be more effective.
When defining your overall strategy, make sure you pay attention to all stages of the guest journey, from laying the groundwork for a good experience at the pre-booking stage with good pricing decisions, to efficient reputation management and learning from feedback. We guarantee that with these ideas in mind, the road to success will be much smoother.