Price war in hotels usually happens for some major tricks which we shouldn’t do all the times!
Let us look deeper into it…
How do we price our hotel on OTA’s- Operational Cost + pricing strategy = Selling the right product to right customer to right price at the right time.
How do we analyze our comp-set – Nearby, Standards, Star Category, Total Rooms, Facilities, Services, and amenities?
Maximum of the hotels have an everyday exercise of calling competitors to get their comp-set in place with last night occupancy & ARR and maintain the data at the hotel level to understand the comp-set hotel’s total occupancy day to day.
Now…Price war actually happens when we do the misconstrue comp-set pricing like…without knowing the total occupancy of the comp-set hotel and then changing the rates for our hotel from time to time. Which is actually a bad practice, and may result in a price war.
Your hotels today’s BAR -INR .3000 -ADR – INR.2900 – 50 Rooms Inventory.
Competitors today’s BAR – INR. 5000 – ADR – INR.2850 – 70 Rooms Inventory.
Now your hotel’s current occupancy is 10 Rooms which is 20 % of the total inventory size.
Competitors current occupancy at 60 Rooms with different segmentations like..a wedding group, a corporate event, a social group or an offline TA group. Since then your competitor’s occupancy had gone up to 86 % of occupancy.
If you actually do comp-set pricing now and increasing your rates up to the same BAR. Then you will face real time revenue loss. Because of the few more competitors in the same vicinity.
Even on the hotel low occupancy times if you follow your comp-set in-terms of BAR without knowing the total occupancy then you will face the real-time end yield loss.
Suggestion here is –
OBSERVE your comp-set hotels, understand their pricing strategies time to time and DON”T FOLLOW THEM by looking at their BAR. Be sure about their total occupancy.