Faced with limited demand due to COVID-19 travel restrictions, hoteliers must think outside the box to capture bookings and maximize revenue. Pricing practices that made sense before the virus hit—like seasonal pricing and non-refundable rates—may not be so relevant now in our pandemic era.
In this tentative climate, revenue management strategies should aim to boost consumer confidence, focus on value, and increase revenue per guest. Here are some ways hoteliers are maximizing total revenue now.
While international travel is still largely on hold, most properties are focusing on domestic demand. Value-added packages are a great way to attract local guests and domestic travelers looking to break from the routine and stresses of pandemic life and to enjoy experiences they don’t get at home.
Create packages that offer your property’s target market the conveniences, luxuries and special moments they crave, whether it’s a romantic dinner package, a wellness retreat, or a family-fun deal that includes kayak rentals. Despite the higher price, packages offer guests more value. While the actual room price is normally discounted, ancillary revenue increases.
Marketed well, value-added packages can help your property stand out from your competitors and increase your share of the domestic market.
Extended-stay pricing is another effective way to increase revenue per guest while offering guests great value at the same time. Discounting additional nights entices guests to extend their stay, especially for staycationers with freer schedules afforded by traveling with their own car and the recent shift to working remotely.
Even when discounts are offered, longer stays result in higher profitability than short stays considering lower overheads (cleaning and other operational costs) and higher ancillary revenue.
While it may be tempting to slash rates across the board to stimulate demand, past crises have shown our industry that this is not the answer. Deeply cutting prices may bring in a few extra bookings in the short term, but can harm a hotel’s image and hold the property back on an even longer road to recovery after the economy stabilizes.
As mentioned above, implementing value-added packages and extended-stay pricing are much healthier ways to capture bookings—and so is offering exclusive discounts to select groups of customers.
Offered only to limited audiences, exclusive discounts allow you to present irresistible offers to valuable clients such as repeat guests/loyalty program members, recent cancellations and Facebook fans without breaking rate parity agreements. Discount codes can be sent to select groups of customers via email or text message, or advertised on your social media channels.
Flexible change and cancellation policies
We’ve all learned the situation can change very quickly during a pandemic. In these uncertain times, cautious travelers will be hesitant to book stays that cannot be cancelled or rebooked without penalty in the case of further outbreaks or traveler illness.
For the foreseeable future, flexible change and cancellation policies will help give travel consumers the confidence they need to book. Consider removing non-refundable rates for the time being, and eliminate or at least reduce penalties for cancelling and changing reservations due to COVID-19.
Use your property management system to track bookings that are cancelled due to the pandemic to help you manage pricing and cancellation policies going forward.
Mass cancellations caused by COVID-19 overwhelmed OTAs, resulting in a negative customer service experience for many OTA customers. During these continuing uncertain times, many travel consumers are now choosing to book with hotels directly for a more personalized and responsive customer service experience.
Now’s the time to focus on your property’s direct booking strategy to take advantage of this shift and maintain a strong direct sales channel going forward. Incentivize customers to book direct with value-added packages, exclusive discounts and direct-booking perks available only through your direct booking channels.
It’s also important to provide a secure, user-friendly online booking process on your website. Integrated with the property management system (PMS), the online booking engine always displays live rates and availability and manages incoming reservations automatically, as well as booking modifications and cancellations coming through your website.
With a lower cost of acquisition compared to bookings acquired through third-party channels that charge commission, direct bookings can make a big difference to your bottom line. (Make sure your website booking engine is commission free!)
Ancillary products & services and new revenue streams
While extras such as parking, breakfast and welcome amenities can be included in value-added packages and used as direct-booking perks, they can and should also be offered to other guests for a fee.
Ancillary products and services will be key to boosting revenue in the wake of COVID-19. Promote your dining and spa services, welcome amenities (like champagne and food baskets), bicycle rentals, fitness classes and other activities, and allow customers to purchase add-ons when booking through your website booking engine.
Get creative and try new revenue streams that make sense for your property and guests. Consider partnering with local businesses to offer guests local experiences such as surfing lessons or wine tasting tours. Think about the type of experiences and services your customers are looking for now. The recent focus on physical distancing and cleanliness makes options like food delivery services, sanitizer and mask packs, and sanitized airport transfers more relevant than ever.
To stay ahead of the game, hoteliers should be equipped with a property management system (PMS) that supports ancillary revenue streams and dynamic pricing strategies with flexible rate management tools—such as instant rate and availability overrides, package pricing, channel management integration, and yield management functionality that automatically adjusts prices in response to occupancy-based rules.
And while historical data has lost a lot of relevance in these unprecedented times, automated RMS (revenue management system) integration can assist with analyzing data going forward (including daily rate, availability and occupancy data, competitor rates and local market data) to help determine optimal pricing on an ongoing basis.
Don’t just wait for things to get better; keep a close eye on your booking data and the local market as the situation unfolds to help identify opportunities to boost consumer confidence, offer guests value and increase revenue per guest now. As travel slowly restarts, hoteliers must be agile and creative to increase their share of existing demand, maximize revenue and get a step ahead of the competition as we emerge from this crisis.