Dynamic pricing and value generation in hospitality sector

Slovenian Marketing

Conference

Jan Kamenicek

Regional Director

Eastern Europe

5/30/2014

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Agenda

Specifics of service/hospitality operations

Challenges hospitality companies face in pricing

Tools available to hospitality sector helping understand and predict demand

Solutions hospitality companies should use to implement efficient pricing decisions

Hospitality sector

specifics

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Intangibility

Destination A: $800

Destination B: $300

Pricing depends on intangible factors such as popularity of the destination, hotel, prevailing economic and social

climate, logical comparison impossible

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Fragmented Macro Supply

In the vast majority of destinations typically no market leader that could dictate the price

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Constrained Micro Supply

Depending on the season the hotels may be too small (and start rejecting reservation requests) or too big (and launch activities to sell excess supply)

Unsold room on a given day is an opportunity cost (like a stale yogurt), an unsold room

on 27.5.2014 will never be resold

The value of “X” reservations rejected due to a sold out status minus the value of “X” last reservations still accepted before the sold out status represents an opportunity cost

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Human Factor

Actual service delivered by people, the least controllable asset. With the growing importance of

social networks and review sites the human factor plays a crucial role in the pricing decisions

Challenges hospitality

companies face in

pricing

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Increased dependence on exogenous factors

Political situation

The impact of the exogenous factors on hospitality pricing decisions is more significant than with other

(primarily non-service) industries

Outbreak of epidemics (SARS)

Exchange rate volatiliity

Accessibility of the destination

Government incentives

Events in the destination

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Dissonance in the purchase/consumption

process

Purchase decision

Actual purchase

Experience Hospitality

Consumer Goods

Purchase decision

Actual purchase & Experience

Consumer Goods

Purchase decision & Actual purchase & Experience

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Behavioural segmentation

High Price Sensitivity

Low Price Sensitivity

Low Demand Predictability

High Demand Predictability

Meetings, Events

Congress

Corporate

Airline , Crews

Individual transient

Group business

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Fragmented distribution

The heterogeneity of distribution makes it stressful for hotels to maintain correct rates across all channels

Source: VFM/Leonardo

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When pricing hotels need to consider:

Target segments When these

segments typically book

What is the general price level in the

market

What external circumstances play

in hotel’s favour

Key is the forward looking approach

Tools available to

hospitality sector

helping understand

and predict demand

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Future competitive segment information

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Competitive segment information

On most of the dates the hotel is running under full occupancy and at occupancy level up to 40%

lower than the competition

Group and Retail segment underpenetrated, hotel is focusing on lower margin segments such

as wholesale and corporate (negotiated)

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Competitive segment information

The hotel has an opportunity in group segment on 17 and 18 Oct. The competition is running at a relatively high occupancy on these days and 1/3 of

their sold capacity is allocated to groups. The hotel can offer a higher rate to any potential group request

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Bookings made versus actual arrivals

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What rates do my competitors sell at?

Real time future rates available to review and correlate with actual hotel occupancy, forecast and competitors’ segmentation

Solutions hospitality

companies should use

to implement efficient

pricing decisions

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Efficient channel management

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Efficient channel management

GDS Hotel Web

Booking Engine Online Travel

Intermediaries

Central reservation system management (CRS)

Property Management System

(PMS)

Centralized updates of all E-channels from CRS or PMS (hotels can choose)

All bookings are automatically sent into PMS

Thank you. Jan Kamenicek

jkamenicek@travelclick.com

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