Now that we have our demand calendar, how do we start with pricing? We have found it effective, before setting a base price for each day, to develop a pricing grid. Such a hotel pricing matrix or rate grid is an essential tool used in our hotel revenue management consulting.
Every hotel should have the tools to sell expensive or cheap when needed. Such tools we call price or BAR levels. In your pricing matrix you can include various BAR levels to offer at different levels of demand.
Below an example of a basic hotel rate grid:
When putting together your pricing matrix thake the following criteria into account:
- Build your pricing points (BAR levels) as per expected level demand (High to distressed for each season)
- Use a maximum of 12 BAR levels
- Check the price compression from one BAR level to the next one
To determine what prices each BAR level should have it will help if you study at what rates you sell the most by channels, month and rate types. This way you will not miss out on any rate levels.
For example if we take a look at the past production per rate level below, we will notice that the hotel had a high production of room nights at BAR 6. It might be effective to move earlier to BAR 5 and sell at a slightly higher price, or if the demand does not sustain such pricing to implement a BAR of 85.00 to capture some of that demand.
We should also try to convert some of the demand for BAR 2 at 130.00. Some clear yielding opportunities that can only be analyzed if you work with BAR levels, instead of simply changing the rate in your PMS.
Below an example of a channel price production analysis for the GDS, in which we can see clearly that BAR 6 overproduced. This is yet another yield opportunity for your hotel.
Example of past production – GDS sales
Studying your historical pick-up for various demand levels, you will be able to develop a more advanced pricing grid for your hotel, and get a real powerful hotel revenue management tool.
As a revenue management consulting company we hope this article has been effective in building your pricing matrix.
