Clever pricing strategies for small hotels and operators

To generate the maximum profit from room reservations you’ll need as a hotel operator to adopt a robust approach to your pricing strategy.
How as a hotel you set your prices can have a direct impact on your bottom-line performance and reputation in the market.

Forming a pricing strategy

Dropping prices may initially stir some interest in your property, for those guests that are price sensitive – but this is not a sustainable strategy, as rarely do price reductions boost revenue growth by increasing occupancy over the longer term.

For pricing to help the bottom line, it also needs to be combined with a frugal approach to your operating costs, anything you can do for example to reduce those third-party OTA commissions will be a direct benefit to your bottom line.

So, it is not only the price that you need to consider but also the distribution channels of how customers reach you.

Assessing your distribution channels

Booking channels such as your website and OTAs (Online travel Agents) should be regularly monitored to compare costs versus revenue returns.

As a part of running a business, managing your variable and fixed costs can have a major impact on your profit performance. So, optimize the distribution channels that cost you the least amount and generate the highest revenue for you.

Each online distribution channel should play a different role in your hotel marketing mix, rather than relying solely on one. For example, the OTAs may help in the short term but it can prove to be a costly tactic over time.

You’ll need to assess how much business comes to your property directly through your own website. Direct bookings will ultimately cost you less, earn you more and allow you to engage directly with the guest to build your own relationship.

As customers, no matter what we are buying we always ask the question “if this is the best possible price?”. Sometimes, as a hotel operator you may find that you have a competitor across the street – you may even have a similar rate setting, but what makes the difference, and why the guest returns to your property is the experience.

Guests that come through a direct booking channel, provide you with the opportunity to understand their particular needs, and to build an emotional bond between them and your hotel.

So that next time, even if the hotel across the street is cheaper an emotional tie with your property can protect you from price competition, a great guest experience builds loyalty.

A well-structured pricing strategy can increase your market share and revenue potential. While a wrong pricing strategy can do just the opposite, and have you lagging behind the competition.

A pricing strategy lays out the process of setting room rates to achieve the optimal revenue for your hotel at a particular point in time. Meaning, that you sell what rooms are available by achieving the highest possible price.

Price setting can be dynamic and is a situation driven by changes in demand, local competition and seasonality.
The following are some suggestions on how to approach your pricing strategy to help build a better booking pace, increase your market share and hopefully as a result improve your bottom line results.

Don’t be greedy

If you are the only property in town and there is a big event and your rooms are in demand, this should be reflected in the level of rates that you set. But it is important to make sure that you do not have too high a fluctuation from normal, select a fair price point and don’t be too greedy.

Ultimately, build a business for the long term with loyal and satisfied guests that you will want to support your business when demand slows down.

Choosing a clear price positioning strategy for your standard base rate will help strengthen your value perception to customers.

Playing the market

Set the price of your most basic room to the cheapest rates available in the market and price your other rooms close to your competitors’ basic room prices if you want to penetrate the market.

Or if you are looking to take a higher rate positioning, find a local competitor and set one room rate at the same price point as they have available, and set another room rate at a slightly higher rate.

Matching the rate strategically lets customers see how you are price positioning yourself, with the opportunity to up sell customers to a more expensive room with added value extras or amenities to justify any price difference.


Offer a promotional code for guests that book direct, incentivise customers to refer their friends and family to stay at your property.

Pet-friendly can be very guest-friendly. By opening your doors to pets, it is possible to attract a different customer segment and charge a little extra for your added services.

Extending a stay from business into leisure by offering a discount for a guest when paying the regular rate for the first few nights, could help boost higher occupancy and an incremental revenue opportunity.

Booking direct

Customer satisfaction is directly affected by your property’s digital online presence. With customers getting their first information about hotels online, property owners can now no longer ignore the need for an integrated online booking engine to be able to control the booking experience for their property.

The ease of booking directly on your own web site needs to match the OTA experience for user experience and confidence that a reservation went through okay.

Happybooking is first and foremost a property management system. That means they help you with the boring admin and automate tasks giving you more time to focus on driving your revenue performance. On average customers can get back up to 10 hours per week – think what you could do with that extra time!

Happybooking have always focused on creating a user-friendly booking system to help property owners improve overall performance, and generate more revenue and reduce costs by enabling guests to book directly rather than go through a third party.

Our guest blogger is John Kennedy. John is a hospitality consultant, dedicated to helping increase profits through marketing, revenue management and efficient operations.

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