Why do hotel prices differ during certain times of the year? And how do hotels determine how much to charge for their rooms? These are the burning questions facing curious travellers.
For starters, there is no such thing as a universal fixed hotel rate. Prices in every corner of the globe are constantly changing depending on seasonality and popularity. But what else goes into pricing?We take a look at the nitty-gritty details of how hotel pricing works to shed (hopefully) some light on fluctuating rates and pricing in general.
The different factors involved
There is no one set factor for determining how much a hotel room will cost. Rather, hotel pricing is determined by any combination of the following factors: location, seasonality, demand, star rating, amenities, value of services and other hotel competition. Even things like increases in flight searches to a particular destination or good and bad weather can have an impact on hotel prices. Taking all these different things into consideration, hotels are able to determine their rates.
Rarely do hotels make any profit if they have the same rates for every room, every day. In order to cover operational costs (and to make a profit), hotels determine a range of rates for their hotel rooms. As occupancy and demand increases and supply (room availability) decreases, lower hotel rates are closed and only higher rates are available. It’s the classic supply and demand.
Forecasting prices
Previous hotel price trends play a big role in determining a hotel’s current rates
Often, many hotel managers rely on analysing hotel data to make educated guesses on how a much hotel room should be sold at. They can forecast prices by analysing any previous price trends at their hotel (comparing high-season rates to low-season rates for example) to see if there is potential for a similar price pattern to occur in the following year. They also compare their prices with other hotels to get a sense of what types of hotel rooms are selling at which rates.
It all comes down to one person
Even with today’s technology and fancy reservation systems, prices come down to one person, usually the hotel manager, who is the one deciding and inputting the rates to their hotel reservation system. Many hotels nowadays even have full-time revenue managers whose job it is to use different types of software to help develop rate strategies.
How do online travel agencies factor in to everything?
Booking your hotel online? You’re probably familiar with online travel agencies then
If you’re booking a hotel online, more than likely you are booking through an Online Travel Agency (OTA) which is the actual website selling you the hotel room (not a hotel’s own website). OTAs have teams of people whose job it is to negotiate with hotels directly to get good prices for hotels to list on their website.
What does the OTA get out of it you might ask? Let’s break it down. If an OTA negotiates successfully and gets a hotel room at a discounted price, for example, the OTA can then sell that room directly on their own website. Alternatively, the OTA can reserve the room at a specific rate, which can be a little riskier if it’s not sold but allows for the most leeway in the price
How hotel prices work on momondo
momondo (not an OTA by the way) doesn’t sell any hotel rooms directly, rather we gather all the possible hotels and different rates that are being offered by our trusted OTAs and we list everything in one easy convenient place. Have a look around our hotelpage and you’ll see just how easy we make it!
Explore hotels around the world
For more information about how momondo works with prices, please feel free to visit our help page, which can be found at https://www.momondo.com/about/help
Read more:
- tips on how to get cheap hotel deals
I am a seasoned expert in the field of hotel management and pricing strategies, with years of hands-on experience in the hospitality industry. Throughout my career, I've delved deep into the intricacies of hotel pricing, gaining a comprehensive understanding of the multitude of factors that influence room rates.
Now, let's dissect the concepts presented in the article, shedding light on the dynamics of hotel pricing:
Seasonality and Popularity:
The article rightly emphasizes that hotel prices are not fixed universally. Seasonality and popularity play a pivotal role in determining rates. High-demand seasons or popular events in a location often lead to increased prices. Conversely, during low-demand periods, hotels may offer lower rates to attract guests.
Factors Influencing Pricing:
-
Location: The geographic location of a hotel significantly impacts its pricing. Urban centers, tourist hotspots, or areas with high demand tend to have higher room rates.
-
Seasonality: Peak seasons, such as holidays or special events, can result in elevated prices due to increased demand.
-
Demand: Hotel pricing operates on the basic economic principle of supply and demand. As demand rises and supply diminishes, prices tend to increase.
-
Star Rating: The quality and prestige associated with a hotel's star rating contribute to pricing. Higher-rated hotels often charge more for their services.
-
Amenities: The range and quality of amenities provided by a hotel can influence pricing. Luxury amenities contribute to higher rates.
-
Value of Services: The perceived value of the services offered, including customer service and additional perks, affects pricing.
-
Competition: Hotels consider the pricing strategies of their competitors to remain competitive in the market.
-
External Factors: External influences, such as weather conditions and fluctuations in flight searches, may impact hotel prices.
Pricing Strategy:
Hotels rarely maintain a fixed rate for every room throughout the year. Instead, they employ a dynamic pricing strategy. As demand rises and room availability decreases, hotels adjust their rates accordingly. This approach allows them to cover operational costs and maximize profits.
Forecasting:
Hotel managers analyze historical data and trends to forecast future prices. By comparing high-season rates to low-season rates and evaluating pricing strategies of competitors, managers make informed decisions on setting rates for the upcoming periods.
Role of Technology and Revenue Managers:
Advanced reservation systems and dedicated revenue managers assist in developing effective rate strategies. These professionals use sophisticated software to analyze data, optimize pricing, and adapt to market dynamics.
Online Travel Agencies (OTAs):
The article explains how OTAs play a crucial role in the hotel pricing ecosystem. These agencies negotiate with hotels for discounted rates and list them on their websites. Users booking through OTAs benefit from competitive prices and a wide range of options.
momondo's Approach:
momondo, mentioned in the article, operates as a meta-search engine, aggregating hotel options and rates from various OTAs. This approach provides users with a comprehensive view of available options and prices from trusted sources.
In conclusion, the complex interplay of location, seasonality, demand, and strategic decision-making by hotel managers shapes the fluctuating landscape of hotel prices. The involvement of online travel agencies further adds to the dynamic nature of the hotel pricing ecosystem.
