Hotel Pricing Strategy vs. Revenue
A new study from the Cornell Center for Hospitality Research explores hotel price stability and price shifting from 2007 through 2009. The study, “Strategic Revenue Management and the Role of Competitive Price Shifting,” examined whether using shifting price strategies (either up or down) over time was superior to maintaining a steady price strategy. While hotels that shifted to a higher pricing band against competitors tended to see greater revenue per available room, a steady price strategy was also quite effective. To obtain your free copy of this insightful report, email info@crystalip.com with your request.
Pricing Strategies
“We looked at over 7,000 hotel pricing data points between 2007 and 2009 for this study,” said Cathy Enz, a professor of strategy and the Louis G. Schaeneman, Jr. Professor of Innovation and Dynamic Management at the Cornell University School of Hotel Administration. “This was a tough time for the hotel industry, and it took a lot of fortitude for hotels to maintain their pricing strategies. However, those that held tight did better than those who moved to a lower pricing position relative to their competitors in those two years.” Enz was joined in the study by Linda Canina, an associate professor at Cornell, and Breffni Noone, an assistant professor at Penn State.
Overall Revenue Effects
Canina added: “It’s important to emphasize that we are talking about the revenue effects of changes in overall pricing strategies, whether moving up or down in relation to competitors. The strategy of shifting to higher prices relative to competitors was the most successful in terms of average annual RevPAR growth over the three years that we studied. By comparison, those who went to a lower pricing strategy saw reduced revenue, compared to competitors. This kind of overall reduction is not the same as targeted pricing promotions, or tactical moves to match competitors’ actions.”
