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Group Pricing Strategies for Hotels

group_pricing_strategies_for_hotelsBesides setting out strategies for the Transient, Corporate and Wholesale segments, we also have an opportunity to generate more revenue by preparing and planning for group business. Revenue management strategies have to be applied to groups as well.

 

So what should we be looking at? Where to start? First of all if we have made an overall demand calendar for the year as well as a forecast per segment, we will be able to determine how much of our hotel room capacity we can sell to groups.

Or taking it a step further, using a displacement calculation, how much we should charge to displace forecasted sales from other segment to generate additional income and profit for the hotel.

But let’s go back a step and work on the foundation of our group strategy.  We should make a group demand calendar which will serve as a guideline for the sales team on how and what to quote exactly, with confidence.

For this we will have to log for which peridos we get group requests, when we get these requests, at which prices we do or do not convert. We need to track the regrets and denials of our groups.

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This will help you to develop a group demand calendar which can look something like this :

Revenue_Management_on_Groups_in_Hotels

Based on the OTB and Forecast we can give a group rate and ceiling in terms of room capacity. Remember, such a tool is to be dynamic and gets adjusted as we analyze the pick-up from the various segments.

Knowing the lead time and conversion of your hotel’s group business will give you more confidence in quoting. The Historical data below would tell us to be confident with quoting groups in January and February for March and April, as we still expect many requests which will also convert well. So no need to negotiate or move on rates here...

revenue-management-groups-hotels-rmb

Last but not least, as mentioned earlier, a displacement calculation should be performed if a group would take away capacity from other forecasted segments. The group should generate more revenue and profit which we would be able to generate with the potentially displaced business. You will have to take into consideration not only room revenue but all spending, revenue sources, including meeting rooms, food and beverage, etc...
 

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