In an interview with Hotel whisperer Andreas Rhein on revenue management after the crisis. That's what matters when it comes to your pricing!
Position yourself correctly and strengthen your direct sales and customer loyalty. This is how you manage to catapult your hotel out of the crisis!
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Hotel whisperer Andreas Rhein coaches hotels in various subject areas. He advises small to medium-sized companies on setting up new systems, developing and expanding strategies, and training employees. His focus is on digitization. Andreas attaches particular importance to comprehensible advice and practicality. His current focus is on revenue management after the crisis, and we talked to him about this.
sebastian: What should a hotelier currently (in lockdown) consider when setting prices?
Hotel Whisperer: First, you should differentiate between city hotels, an extensive hotel market and holiday regions. Of course, low demand cannot be ignored at the moment. Unfortunately, price dumping has already begun in cities. I hope that this will recover quickly and that hotels will come to their senses.
Hoteliers should never offer rooms below value! Prices can be reduced quickly, but not raised again so quickly. This reduces guests' willingness to pay and disrupts guests' sense of value.
Hotel whisperer Andreas Rhein interviewed by Sebastian Kuhnhardt from happyhotel
Especially in small destinations, for example, demand will not be able to increase even through low prices! Price dumping is counterproductive here. Business travelers, on the other hand, are not as sensitive to prices as holiday travelers, meaning that price reductions won't get you anywhere here either.
sebastian: I can sign that in the same way. Our experience in recent months has also shown this. Some hotels in rural areas initially lowered their prices out of fear and panic. But we also quickly realized that this was of no use. In the meantime, all of our customers are holding back. In the second lockdown, no one sold themselves below value.
sebastian: Which options remain in cities like Cologne or Berlin?
Hotel Whisperer: You have to weigh up and deal sensitively with revenue management rates after the crisis. It is fatal when you start to lower prices first. This is the start of a price war and all hotels are trying to undercut themselves, even if only by 50 cents. This quickly develops into an avalanche.
It is generally the case that hotels that are not located directly at the train station or in the city center will not get guests to travel two kilometers out of town from the train station at half price. It's just no use.
In addition, there are the increased costs due to increased hygiene requirements, so that the price must actually be higher.
This is understandable to the guest. Here you simply have to be careful not to unnecessarily reduce awareness of the value of the service and the value of the room.
Hotel whisperer Andreas Rhein interviewed by Sebastian Kuhnhardt from happyhotel
sebastian: Many suspect that record figures can be written after the opening, just like last year. What is your recommendation, with which rates and which price philosophy should hoteliers get back on board after the crisis?
Hotel Whisperer: Without a crystal ball, it is of course difficult to estimate exactly how the situation will develop. But:
With technical aids, you of course have a good basis for being able to quickly identify what is happening on the market and how the situation is changing. That's what matters in revenue management after the crisis!
Hotel whisperer Andreas Rhein interviewed by Sebastian Kuhnhardt from happyhotel
I'm sure that demand will be higher because people are sitting on packed suitcases and want to get out! It's no different for me! I am working from home and will stay in Germany for the time being if you can again. Therefore, you can definitely adjust the rates here to the situation. Nevertheless, we should not call for utopian prices, but think sustainably. Because you want the guests to come back again. With prices that are too high, there is a risk, as was the case with the Baltic Sea last year, that too high prices will cause bad PR.
Of course, you shouldn't miss out on additional sales, but please do so with moderation. You won't be able to make up for the holes in the books from the last few months anytime soon. Therefore, you should definitely not sell too cheaply, but also refrain from usury.
sebastian: If the situation is going to be something like it has been in recent years, then demand can be roughly estimated in order to ensure a healthy pricing policy.
sebastian: Now on to another topic that has been bothering the hotel industry for a long time. What do you recommend to hoteliers to strengthen direct sales?
Hotel Whisperer: I am generally not someone who demonizes OTAs because they offer a service at a fair price. Of course, 15%-20% is not a little! But the reach that can be achieved with it definitely has its right to exist. In addition, it is largely associated with costs for Ota's connected, such as through Google AdWords, and translations into various languages.
Nevertheless, the relationship should also be taken into account here. That's why I too am a big advocate of encouraging direct bookings. Of course, you also have to offer guests the opportunity to book directly online. And for that, every hotel needs a well-functioning Internet Booking Engine (IBE).
You should make sure that the prices and conditions you offer are the cheapest on the web! Here, for example, you can play very well with the cancellation conditions and offer guests benefits if they book via their own homepage.
The guests who search directly for the hotel name on Google should then book directly and not via detours — even if the OTAs appear at the top of the Google search.
sebastian: Exactly! The commission of OTA's should be Marketing costs be understood. Every hotelier should ask themselves how much does a booking cost me?
If you divide the marketing costs by the number of bookings, you get the CPB (Cost per Booking).
Here you can compare commissions with your own marketing costs. Because this also involves costs and, above all, time! It also requires the appropriate know-how and often, such as in search engine optimization (SEO) or Google Adwords, it takes time.
What is dangerous, however, is the lack of transparency on the part of OTAs, which deprives hoteliers of their trust and power over their own prices.
Hotel Whisperer: Exactly. What should not be forgotten is that the commission really only accrues when bookings are actually received. Own marketing costs, such as those from an external company or your own staff, are fixed costs that arise anyway, whether they result in bookings or not.
The commissions should therefore be understood as sales channels, which they are. This is where you buy in the range. You should only refrain from doing it yourself if you have the necessary know-how and then only if the reach leads to corresponding demand. And that is simply not so often the case.
Hotel whisperer Andreas Rhein interviewed by Sebastian Kuhnhardt from happyhotel
Instead, you should concentrate on your homework. And that's the best way to set up your own IBE, to the PMS to connect and create the best conditions for the guest who books directly.
sebastian: Nowadays, many more value propositions and brands are sold with emotion, rather than simply hotel rooms and beds. How can hotels, and in particular small individual hotels, strengthen their market positioning with regard to the new start?
Hotel Whisperer: I recommend carrying out a classic SWOT analysis (strengths & weaknesses, opportunities & risks). You should ask yourself the question: “Why should a guest stay with me?” This helps to create a clear profile, to become aware of one's own strengths and competitive advantages and to use them in a targeted manner.
Especially in big cities, there are just a lot of rooms & beds. An interesting profile is becoming increasingly important, which gives guests a reason to book your hotel of all places. Especially now that bed castles are increasingly being opened again despite the current Covid situation, this can only help. Because large hotels simply do not have certain aspects that smaller hotels bring with them. These must be specifically emphasized.
sebastian: Thank you Andreas! You can tell that you are taking on your role. Finally, tell us your three points that every hotelier should focus on after reopening.
- To keep an eye on current developments
- Keyword value pricing, making the right price reasonable — not too high and not too low. Define the right price for the right target group.
- Continue to drive digitization forward in order to deal more effectively with rapidly changing market situations, monitor the market with great tools such as Happyhotel, adapt and simply keep up with the times.
