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Every Accommodation Host aims to build a sustainable and profitable business. To do so, they should focus on their pricing strategies. Every business, large or small, can benefit from finding new ways to optimize accommodation pricing. But this doesn’t happen by simply assigning a monthly price list to the whole catalog. On the contrary, when it comes to pricing, Hosts should get as creative as possible with their marketing efforts, because different pricing strategies can dramatically affect their bottom line. Here are three very clear reasons why every Accommodation Hosts should always test and optimize their prices.
Every Accommodation Host faces competitors that are ready to swoop in and welcome Guests who abandon bookings on your site for a better deal elsewhere. But this doesn’t mean you should engage in a “race to the bottom.” While you may lose some Guests to competitors who slash prices, you are likely to win new customers who are more interested in a loyal relationship than a once-off booking. Consider focusing on Guests who already prefer your business and are likely to continue booking with you, even if your prices are slightly higher than what they might find elsewhere.
Many Accommodation Hosts play the best-deal game too aggressively. They end up with prices that are so low, even a 5% increase isn’t likely to impact the performance of their Listing. This is an opportunity to test a price increase. Using specialized searches, Hosts access an overview of what their competitors are charging for key product categories. Armed with this intelligence, Hosts can make precise decisions regarding small price increases that allow them to remain competitive. Ideally, you’ll find a balanced price that brings in more money for each accommodation listing, while still maintaining a “best deal” position that attracts buyers.
Prices and costs are on opposite sides of the profitability equation.
Accommodation costs regularly fluctuate. A unit’s cost is determined from a multitude of factors that change over time. The major share of the unit product cost in Accommodation is the maintenance. The remainder of the unit cost comes from marketing spend and overhead costs for staff, facilities, travelling, phone calls, etc.
Maintenance costs are a big deal for Accommodation Hosts. Deciding on supplier cost generally comes down to two factors: purchase volume and negotiating power. The first is rather simple: the more you buy of a product, the less each individual unit costs. However, negotiating power is more fluid and depends on many factors, like the company’s market position, the state of the retailer-supplier relationship, whether it’s long-standing or newly established, etc. Accommodation Host should aim to lower unit costs by managing these two variables as smartly as possible.
Marketing budget and overhead costs also change over time. It’s worth putting energy into optimizing them because they will directly impact the final unit cost.
One of the most important competitive forces, in Accommodation, is pricing. Online Guests around the world love a good deal, and they won’t hesitate to drop one Host for another if they find one.
So while Accommodation Hosts should avoid price cutting themselves into a corner, they still need to work out a competitive pricing strategy. Finding what this means for each market implies keeping an eye on the competitive landscape, and assessing how pricing decisions will be felt by customers: If you are under booked then chances are good that you are overpriced!
Keeping prices constant, instead of changing them to reflect market movements, puts companies at risk of losing out on profit opportunities and new customers. But doing this intelligently requires competitive pricing knowledge.
One of the best and most affordable ways to gain insight is to use is to do price tracking software that suggests price change decisions as soon as they become relevant. Smart price adjustments made based on competitor insight can be a powerful tool for Accommodation Hosts to remain competitive and profitable.
Accommodation Hosts are in a competitive landscape, but Hosts who seek to understand their competition will see it become a strength rather than a threat.
Article ID: 165
Category: Vacation Rentals
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