How to Price your Hotel Experience
What do you think the ugliest "C" word is in business?
Cheap? close!
It's commoditization.
Hoteliers who obsessively examine their pricing and the competition’s pricing and neglect their brand value will eventually fall prey to the beast of commoditization.
What does commoditization look like?
Experience is standardized and undifferentiated
Competition is primarily based on price rather than unique features, quality, or branding.
Guest sees little or no difference between you and other hotels in your market
These are indicators that commoditization has moved in.
Have you ever had trouble deciding between two products?
You can’t tell the better value other than the different price.
As a buyer, you fear making the wrong choice because one doesn't seem better than the other.
Of course, we face commoditized product decisions every day.
A hotel, or any business, trapped in commoditization, suffers from:
Pressure on profit margins and cost-cutting
Loss of brand value
Reduced amenities, services, and unique experiences due to profit pressure
Erosion of unique team culture - what the team stands for
As a result, the hotel becomes one of many - offering a similar experience at a similar price.
There is a way out, though.
It’s not found in pricing but in positioning.
A commodity can’t exist where a brand persists.
This phrase is one that I coined as a reminder to always stay focused on the brand.
Your hotel can't be a commodity when you stand out as a differentiated product, offering a “category of one” experience. Why?
Because the customer has difficulty putting you side by side with anyone, the price-to-value ratio can’t be compared equally.
It’s a good place to be. Strike that - it’s the best place to be.
Here's your actionable tip, because hey, you are running a business and every minute is "go time".
Your Actionable Tip
Understand the Price: Value Ratio and promote the heck out of it.
Let’s break it down.
Price = what the guest pays
Value = what the guest receives
❌ Poor price: value ratio:
If the price goes up but the value doesn’t, there is a value separation. The guest doesn’t see the value and is likely to complain. Worse, they never return to your hotel and tell all of their friends why.
✅ Good price: value ratio:
If the value the guest receives outweighs the price they pay for it in the guest’s mind (even if you keep your prices high), you have success. A hotel that has a good price-to-value ratio will not spend as much on marketing costs because it will have a great online rating and fans to spread the word.
That’s a hotelier’s holy grail.
Think of value as more than the list of things they get - a room, gym access, breakfast, spa access, etc, etc.
Think of value as an overall package. What they get is your signature experience—the thing you do well that helps them live life better.
How this has worked for one of my long-standing clients.
I have worked with this hotel for over 10 years; they operate in a competitive market.
They have 2 areas of focus.
1) friendly and caring service
2) a free breakfast that exceeds expectations of the “standard free hotel breakfast”
From the guest's perspective value looks like this:
not having to figure out where to go for breakfast.
not having to get in the car (hello, cold winters) and drive to get breakfast.
not having the pain of shelling out a lot of cash for a family of 4.
not having to wait to order off of a menu and keep all of their family members happy
Yes, you could easily say the value is getting a great full breakfast buffet only a few steps from their room.
The real value for the guest is what they don't have to do.
We talk about it a lot in the marketing of their property.
The results?
👍They charge higher rates than their competitive set.
👍They are in the top 10 on TripAdvisor.
👍They are one of the busiest hotels in the off-season in their market.
Find your uniqueness.
Focus on it and go all in.
Never tire of promoting the heck out of it.