Trivago: Why hotel competition based solely on price is not a good strategy

Α Decrease font Enlarge font
Trivago: Why hotel competition based solely on price is not a good strategyTo ensure a maximum and sustainable competitive edge, other factors should be taken into consideration and should be adapted in parallel with pricing

When hoteliers are trying to attract new guests to your property, it can be enticing to use price as an incentive, businessblog.trivago.com notes in the following recent report:

After all, competing on price often feels like such a natural path to follow. But competing on price alone is a risky proposition. Thus, to ensure a maximum and sustainable competitive edge, other factors should be taken into consideration and should be adapted in parallel with your pricing.

Why focusing only on price is risky:

Here, we discuss why competing on price alone, is not a good strategy for hotels who want to win loyal, long-lasting guests.

You might lose your value proposition

A competitive pricing strategy involves setting room rates based on competition rather than on guests. While setting prices based on your competition can make you a strong contender in attracting price-sensitive customers; setting your prices based only on this strategy can be risky for not only your business but also your reputation. Let us tell you why.

Firstly, competition-oriented pricing is based on the presumption that your competitors are priced correctly, thereby taking power completely out of your hands. Since you set your room rates based on your competitors’ rates, this leads to ignoring your own unique positioning. There are chances that you rate your rooms at a much lower price than what you offer, thereby facing revenue loss. On the other hand, you might rate your rooms and services at a much higher rate than your offer, thereby indulging in price wars without offering anything substantially valuable to your guests. Understandably, when your guests won’t find value for their money when they stay at your hotel, they’ll be more prone to leaving negative online reviews, thereby affecting your business and image.

Secondly, it makes you ignore your value proposition. Value propositions are the core to growth for any brand, but pricing based solely on the competition can make you lose your value proposition. What’s the worst part of price war is that you’ll never be able to win loyal customers as low-price guests are usually loyal to prices than to hotels.

Therefore, while setting rates, you should assess your own position within the market and consider linking competitive pricing strategy with some other pricing strategies.

You might face financial instability

When competing on price, you tend to set low prices for your rooms which translates into earning narrow profit margins, which translates into less cash flowing around your company. With such a small financial cushion, you’re more vulnerable with every slight increase in costs or unexpected costs, say emergency boiler replacement at your property. In such a situation, you might be forced to look out for ways to reduce costs.

The first thing that might come into your mind, as a hotelier, is to reduce benefits and wages for your employees or to cut down on quality services, like an impressive breakfast spread, for your guests. In both of these cases, you run the risk of hurting your business. Your employees are less likely to remain as productive and motivated. Also, your guests might not like to come back to your hotel as a result of poor offerings and inferior customer service.

Competing only on price can hurt you in the long run

Hoteliers start price wars to win market share, sometimes not as a result of careful analysis, but because of their competitive instinct kicking in. A price cut can lead to a shift in market share which proves to be helpful for some time. But what if it doesn’t shift at all or it reaches a saturation point? In this situation, you’ll not have a sustainable cost advantage as you give your customers a big discount and hurt your bottom line.

Moreover, due to price wars, you miss out on your chances to grow as it’s difficult to get out of cutting-price strategy. tutor2u, in its evaluation of Price Wars, says, “Price wars are nearly always bad news for the majority of businesses that get locked into them.” Consequently, a low-price winner might win that battle but can never win the war as it’s not a sustainable model.

Ways to optimize your competition strategy:

Here, we show you how you can build a consumer-oriented pricing strategy while improving demand to gain a competitive foothold in the market:

Rethink pricing strategy from the consumer perspective

It isn’t easy to price something. It’s where a lot of hoteliers get stuck. Sometimes, they assign an arbitrary rate to their rooms that just barely turns into profit. Some hoteliers focus only on competitor-oriented pricing, thereby ignoring the consumers. Therefore, having a proper revenue management strategy is important as it helps you strategically price your rooms and other services.

Many factors shape the pricing decision, but fundamentally good revenue management exists when there is a positive correlation between hotel prices and occupancies. This means that when occupancy is high, the rate should be raised and when occupancy is low, the rate should be dropped. Through this dynamic pricing system, you should try to achieve a balance between underpricing and overpricing by adjusting room rate with response to demand and supply.

As a part of your revenue management strategy, it is also important to understand your offers and your market to implement value-based psychological pricing. EyeforTravel, in its study, The Pricing Puzzle notes, “While cost will always have some impact on pricing, for core products like rooms, the hospitality and travel industry has moved beyond pure, cost-based pricing where margins are fixed. Rather they have shifted to a more dynamic model which take a customer’s willingness to pay into account where margins can change with the market.”

This type of pricing entails assessing the value of your offer and also, understanding your customers’ behaviors and lifestyle. The next step is to communicate the value to your potential and current guests. Such a customer-based strategy is about pricing your rooms and services according to perceived value. And, this brings us to our next factor with which you can raise the value of the overall experience of your guests.

Make quality your selling point

According to Tourism & Hotel Competitiveness Research, “Value perceived by customers in the hospitality setting combines elements of both price and a customer’s expectations for service experience.” And, in order to communicate with your guests that the best price doesn’t equal the best value, you have to optimize your offerings and customer service as per the rate at which you offer your room. This implies ensuring guests derive ultimate value for what he/she’s paying by offering tangible benefits, like an on-site gym, sauna, or spa; quality of food, free parking, safety and security, room cleanliness and comfort, and in-room amenities including plush pillows and towels, complimentary refreshments, and so on.

To reinforce this point about quality, another very essential approach is to provide a level of customer service your competitors can’t match. Prompt and courteous service quality and friendliness of hotel staff are of utmost significance to ensure your guests get value for their money and you enjoy a high level of customer satisfaction. This also builds trust and often leads to repeat business and referrals for hotels. As a hotelier, your aim should be to take your unique approach and focus on providing value that will help you avoid competing only on price. You should also focus on improving your hotel’s online reputation to influence travelers and your potential guests.

Give incentives to new as well as loyal customers

Running attractive loyalty programs guarantees repeat business for your property, and also, high revenue gains, as pointed out by PwC in its Consumer Intelligence Series. The report also makes an interesting observation on how customer preferences drive loyalty, “After room quality and location, business travelers value loyalty benefits over room price—not surprising, since their companies typically cover room price on a business trip but loyalty points add up to free nights as a leisure traveler over time.”

Furthermore, your initiatives to foster guest loyalty and inspire repeat bookings can also help you attract, convince, and delight first-time guests as well. Such efforts include implementing personalized Email marketing campaigns, adding small personal touches to enhance the guest experience, streamlining operations, and facilitating feedback-sharing processes.

Not only this, you should offer special deals to your potential guests to make them choose you over your competitors, like free airport shuttle, complimentary breakfast, fruit basket on arrival, and so forth. One way to do this is through trivago’s Special offer feature. Here, you can find popular Special Offer templates, viz. free service, discounted service, or a nice gift and promote special offers.

RELATED TOPICS: GreeceGreek tourism newsTourism in GreeceGreek islandsHotels in GreeceTravel to GreeceGreek destinationsGreek travel marketGreek tourism statisticsGreek tourism report

Photo Source: pixabay.com

Tornos
  1. 07/02 22:13

    Media Report: Revolutionary Hydrogen Car has finally arrived in Greece

  2. 07/02 20:04

    Greek FM meets with his Uruguayan counterpart in Montevideo on Tuesday

  3. 07/02 17:52

    Greece's Energy Minister: Subsidy for photovoltaics requires installation of batteries

  4. 07/02 16:09

    New draft bill aiming to speed up courts to be tabled in Greek Parliament

  5. 07/02 15:57

    EU greenlights €1.36 bln Greek scheme to compensate energy-intensive firms

  6. 07/02 14:47

    All National Theatre plays cancelled on Wednesday due to actors' strike

  7. 07/02 13:41

    Barbara weather front hits Greece for third day

  8. 07/02 13:19

    Apartments prices continued upward momentum in Cyprus during Q4 2022

  9. 07/02 12:33

    Seamen's union to launch 48-hour nationwide strike in Greece from Wednesday

  10. 07/02 11:02

    IATA inks cooperation deal with Federal Republic of Somalia government

  11. 06/02 20:07

    FM: Greece mobilised resources and is ready to assist Türkiye and Syria

  12. 06/02 19:52

    Inspirational project promoting Hellenism and love for Greece globally (video)

  13. 06/02 19:39

    Tri-city winter luncheon unites upstate New York Philoptochos chapters

  14. 06/02 19:25

    UNWTO, Antigua and Barbuda share vision of sector for growth and opportunity

  15. 06/02 16:44

    International air cargo sector finishes 2022 near pre-pandemic levels

  16. 06/02 14:52

    Air passenger demand recovery continued in December and for the full 2022

  17. 06/02 13:48

    Severe weather front to continue across Greece until Wednesday (video)

  18. 06/02 13:27

    Metro service to Athens International Airport restored

  19. 06/02 12:49

    Ferries remain docked at Greek ports due to strong winds

  20. 06/02 11:57

    Expert: Türkiye`s earthquake will not affect geological faults in the Greek area

  21. 05/02 14:30

    Greek authorities on alert as heavy snowfall continues

  22. 05/02 13:50

    Greek President attends opening ceremony of '2023 Eleusis European Capital of Culture'

  23. 05/02 12:40

    Experts: Greece won’t know about investment upgrade hope until elections

  24. 05/02 10:47

    Parthenon AHEPA Chapter 495 hosts Byzantium Presentation in New York

  25. 05/02 07:44

    Dangerous weather warning sent Attica region residents through 112 phone line

  26. 04/02 16:13

    Stadium of Ancient Nemea reopens in Southern Greek Region of Peloponnese

  27. 04/02 13:54

    Greek and foreign visitors in the renovated Agora Modiano of Thessaloniki

  28. 04/02 13:17

    Over €1,100 benefit per Greek household from power subsidies in last seven months

  29. 04/02 12:50

    Imminent cold weather front in Greece keeps municipalities on alert

  30. 04/02 11:21

    Home and loss: Outdoor exhibit commemorates Holocaust victims in Greece

  31. 03/02 15:25

    Cyprus and Egypt FMs talk further enhancing trilateral collaboration with Greece

  32. 03/02 15:21

    AP report: Olympic flame to take seaborne journey from Greece to 2024 Paris Games

  33. 03/02 15:06

    Tourism 2023 | Greece in top-10 European destinations for long-haul travelers

  34. 03/02 12:01

    Greek Tourism Minister: Pandemic management, vaccinations and sector take Greece higher on democracy index

  35. 03/02 11:18

    FinMin: Extrajudicial Debt Settlement Mechanism functioning satisfactorily in Greece

  36. 02/02 23:16

    Geneva court: Fifteen antiquities on their way back to Greece from Switzerland

  37. 02/02 23:11

    Public Health Organization says fall in Covid infections in weekly report

  38. 02/02 22:54

    National Observatory: January 2023 one of the warmest on record in Greece

  39. 02/02 22:41

    Greece-India relations promoted with visit of State Minister to Athens

  40. 02/02 22:25

    Media report: The old Hilton in Athens will transform into new hotel Conrad

  41. 02/02 21:47

    Hoteliers' Association of Athens and Attica: 2022 occupancy high, but lower than 2019

  42. 02/02 20:35

    Smart Attica Digital Innovation Hub for Greece launched at Demokritos center

  43. 02/02 19:00

    Berlin minister: Greece is ahead of Germany in digitization of public services

  44. 02/02 17:06

    Greece rises nine places on the Economist’s Democracy Index for 2022

  45. 02/02 07:19

    EFSF greenlights eighth reduction of step-up interest margin for Greece

  46. 01/02 23:24

    National Archaeological Museum will host 125,000 ancient treasures in Athens

  47. 01/02 19:14

    Cyprus and Greece sign deal on mutual academic recognition of university degrees

  48. 01/02 18:34

    IOBE report: Greek economic sentiment index rose to 104.9 points in January

  49. 01/02 18:04

    Greece and Japan ink MoC on improving business networking and investments

  50. 01/02 17:11

    Eurostat report: Greek inflation rate to slow down to 7.2% in January

  51. 01/02 15:46

    Greek Foreign Minister received United Arab Emirates Ambassador in Athens

  52. 01/02 14:20

    Greek unemployment dropped to 11.6% during December

  53. 01/02 10:59

    Greece reaches target of slashing road fatalities by over 50% in 2020

  54. 01/02 09:31

    One bid for long-term lease of Markopoulo Olympic Equestrian Center property

  55. 31/01 23:07

    Historic First Synaxis of Orthodox Hierarchs of Ecumenical Patriarchate in USA

  56. 31/01 19:13

    ‘Friends of the Kastro of Siphnos’ host gathering in Greek capital of Athens

  57. 31/01 19:10

    Bank of Greece: Demand for loans by Greek enterprises to increase in Q1

  58. 31/01 18:45

    Greece wins "Best Tourism Destination for 2023" title at Grand Travel Awards

  59. 31/01 18:17

    UNWTO announces winning start-ups for global "Awake Tourism Challenge"

  60. 31/01 16:55

    Extra four flights from Belgrade to Greek tourism destinations this year

  61. 31/01 15:59

    Foreign Minister: Greece and Israel forged enduring partnership at strategic level

  62. 31/01 15:55

    Revenue from tourism at €2.4 billion in Cyprus for Jan-Nov 2022

  63. 31/01 14:22

    Prime Minister: Greece is now an attractive destination for foreign investments

  64. 31/01 13:04

    Athens taxi drivers stage downtown protest over ‘pauperization cocktail’

  65. 31/01 12:50

    Electricity subsidy set at 40 euros per MWh for Greek households in February

  66. 31/01 00:11

    Booking.com: Greek region of Epirus among most welcoming places on earth

  67. 30/01 22:22

    Credit ratings agency Fitch upgrades credit rating of three systemic Greek banks

  68. 30/01 19:11

    Greek Foreign Affairs Minister to visit officially Israel on Tuesday

  69. 30/01 18:26

    Small and Medium-Sized Enterprises to get plenty of funding in Greece

  70. 30/01 17:15

    Traditional Greek handicrafts get their own museum in the center of Athens

  71. 30/01 16:21

    Greek PM and Japanese counterpart sign Joint Statement of Strategic Cooperation

  72. 30/01 11:39

    Four Greek ports get European Union financing for infrastructure upgrades

  73. 30/01 11:27

    Frost recorded in many parts of Greece on Monday

  74. 29/01 00:33

    Israeli Ambassador at Economist event: Greece-Israel relations at their highest point

  75. 29/01 00:00

    Ambassador to Athens: Even more United States investments coming to Greece

  76. 28/01 14:14

    Finance Minister at Economist event: Greece has turned a page

  77. 28/01 14:11

    Private sector deposits up by 5 billion euros in Greece during December

  78. 28/01 14:06

    Ambassador to Athens: Greek and American interests are identical

  79. 28/01 13:59

    Fitch upgrades Greece's credit to BB+ a mere one step below investment grade

  80. 28/01 09:03

    Three-hour work stoppage on metro Line 1 on February 2

  81. 27/01 15:09

    Minister: Crete plays a key role in Greece's new and active foreign policy

  82. 27/01 14:48

    Greek Tourism Minister: In 2023, direct flights from the USA will bring over €1 billion

  83. 27/01 13:01

    SNF support assists students put affordable housing theory into practice

  84. 27/01 10:57

    Hellenic Parliament displays slogan 'We remember' for Holocaust victims

  85. 27/01 09:03

    EU Commission calls on six member states to apply nvironmental directives

  86. 26/01 21:58

    AEGEAN Airways connects more Greek cities with Israel

  87. 26/01 21:53

    Finance Minister presents six priorities of Greek economy to ESM's new head

  88. 26/01 21:47

    Monica Bellucci at Greek Consulate in New York to promote "Maria Callas" movie

  89. 26/01 19:23

    New European Union rules for drone traffic management come into effect on Thursday

  90. 26/01 18:43

    Supreme Court hears arguments between funds and defaulted borrowers in Greece

  91. 26/01 18:12

    Drop in coronavirus and flu infections agency records in weekly report

  92. 26/01 12:33

    Stormy weather warning sent to residents of Attica region via 112 phone line

  93. 26/01 09:27

    Flights extended from Saudi Arabia and Bahrain to Mykonos and Santorini islands

  94. 26/01 08:38

    Athens to host two European football finals over the coming 16 months

  95. 26/01 07:16

    All 22 flights to and from Cyprus to be affected by Thursday's island-wide strike

  96. 26/01 03:19

    Media report: Hamptons to bring New York-style luxury to Northern Greece

  97. 26/01 03:12

    Greece to transform "green" commercial shipping fleet with new fund

  98. 26/01 03:01

    AIRDNA: Average price of Airbnb in Greece at €193 in 2022 up by 35% from 2019

  99. 25/01 20:50

    1.7 million pensioners to see 7.75% pension rise in Greece this month

  100. 25/01 19:46

    IATA welcomes restoration of ‘Class A’ ATC services over Somalia airspace