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Demand Based Pricing

Demand Based Pricing

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Published by Sachin Pabreja
demand base pricing rule.
demand base pricing rule.

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Categories:Types, Research
Published by: Sachin Pabreja on Oct 15, 2010
Copyright:Attribution Non-commercial


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Demand Based Pricing

Summit 1st meet in Bangalore ± by sachin pabreja

Web gds distribution
Each hotel shud work on grid of their repective hotel and 3rd party partners. Checklist for updation of each portal. Rate strategy shud be done at lease prior 2 months of each quarter. Rate strategy rate codes as a standard for all our hotels.

What is Demand Based Pricing
Link the selling price directly to the demand faced by the hotel. If the hotel is in high demand, the price should be accordingly high. If the hotel is in low demand, the price should be accordingly low. The overriding principle is to charge the right rate at the right time. In an easy to execute manner.

Target audience
Demand based pricing falls in the arena of Public Rates. Available to any and all potential customers Primarily aimed at non-contracted market. Low brand/product loyalty from this market. They are mostly ³shoppers´ Looking for best value. Contracted Corporate and Wholesale rates are not directly impacted but must be logical in relation to Public Rates

Guiding principles
Clarity in pricing structure. Logical selling strategy. Avoidance of adhoc rate decisions

ti n l and f ir pricing within the competitive market place, based upon de nd H nest , integrit and p rit of rates offered.
Set the rates that you think are honestly good rates for a given demand level. Have the integrity to offer this rate - instead of a higher rate if you think you can get away it« The rates must be available in every channel at parity.
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Why do we need DBP
The most time consuming task is the actual setting of rates. Therefore, difficult to reassess and reset rates often. Results in rates being set for a month, or fortnight at best, and a few days spent to set them each time« Most basic thing a hotel/sales/front office does is occupancy and availability forecasting. If link rate availability to occupancy forecasting by pre-deciding what rate to sell at what occupancy demand level« Then the execution is merely ³switching on´ or ³switching off´ a demand.
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What will be our model
There will be Five demand levels
City igh When the whole city is facing high demand. Can charge premium rates. Hotel High When the hotel is facing high demand, but city is not. Leaves the customer with choices. Normal As the name suggests. Shoulder (S) Occupancy is lower than normal, but it is not yet a critical need period. Low As the name suggests

Rate setting
Rates will need to be set once a quarter for each demand level. This will be done estimating the kind of business expected over the next quarter. Will need to forecast what occupancy/demand level should be viewed as High, Low etc. Set rates for each demand level accordingly.

Example ± Demand levels
For April to September you may set.. Hotel High ± at 75% occupancy Normal ± at 50% to 75% occupancy Low ± at below 50% occupancy Then.. Monitor demand build-up. Based on occupancy build-up to any of the above.. Activate relevant demand level. Complete flexibility is available Occupancy forecasting, keeping lead times in mind, is the key.

Rate Structure
There will be two rates in each demand level Business Rate Rate (SR)
Primary selling rate No restrictions Equivalent of current SR rate

Extended Stay Rate (SR1)
Restricted by minimum length of stay Must be lower than Promotional Rate Credit card guarantee required Entire length of stay to be charged on arrival Early departures do not qualify for refund. Equivalent of current SR1 rate.

Rate Structure
There will be one additional rate. Early Advantage Rate
Can be booked only a minimum of 21 days in advance. May vary to higher advance booking by unit. Must be lower than lowest Extended stay rate Credit card guarantee required. One nights charge to be pre-charged at time of reservation. Non-refundable in case of cancellation, no-show or change of arrival date. Not linked to demand level, pre-set for each quarter.

Based on requirements Must include meaningful value add-ons. Package guidelines will be circulated later.

Distribution Channels
Will be set on on all portal
Will be available on GDS and Internet. Will be available for hotel direct reservations Will be available at Reservation

Next Steps
Rate setting formats will be circulated with pricing recommendations for next quarter. Finalise the rates. Will include both USD and INR. Setting up rates on Online reservation system (utell,rezview) Demand level management guidelines TO be circulated BY individual sales head. Once rates are decided and set up, demand level management will be done by units, on all the sites.(a team/time needs to be dedicated to this only and shud be monitored weekly)

Promotions which can be participated by all our hotels«
Residence special rates Rate codes Value addition some of the example are given below

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