Rooms’ Management

Module code: TH5AH390

Student Id: 21420602

“Analyze the room pricing and distribution channels and its impact on customer
experience and revenue optimization”
Currently hotel industry are standing with pride and honor because of their real time (dynamic)
pricing style and strategies. Although hotel have various segment of generating revenue but
selling of room creates the vital role in pulling income. So to maintain the decorum of hotel
operation, hotel need to expertise the importance of selling rooms according to the market needs
through proper room pricing and distribution channels. So as to get popularity among the market
competitors the hotel need to be keen on their guest needs, demands and giving them suitable
rates and their memorable stay which make them to give their best feedbacks and stay
experience on guest surveys satisfaction like hotel website. This repeated process of anticipating
the guest needs and services will increase the revenue optimization and desired target of hotel
sales. So the purpose of this essay is to illustrate the meaning of room pricing along with
distribution channels and investigate its impact on customer experience and revenue
optimization.

Room pricing defines as a different pricing strategy applied by hotel to sell the rooms according
to the market needs and demands so that hotel can generate maximum revenue. According to
Kotler and Armstrong, (1996) both hotels internal as well as external components together affect
room pricing decisions. Internal components contains advertising thoughts, promoting system
blend, cost and association while external components include the type of the market and
require along with competitors. Additionally, (Collins and Parsa, 2006) has recognized various
impacts on estimating choices as star rating, the executive type, area, number of keys and
conveniences. With respect to choice, hotels frequently utilized various distribution channels to
sell room (O’Connor, 2003). Room prices fluctuates depending on season, and the happening of
events in hotel surrounding. So to maintain the consistency of generating profit in better margin,
hotel must know the room rate economics to price the rooms, as handling of room rate is not an
easy task because proper room rate helps in an increased RevPar (Revenue per Available Room)
which will affect in increment of ADR (Average Daily Rate) and hotel occupancy. Also correct
pricing of room is done through analyzing the key inventory of hotel, target market, competitors
and most importantly the willingness of consumer to pay a certain amount for particular number
of nights as mental budgeting and salary impact consumer responses to cost increments
(Homburg et al, 2010). Also selling the room is done through knowing the rate types and types
of plan consumer wants to purchase. So to exercise this, hotel must know how to fade their room
rate looking upon consumer’s profile. Also hotel set the room rate according to traditional pricing
strategies like Hubbart Formula, Rule of Thumb and web-influenced pricing strategies like
competitive and prestige pricing (Woods R, et al. 2007). There are enough number of evidences
which shows that consumer uses price as crucial factor to judge whether they are satisfied or
not. Also price demonstration is one of the major factors in driving consumer impression or
attention towards an item (Ahmetoglu, et al. 2014). At the low price, room price bend towards
an increase in consumer satisfaction while, at high price, room price makes an opposite effect.
Also in peak season or higher occupancy a customer is less satisfied because of relatively higher
room prices in comparison to low season or low occupancy (Mattilla and O’Neill, 2003). Pricing is
a central calculated lever utilized through hotels to operate revenue (Kimes and Chase, 1998). In
contemporary hotel industry, proper room pricing plays crucial role in revenue optimization as
nowadays lodging guests are looking uniformity and value at accurate cost (Dube and Renaghan,
2000). So it is necessary to sell the rooms at right price so that hotel can generate maximum
revenue like on black-out dates and during peak season. Anderson demonstrated that one point
increment in online ratings can enable a hotel to expand its ADR by 12% without adversely
influencing occupancy (Anderson, 2012). It was discovered that positive behavior in online
surveys increment the quantity of hotel rooms booked, along these lines expanding by and large
hotel revenue, and furthermore that a 10% expansion in review rating can help hotels online
bookings by over 5% (Ye et al., 2011).
In the hotel industry, term distribution channel defines as a chain of inter-medium through which
a customer gets the access to book or reserve the hotel rooms. In the race to sell the maximum
number of rooms in a hotel, proper room pricing alone cannot help in generating maximum
revenue as every customer cannot come directly to hotel to book a room so to overcome these
challenges, distribution channels emerges as an important aspect in generating maximum
revenue from different types of customer. So distribution channel is a path that shows proper
details to the correct individuals at the perfect time and in the right place to make a choice for
purchasing the hotel services, and this permits the customer to reserve and pay for the required
services. (Buhalis, 2000). The distribution channels comprises of customers; suppliers; OTAs
(Online Travel Agents) web-empowered corporate trip specialists, visit administrators and retail
operators; the Global Distribution System (GDS); Destination-Marketing Organizations (DMO);
web programs, web search tools, official website of hotel and meta-search engine. There are two
methods to book a room and this are traditional and online method. In the traditional distribution
channels, customers more depend on traditional delegates, like travel offices to book their rooms
via GDS. Through Internet, customers can now directly make their bookings by means of the
hotel’s website without experiencing the intermediaries. The hotel industry has been taken by
the internet in a massive way, where majority of hotel booking is done by internet or online
method. Also it is necessary to keep multiple distribution channels because it is very difficult for
a hotel to sell its all rooms by one source. Also Anderson’s oft- referred reports on the “billboard
effect” demonstrated that hotels in general increment its earnings through advertising its room
rates on various distribution channels (Anderson, 2011). But it is a challenge for hotel industry to
keep their customers engaged over all distribution channels because all this source have different
ratio of profit margin, so there is a huge price difference (price disparities) of a same room at a
same night to different customers across the world, so it creates a negative impact on customer’s
mind about a particular hotel. Past studies have advised hotels to keep same room rates over
each and every distribution channels. Rate parity is characterized as keeping uniform rates over
each and every distribution channels. Whenever the revenue department maintains rate equality
(parity), rate honesty is guaranteed. Also, by maintaining uniform rates over each and every
distribution channels, hotel can provide guarantee to customer that no more cheaper prices are
present somewhere else. Nowadays customer are more focused on easy and trustful mode of
booking the room and it is mainly done by reading or viewing the former or other customer
reviews about a hotel. So to exercise this trustful method, hotels are now more focusing to make
their good impact on social media, as social media has the power to make or break the image of
hotel among the customers. Nowadays various reports have discussed about the seriousness of
social media as a medium for collecting reviews as well as for building consumer loyalty. Also
online survey distributed on both specific sites (TripAdvisor.com) as well as OTA websites
(booking.com) are developing into a significant method of inquiries. So it is necessary to keep
together both online hotel contact (like hotel websites as well as OTAs) as well as interactive
media (social media) as a source of distribution channel to achieve better customer experience
and to generate better revenue for hotels.

Though direct booking of the hotel rooms are preferred by hotels to increase its revenue
undivided but hotels find it very difficult to sell all of its room single handedly. So to overcome
this issue, hotels need distribution channels to sell its maximum number of rooms. But on the
contradiction hotels are facing more loss as distribution channels are taking a massive percent of
commission on each booking, hence its necessary for hotels to maintain their room prices
accordingly. In addition, customer experience is also a major issue for hotels to look over, as
customer satisfaction is directly linked to the revenue generated by the hotels through room
pricing strategies and distribution channels. So to overcome this issue, hotels need to be keen on
its customer needs and demands by implementing rate parity over multiple distribution channels
and social media. If hotels keep balance on both customer experience and revenue optimization
a proper tact and right medium can be utilized by hotels like strategic room pricing as well as
distribution channels so that customer get satisfied by the hotel services. Which gives their best
rating on review scores perhaps ultimately lead to achieve optimum revenue.

Total word counts: 1489

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