FACULTY OF COMMERCE

TOURISM AND HOSPITALITY MANAGEMENT

GROUP ASSIGNMENT

TOURISM HOTEL AND INSTITUTIONAL MANAGEMENT (THM 209)

NAME SURNAME REG NUMBER

RUMBIDZAI MELLISA DZINZI R198686Y

PRUDENCE SITHOLE R198615R

MARIETE SHOKO R199942C

FREDLEEN MUGWAGWA R197648P

TAKUDZWA KAJEKERE R1911042Q

DECENT KUDAKWASHE KUFONYA R1915661C

IDAISHE CHIRIGA R198929Z

MARGRET KUTSANZA R1917672B

PROMISE MAKORE R1917842Z

MICHAEL LOVEMORE BAKE R1914058T

TINASHE CHNHAMO R197846C

EXPLAIN THE DIFFERENT TECHNIQUES HOTEL MANAGERS CAN
EMPLOY TO PRICE THEIR ROOMS. (25)

A hotel is an establishment of a permanent nature which consists of four or more bedrooms and
offers bed and breakfast on a short-term contract and provides certain minimum standards. The
different techniques that hotel managers can employ to price their rooms are; occupancy-based
pricing, forecast based pricing, market competition-based pricing, length of stay based pricing
among others.

Occupancy based pricing strategy is the best way if you want to increase room revenue. You can
set hotel room rates based on the demand and supply. Whenever there is a demand, you can
increase your room rates for more business ROI. And when there is off-season or low demand
than other seasons, you can lower the room rates to fill your rooms and gain profit even in the
off-seasons for example During the peak season, if your 7 to 8 rooms are still unoccupied, you
can increase the room rates of the same for more business profit. Similarly, when there is off-
season and you want to fill your rooms, you can charge less to encourage bookers to book at
your hotel.

Forecast based pricing is an important factor to consider for setting the price of the rooms
available for future dates. However, one needs a booking history of the previous months based
on season, events, demands, and promotions to make an accurate forecast. Accordingly, you can
change the room rates based on the upcoming demand or expected occupancy. For-example
when analyzing the previous data, you observed that most of your guests generally book a simple
room rather than a luxury room, then you can charge a bit higher for simple rooms than usual,
and even include them in your packages and promotions to sell them better.

Market competition-based pricing is another pricing technique hotel manager can use to price
their rooms. What your competitors are doing or offering is the foremost thing that you need to
take care of to compete in the market. For that reason, you constantly need to monitor your
competitors’ room rates and understand their pricing strategy. Keep in mind to compare that with
your room rates to get a clear idea on how the market is trending. When done and monitored
properly, it will help you know what guests are paying and what they are willing to pay for a
hotel room. On the basis of all this data, you can devise your hotel pricing strategies to gain a
head start among your competitors. You can define or list your competitors based on factors like;
property type, room rates, star category, offers or discounts, or promotion channels. Hence, it is
important to consider all these factors and oversee relevant competitors to set a pricing strategy
that will help you compete with them. For-example when checking up with the competitors, you
come to know that they are offering a complimentary service, like one-time free breakfast or spa,
to those who are booking well in advance and long-staying guests to make more profit. Hence,
you can set pricing and even create packages accordingly.

More-over another pricing technique that hotel managers can use is Length of stay based pricing
where managers can adjust pricing based on the length of stay of your guests. The length of stay
ideally depends on the number of night packages you are offering to your guests. An advantage
of the length of stay pricing is that they are offered one rate for their entire stay based on their
arrival date and total reservation night length. The best time to apply this strategy is during
festivals and vacations. Here, you want guests to stay for a minimum of a few days at your hotel
so that even if you receive lesser booki6ngs, it does not matter much as nights stayed will
increase. The main aim of a revenue manager is to modify the room pricing based on the
maximum/minimum length of stay to increase occupancy and business in most cases. For-
example let`s say, you know that guests tend to stay for a longer period during school vacations.
Or say you got a booking inquiry from a guest willing to stay for a longer period. Accordingly,
you can set different packages for 1, 2, or 3 nights for the upcoming guests as per the demand or
occupancy.

Cost oriented technique is another pricing strategy that managers can use to price their hotel
rooms. It is largely used in the setting of prices in catering operations. Cost-plus method is used
where a percentage mark-up is added to the cost or a set amount added. Factor pricing- price is
set by multiplying the cost by a standard factor such as 2 or 10. Actual cost pricing is a variation
of the Hubbart formula , where sales targets and profits are established and all costs except food
are taken away from the sales less profit target to establish a food cost ceiling.
Other sales-oriented technique is another pricing strategies that hotel managers can use to
increase revenue in hotels. Prestige pricing is based on the concept that there are some products
for which demand increases as the price increases. Leader pricing is when the concept of pricing
one element of the product mix low so as to attract sales. Moreover, psychological pricing
utilizes a range of approaches for setting price according to what it is perceived the customer is
prepared to pay. These techniques are suitable for adjusting prices in short term.

In conclusion, hotel managers use these different techniques to price their rooms in order to
increase their revenues. The manager of the hotel is made responsible for maximizing the full
potential of the operating unit by managing the price at which his product is sold through the
various techniques mentioned in this essay.

REFERENCE LIST.
Smith, T., Pricing Strategy: Setting Price Levels, Managing Price Discounts and Establishing Price
Structures, Cengage Learning, 2011, pp 270-272

Dibb, S., Simkin, L., Pride, W.C. and Ferrell, O.C.,Marketing: Concepts and Strategies, Cengage,
2013, Chapter 12
Nagle, T., Hogan, J. and Zale, J., The Strategy and Tactics of Pricing: A Guide to Growing More
Profitably, Oxon, Routledge, 2016, p. 1 and 6

Brennan, R., Canning,L. and McDowell, R., Business-to-Business Marketing, 2nd ed., London,
Sage, 2011, p.331

Neumeier, M., The Brand Flip: Why customers now run companies and how to profit from it
(Voices That Matter),2008, p. 55

Irvin, G., Modern Cost-Benefit Methods, Macmillan, 1978, pp 137-160

Kotler Principle of Marketing, Pearson