Question

Topic: Customer Behavior

Hotel Price "a La Carte"?. Pros & Cons.

Posted byflaon 250 Points
According to research, tourists are now travelling less, spending less and/or reducing their stays. The South American village I'm writing from receives mostly tourist who simply do not want to spend money. Some of them are backpackers with limited finance. Tourists spend on average 2,5 nights.

The kind of tourist I'm targeting are not enough (at the moment) and I'm thinking how to catch some more from competitors who offer a slightly lower price (-15%) but not the same service.
Most of those lost prospects admit that I offer a good "value for money" but want to spend less due to their budget.

Do you think that a "price a la carte" could be a way to keep some of them? Let's see the numbers: my rack price for a double is about 40 USD, which include a good breakfast, daily cleaning and towel change, free Internet.

I could lower to 34 USD (15% less), then widening my market share, if the client doesn't need(want) some of those services.
No daily cleaning? 2 USD off
No towel change? 2 USD off
Basic breakfast? 1 USD off
No Internet? 1 USD off

They can of course decide -at any time- what to get and pay for. If this strategy is going to work I will then have to sell the rooms not at 40 USD but "starting at 34 USD only".

Is this "guerrilla mktg"? Since tourists are one time only visitors of this area, I think that to give a try will not be harmful.
What impact could this "strategy" have? Pros? Cons?
Many thanks in advance.
Fla



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RESPONSES

  • Posted bywnelsonon Accepted
    Hi, Fla,

    对于一个工厂,通常利润来衡量fully loaded cost - materials, labor, and a figure that represents the fixed overhead - rent, lights, management, etc - all the other costs it takes to have a business. If the price of the product is too high such that the line is idle because there is no demand, then the factory is making zero profit and not covering its fixed overhead. When demand falls off, a factory will reduce price so as to make profit over variable cost (cost of materials and labor) and that profit helps offset the overhead. The object is to price such that the factory line is always full.

    Think of your hotel as a factory. If you are running at minimum staff - you can't reduce any more and still accommodate even one guest - then their salaries are part of fixed cost - these costs don't change until you reach a number of guests such that you have to bring on another staff member. In this case, if you have empty rooms and these staff members are not working up to their maximum capacity, then you can price rooms using variable cost pricing until those rooms are full. At that point, you have do decide if you bring on another staff member and fill up the next block of rooms. In that case, you'd count the next staff member hired as variable cost and you'd have to cover them in the pricing.

    What I'm recommending is that you begin looking at your empty rooms and your variable cost and price accordingly so that you fill the rooms you can accommodate with present (fixed) staff. If it's 15%, great! If it's lower, make it lower. With this approach, if you look at total profit versus profit per room, you will see you will make more total profit.

    Obviously, you can price higher for reservations out further and as time gets closer, reduce the price you need. Since most people are one-timers, people won't catch on to this and just delay making reservations out further. It shouldn't hurt you.

    或you could have a tiered pricing such that if guests aren't paying "full price," they don't get the "amenities" that a full price guest gets - paper delivered to the room, breakfast included, access to the spa/health club, invitation to the happy hour with hors dourves, premium TV, 300 count linens - whatever it is you care to offer.

    I hope this helps.

    Wayde
  • Posted bymichaelon Member
    You really have to see what the competition is offering for those prices. Honestly, are you measured on revpar or some other way?

    Daily cleaning is not a necessity. Even when I stay 5 days I don't ask for cleaning. For what? If I need something I go to the front desk. Why pack up all my stuff each night to prevent possible theft?

    $1 for breakfast? Let me in! Still, maybe your gift shop could stock food and make more money.

    How are you going after these customers? You should be able to sell $1 more without a problem.

    Michael
  • Posted byflaon Author
    Michael says:
    ---You really have to see what the competition is offering for those prices.---

    Competition has a lower value for money I'm offering but have the advantage to be operating since a few years, while I'm the newest on the market.

    The fact is that at the moment there are not enough customers willing to spend 40 USD. Those who sleep in 40 USD or more expensive hotels have booked through travel agents.
    I think I have to adapt my price to what the market wants.
    Of course I can't sell a 40$ room for less then $34, even because nobody is offering my quality for that price.

    这个故事将会改变当我接触travel agents will start to generate my targeted customers.

    So, as a tourist, do you get hooked by a price "a la carte" ? I personally would use this formula but how many out there do?
    Thanks.
  • Posted byJay Hamilton-Rothon Accepted
    This strategy can work with budget-minded customers, if your value/quality is clearly better than the price you offer. If you've determined that 40 USD is the tipping point for hotel rooms, then you certainly can lower the price. Make sure that the a la carte price + extras is more than 40 USD. You want the "full luxury" price to be a deal compared to the a la carte price "fully loaded".

    If you don't already have a wealth of people who have written positive reviews for your hotel on the various travel blogs, start requesting your guests do it (offer them a gift on a future visit with proof, for example). Reviews by people who stay at your hotel are a great source of information by prospects.
  • Posted byflaon Author
    I add some details in order to better understand. --I had to do it earlier :-(
    This situation should be temporary since it will take months before advertising, contacts and contracts with agents will take effect. I want to stress out that we are talking of a very small tourist lodge in a Andean village of Chile.

    The problem I'm facing is the shortage of independent travellers looking for this kind of accommodation. Until I will have "my clients" (generated from publicity and Tour Operators) I don't have other choice than to catch from my competitors basket. I don't want to sell gold at the price of silver but with "a la carte price" or a discount I should get some of these prospect and "survive" until the market will know my Lodge.

    I agree with Yen (incentive to stay longer etc.) and I think the incentive for the 3rd day could work (the average stay here is 2,3 nights). Still too many customers want to spend one night only and with that I can't be too flexible. In that case "a la carte" will not work well because rooms, beds and towels must be done anyway.

    In these days I'm receiving results from a survey: 75% people interviewed would be happy to save money with "a la carte prices". Main reason is that (for just 2 -3 days stays) they don't care for beds done or towels changed.
    Thanks to all.

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