César López5 minutes read

Advance or last minute: up to you

One of the key factors to determine your pricing and sales strategy is how long in advance your clients book their room in your hotel. Do you rely too much on last minute bookings to fill your rooms? Were you ever forced to lower your prices? If so read on: we will help you to change that .

The advent of Internet is making the market change. Now you, as a hotelier, have more bargaining power than ever before to be able to get prices to suit your needs in a fast and flexible way. Your work is complicated: You must know and combine the many factors that influence the right pricing. It is not easy, and you mustn’t relax the competitiveness of your hotel is at stake here. How long in advance customers book their rooms is one of the most important factors when it comes to determine your pricing and sales strategy. The recent tendency to book later and later is influencing all the process.

Many hoteliers observe the last-minute phenomenon as something negative: it stops you from preparing forecasts, keeps everybody on their toes and more than one sales manager gets nervous seeing how the occupancy forecast barely moves until shortly before each date. Only a few have a clear strategy for action. Some, seeing it as the least of two evils,  get into the last-minute game by issuing last minute deals. Lowering the prices only encourages the opposite effect, it encourages prospective customers to hold on their bookings until the very last minute with the certainty of finding very good deals.

There is nothing you can do to change the lifestyle of your customers and that has a lot to do with the increase of the last-minute phenomenon. Holidays are no longer that well planned regular period that would be considered sacred every summer. Now, holidays tend to be spread over the year and largely improvised. If you work with corporate clients, you would have probably noticed than they, too, tend not to book as much in advance as a few years ago.

What can you do? How can you resist the temptation of lowering prices before the prospect of bad occupation figures? It is the airline sector the one leading the way, giving hotels a clue about the strategy to follow: the earlier you book, the better the price you get. Users seem to have got their message. However, hotels are still a few steps behind and it’s still not very clear if they will be following this path.

It may be that the last-minute craze is a market trend and answers to demand, but it is ultimately up to the hoteliers to encourage it by offering last-minute deals or reverse the situation as have done the airlines. Encouraging advanced bookings is not only convenient for the hotel industry as a whole, but it is also a great business opportunity for your hotel. In recent months some hotel businesses have taken the initiative. They are only a few and they are benefitting from the fact that they are pioneering the way. Think about it. Many hotels are concentrating their attention on the last-minute customers, but only a few do on the advanced-booking customer.

If you decide to take action, you should take the following into account:

* It is a medium and long term strategy. Do not expect immediate results. Take it step by step. It will take several months before you start seeing the results.

* You must know well your goals and the way your customers react towards pricing. You must know what they are prepared to pay and when, when you can expect more demand, what is the likely impact of each price … Experience will help, but it is essential that you get the right statistics, that should be provided by your PMS.

* Start to act in the long term. The long run is a blank book in which the hotel has little data to decide the right price. Your hotel will have only a few reservations confirmed so far. Do not fall into the common mistake of setting from the beginning the price at which you would like to end up selling. Experience tells us that the desired price is not usually realistic and even more so in such difficult situations like the present one. Change completely this approach and charge the lowest price from which to start selling for a certain date. It looks just a little nuance, but it’s one of the keys to success.

* Do not be afraid to start with the lowest price possible, the price that will almost make you feel embarrassed. It’s just a starting point. The idea is that the price goes up gradually in a controlled manner, as bookings start coming in. Keep track of the gradual occupancy figures for your hotel daily. You should be ready to increase the price several times before you get to each date. Every time you change a price, study the response on the number of reservations received in subsequent days and calculate whether the current evolution is the appropriate on to allow you to sell all your rooms within the remaining time. Use price as a deterrent, not as an accelerator. If you do, you will have a safety net of rooms that will prevent you from having to rely on last-minute reservations. If lack of demand does not allow you to raise the price as you near that date, at least you will have that cushion.

* A policy of increasing prices has several advantages.

  • It will prevent customers with confirmed reservations to discover that prices have fallen after their reservation.
  • It will reduce conflicts with companies, which tend to book at short notice and therefore they will see a public price that will be more expensive than their usual corporate rate.
  • It will be creating a new way to segment customers to justify policies of Yield Management. We will talk about that another time.
  • And, above all, it will encourage those customers who are tempted to book a room in your hotel to reserve as soon as possible. You will not lose customers that think about it and end up by booking in a competitor’s hotel.

* Provide resources and time to pursue this strategy. Watching the evolution of occupancy every day of the coming months and updating the corresponding price takes time. More and more chains are creating specific departments for Yield Management. Independent hotels have the advantage of knowing their market well.

* Apply this policy in all the possible channels. Even the most rigid and traditional tour operators offer ways to reward early bookings. Check with them.

* Do not just limit yourself to a pricing strategy, it will not suffice: You will have before you a powerful marketing argument. Use advance promotion as your slogan, sell it as a special offer: Do not just settle for meeting the demand, create it! Go hunting for advanced buyers. Right now they are a cloud of neglected potential customers that are flying over your city looking for an offer (They do “fly” as many of them would have probably already bought their airplane tickets in advance and need to supplement it with accommodation).

As you can see, it’s not about giving up last-minute reservations with immediate effect, but gradually replacing them with other type of customer. Free yourself of that dependency presenting your strategy in such a way that waiting to find a good price would not make any sense for you or your clients. Then is when you can really introduce that last-minute offer that really interests you.: That very restricted, limited to the hours prior to arrival that potential customers perceive as too risky and that it may not be available if they wait before they book it.

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