If you’re an accommodation business owner, you’ll have been told countless times about the importance of seasonal pricing. If you haven’t, here’s one more reminder!
Whatever scale of ownership you fall into, seasonal pricing is key to running a successful, growing hotel, rental apartment, B&B or multi-national accommodation management company.
This year, hotel occupancy rates are expected to improve, with research by PWC suggesting a 52% rise in London, and an increase in average RevPAR to £64.81 (126% up on 2020).
That’s much-needed good news, but it won’t impact your business without some proactive effort on your behalf.
In this blog post, we’ll look at how anyone can create a seasonal pricing plan in just a few simple steps. It’s far easier than you think, and within minutes, you’ll find yourself tailoring a pricing strategy that works perfectly for your business and its audience. But first, let’s tick off the basics.
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What is seasonal pricing?
Seasonal pricing does what it says on the tin. Put simply, it’s a way of flexing your pricing depending on demand during specific times of the year.
The most obvious example is the summer period. With kids on school holidays and families looking to grab some much-needed time away, demand is likely to be higher for certain types of accommodation.
Adjustments can therefore be made to either make rental properties or hotel rooms more attractive to a larger pool of guests.
It can work the other way, too. Increasing pricing seasonally can create a sense of scarcity, demand and exclusivity.
Seasonal pricing is a tactic that has been used by the hospitality industry for many years, and these days, the results of these strategies are leveraged wholesomely by online travel agencies (OTAs) in order to tempt click-throughs and increase rankings on Google.
What are the benefits of seasonal pricing?
If you’re lucky enough to have an accommodation business situated near a venue that draws a significant audience during a specific time of the year (without fail), seasonal pricing will significantly boost your profits - predictably.
But you don’t have to be located next to the Silverstone Circuit or within stumbling distance of the Edinburgh Festival to benefit from seasonal pricing.
Any venue can use this strategy to:
- stand out head and shoulders above the competition;
- increase occupancy during typically quiet days of the week;
- maximise the profitability of every room or apartment; and
- increase the likelihood of receiving direct bookings rather than paying commission to the OTAs.
Most importantly, seasonal pricing will open up your business to a much bigger pool of potential guests, and that gives you the opportunity to create new, ultra-loyal customers.
How to set seasonal pricing: 5 simple steps
Now we understand the reasoning behind seasonal pricing and the benefits it’ll offer your business, let’s dig into how you can create your own strategy.
Choosing a season pricing model is actually pretty straightforward. But you’ll need the right tool to see it through, therefore a property management system (PMS) with built-in revenue management capabilities is a must.
The good news is that most platforms of that kind, along with the OTAs themselves, will offer the ability to easily ‘flex’ rates and add seasonal pricing onto your base rates.
So, tool in hand, here’s our five-step process for setting seasonal rates. It’ll work for hotel rooms, rental properties and even within group accommodation businesses.
Step 1: Set your minimum and maximum rates
For seasonal pricing to work effectively you need to have a base and ceiling from which to work - and to work towards.
Think about the absolute minimum price you’d charge for each type of accommodation you provide. This will probably differ by room type, but it’s important to remember that, at this stage, you’re not thinking about occupancy vs price.
For instance, a two-night booking at £400 is going to bring in a lot more revenue than two single night bookings at £100 each. Your minimum and max pricing therefore needs to be determined by answering the following question:
What is a fair price to pay for a stay at your property, venue, or a franchisee within your brand?
There’s no right answer to this, and it’s something you’ll have to tweak as the business grows and becomes more widely recognised. But, deep down, you’ll know when you’ve hit on the right minimum and maximum charges for now.
Step 2: Map out your key seasons
Winter, Spring, Summer and Autumn (or fall, depending on your region) are the seasons all accommodation providers need to work with and maximise.
It’s important to work out where your key seasons sit within the calendar year. Map it out on a piece of paper or calendar. Note down the following:
Peak season (where demand for your venue is at its highest) Off-season (where demand is at its lowest)
Shoulder season (the periods that precede and follow your peak season) This task is made easier if you can look back at the last three years or so and review the occupancy stats across each year. The key seasons for you will become immediately evident.
Step 3: Look for additional seasons
Now you know what your key seasons are, you can look for additional ‘mini’ seasons within them.
These are dates which, just like the ‘big’ seasons, are ripe for price flexing, based on demand. Classic examples are Christmas, Easter, public holidays and school holidays. Note down all of the events and seasonal events which pertain to your local area (or which will be important to your ideal guest).
Think about local events, too. They don’t have to be big, either; a small sporting event or local town festival might be enough to demand a different pricing strategy whilst footfall in the area is a little higher than normal.
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Step 4: Work out your base rate
Your base rate is the most important rate of all. It’s the price from which all of your adjustments are made, and it’s the price you fall back on when there’s no reason to increase or decrease your rates.
It’s the perfect middle ground for your business. It’s also a number which pretty much every OTA and online booking system will require you to enter in order to begin advertising your availability.
To work out yours, undertake some competitor research (OTAs are perfect for this - just filter out your search with amenities that match your own), and look for the base rates. They should appear more regularly and, in particular during shoulder seasons.
Your base rate shouldn’t be set and forgotten about, either; you may need to adjust it in line with competitor movements and the overall confidence (or lack of) within the market.
Step 5: Flex your rates
Adjusting your pricing for each season isn’t a quick job, and it requires lots more competitor research, but it really is worth your time.
You’ll also probably have to flex prices at short notice and as demand in your area fluctuates. But there are some tried-and-tested strategies you can lean on.
- Off-season pricing should be around 25% of your peak pricing.
- Shoulder season pricing should be a maximum of 75% of your peak season pricing.
Remember to keep in mind those additional seasons you outlined in step 3. The same goes for weekends; demand often rises then, and it’s important that any mid-week flexing you undertake is reflected in your weekend rates, too.
Seasonal pricing is different for every business. This makes it hard to distil the practice down into a few steps, but we hope the above gives you something to get started with.
The key thing is to be bold with your pricing and unafraid to raise it above the price of the competition when you think demand and the magnetism of your brand deserves it.