Uses of Big Data to Improve Your Pricing Strategy

by Beonprice

4 January, 2017

Uses of Big Data to Improve Your Pricing Strategy

The maximum commercial and distribution potential of the tourist product through online is the ability to know where we invest our resources. 


The possibilities offered by the data translated into useful information enable us to refocus our strategy and optimise the sales generated. 


How we use the vast amount of information around us will depend on our ability to process and interpret it. From Beonprice we propose 5 concrete actions to take advantage of the data that we have at our disposal and that in turn can influence the pricing strategy: 


1. Net profit per channel

This point involves classifying each demand channel according to its net profit, deducting all the costs associated with the channel (advertising costs, commissions, etc.). In this way, the criteria to be taken into account per channel is unified and we can make a comparison between the channels through a single parameter.


To make this classification in a correct way it is important that we ask ourselves questions such as the following:


What is the benefit of each channel in terms of accommodation costs? 


What is the average daily rate per channel? It may happen that, first and foremost, the price is higher on the web hosting itself. It’s a good idea to do your own analysis to see which numbers we are moving through channels. 


Which days of the week do we get more customers for each channel? It may happen that certain channels pile up reservations by dates that could be booked through the direct channel. In this case, it is advisable to analyse the availability offered by each channel at certain times of the year. 


2. Do not lose sight of the historical data

Having a vision of what has happened in the past can help you approach the future from a different perspective. It is important to analyze spending patterns and the length of time each channel has been booked to see how they vary over time. With this we will be able to analyze the amount of income they contribute or if what they generate are expenses for housing. Looking back on a regular basis does not always lead to a life of remorse. On the contrary, it can help us look to the future!


Thanks to the historical data we can analyze the spending patterns and the use of each channel to understand if they have improved steadily or if the income they contribute is decreasing. This action will be perfect for knowing whether revenues outweigh costs and vice versa. 


Depending on the channel through which customers arrive, the latter may or may not contribute the value we seek from our accommodation. It may even happen that the real value of a given client is at a higher expense level than that generated in the hotel accommodation reservation. It is advisable to analyse the average expenditure of the client and see in what range of expenditure is per channel, analysing whether it is really convenient to attract that guest. 


3. Planning strategies for the future


Availability and pricing decisions should be based on a hotel’s booking rhythm report. This type of report generally shows the total performance of the rooms according to the market, putting the year in context. You can also create rhythm reports by room type, by days of the week (Monday to Friday or weekend), reports of events such as New Year’s Eve or a locally significant event. One of the greatest advantages of these reports is that they allow an estimation of possible levels of demand to be made as a projection for the coming months. The way in which we filter the data will help the information generated to meet the needs of the hotel.


4. Identify the right time to adjust the sales force

Taking into account the average time in the reserve is important, but the analysis of how outliers influence the “equation” is no less important. We must identify and be aware of the average reserve window for a given day. As an example, we can see that for a specific day the reserve window is 20. However, taking into account outliers, it should be 10.


Quality is paramount in the action and above all in our awareness when planning and executing a marketing campaign based on the booking window. Doing so in the wrong way could be an unnecessary waste of resources. It will be essential not to lose sight of the booking window, examining who and what is being booked in each window.


5. Who ended up staying and where the cancellations came from

There are comparisons of the rate of cancellations per channel that are worthy of analysis, especially when it comes to making decisions. Is there a pattern of bookings with longer stays and lower cancellation rates? 


When bookings are made earlier, there is greater uncertainty about decisive times that compromise the future of the hotel. If we have forward-looking projections of cancellation estimates we can determine which channels are most interesting. 


The work of the person in charge of Revenue Management requires constant evolution. The difficulty lies in knowing what to do with a large amount of data and how to use it operationally in the day-to-day marketing of the hosting. The processing of that information through the right tools will be a key decision that will impact the hotel’s bottom line: Ready to take advantage of the Big Data and transform it into Smart Data?

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