Our advice is: persevere, and spend a good bit of thinking time on your pricing – not just at first, but as you go along, when you should be regularly testing different promotional pricing, and tweaking your price framework according to experience.
Try to make your pricing:
• Intelligent: ie designed with consumer demand and your business needs in mind, and
• Simple to communicate to the customer, and easily understood by the customer
Clearly, it is a question of balance between the“ intelligence” of your pricing, which may lead to complexity, and the“ simplicity”. It is always worth considering a relatively simple basic price structure( two or three seasons at most, and weekend supplements are understood and expected), with a series of temporary“ special offers” applied.
As we have said earlier, the fact that the Gross Profit Percentage( GP %) is so high in an accommodation business like a B & B is very important, especially in pricing. Another vital and unique thing is the“ perishability” of our stock. David’ s grandmother, who ran a 57 bedroom hotel on Brighton seafront for over 40 years, used to always say“ an empty room is a dead loss”. If you don’ t sell tonight’ s rooms tonight, you can’ t ever sell tonight again.
A third factor to mention with accommodation marketing is that, unlike stock available in a store, there is almost no“ substitution effect” between different dates or periods. In other words, in a store, if you discount your stock during your annual sale, you will hit sales at other times because people may have bought more when the price was lower, and some people may hold off buying if they think a sale is imminent. In a B & B however, if you reduce your room rate from Sunday to Thursday, it will not mean that those who would have booked for Friday and Saturday will book midweek instead.
So price according to demand. If Friday and Saturday are generally full, charge more for those nights. And if midweek is generally empty, try promotional pricing( eg“£ 10 off your second night”, or“ third night half price” or“£ 25 off your fourth night”) to promote occupancy. If need be, reduce your standard midweek rate.
Don’ t forget, if your price was £ 60 and you were not getting bookings, and you then discount or reduce it to £ 50 and get bookings, you have not“ lost” £ 10 but“ gained” £ 50 for each booking.
Your overheads must be paid whether you are full or empty
Of course,“ intelligent pricing” requires you to understand the demand pattern in your local market. This will only come with time and experience, so at first you will have to use your“ gut feel”, and then carefully monitor demand and adapt your pricing accordingly.
To take the various variables within the pricing framework one by one: