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 :