Guide to Seasonal Pricing for Hotels - Maximize Revenue!

Hotels exist in a highly competitive market. To survive and thrive, they need to follow contemporary trends and carefully worked-out techniques. Not blindly, though. A hotel should always weigh the costs and benefits, evaluate the suitability of any trend with its requirements, brand ethos, and image and then proceed with any strategy meant to enhance the hotel business.  

Seasonal pricing is one such thought-through, tried, and tested technique that is used all over the world by different industries to boost sales and revenue. It has extensive benefits, only when implemented keeping the unique hotel location, structure, and needs in mind.  

In simpler terms, don’t just follow suit, be smart and self-aware! 

Thus, this blog is a guide to seasonal pricing. Our aim is to assist hotels with understanding the basics of it as well as give pointers to adopt it in a way that creates a maximum positive impact. 

What is seasonal pricing?

Hotel seasonal pricing is a term that means adjusting the hotel price according to low, shoulder, and peak seasons. It is basically a temporal price differentiation that is based on demand throughout the year and is one of the hotel rate management strategies.  

Demand can be influenced by multiple factors such as climate, attractions, or local events. 

The low-demand period is categorized as the low season, while the period with the highest demand is called the peak season. The period in between or immediately preceding and following the high season, the medium demand season, is the shoulder season.  

For example, travel and tourism in New England in the Fall season are very high due to its foliage. Similarly, Aspen is known for its winter skiing. These are the seasons when these two destinations are brimming with tourists and the travel and tourism prices skyrocket.  

Similarly, between 10 January till 30 March and 01 October to 31 December, are the high/peak seasons in India for hotels. Additionally, 01 May till 31 July is the period of low demand or low season. This categorization of seasons is based on multiple factors that affect demand. 

Some tourists also tend to escape the inflated seasonal pricing and thus choose shoulder seasons, which are as close to a peak season as possible.  

Seasonal pricing thus is an important hotel price strategy that gives it an edge over its competitors, helps it to stay relevant, and even expand.  

Why use seasonal pricing?

Hotel seasonal pricing is simple economics. High demand and limited supply call for higher prices while low demand with usual/greater supply bring the prices down. This can also be called dynamic pricing. 

And increasing your lodging rates during popular times to travel i.e., when the particular destination is desirable is a smart move to capitalize on the increased demand.  

Just like seasons that come bearing fruits, seasonal pricing also comes with multiple benefits for the hotels. These perks include:  

• Staying ahead in the competition 
• Leveraging the season’s demand to maximize hotel profits; it increases the Average Daily Rate (ADR) and Revenue per available room (RevPAR) 
• Facilitating direct bookings; saving commissions directed towards OTAs 
• Keeping guests engaged throughout the year with deals that attract them and increase occupancy

While these were some of the advantages that seasonal pricing offers, the pricing strategy needs some work to be implemented and leveraged. The next section of the blog lists the steps involved in meticulously setting the seasonal rates for maximum benefits.

Note: ADR is the average rate paid by guests per rooms for a specific day or any specific period. It is calculated by dividing the total room revenue earned by the total number of rooms sold at the hotel.  

RevPAR is calculated by dividing the total revenue of hotel by the total number of available rooms during the period in consideration.

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How to set seasonal prices?

Seasonal pricing benefits a hotel when it’s done right. Every hotel has its strengths and weaknesses in terms of location, services, and pricing. Keeping every factor in mind, a hotel needs to build hotel rate management strategies.  

Follow the simple steps to get the hotel seasonal rates right: 

Identify and define the hotel seasons: 

The first and foremost step is to identify and then define the seasons as per categories for your hotel. Although this can be defined by just identifying the busy times at your hotel property, the bases of research should be more coherent than that.  

Thus, this is where the past and current data stored in the CRM system come in handy. It gives a more hotel-specific idea of seasons. Seasons may vary for different hotels and locations. Therefore, relying on the data is the safest bet for hotels.  

Establish your base rates: 

Base prices are the prices that a hotel charges for the off–peak seasons. It is basically the minimum a hotel is willing to charge its guests.  

These rates are based on multiple factors like competitive analysis, the fixed, and variable costs of the hotel, and the profit margins a hotel is aiming at.  

The base price should be calculated very carefully so that the additional prices that can be charged over it for peak seasons are rationally and accurately set.  

Want Your Guests Coming Back? Check Out Guest Retention Strategies!

Work out and set your seasonal rates: 

Once your hotel seasons are identified and base prices are set, seasonal markups can be worked out. Additionally, a hotel can now create its seasonal rates packages, and promotional campaigns to spread awareness around these rates.  

Seasonal rates need to be sorted out for high as well as shoulder seasons. The price for the latter would be somewhere between the base prices and the high season prices.  

For example, if the base price is, say $80 and the high season price is $170, the shoulder price can be $120. This is done to optimize the seasonal change and make the price transition smooth and profitable.  

Seasonal rates need to be set and fed into the system in advance in case of direct bookings or communicated to the OTAs and third-party channels, well in advance, say 12 months. This would help hotels avoid any bookings that are done on the base rates even during a high season.  

While these three steps make a successful seasonal pricing strategy, circumstances and humans are unpredictable. Therefore, a hotel must have a cancellation policy in place at all times.  

Suppose a guest cancels last minute in high season. The loss would be borne by the hotel. To avoid such losses, major or petty, an established cancellation policy makes the guest aware of the amount of refund and deduction policies related to cancellation.  

So, this will reduce the number of cancellations and protect the hotel from any type of monetary losses related to them. 

Tips for Success

Therefore, seasonal pricing is highly beneficial for hotels if done the correct way. It helps a hotel to increase the hotel room rate in case the demand exceeds supply in order to capitalize on ADR and lower it when demand is weak to enhance occupancy.  

Seasonal pricing thus creates a balance between the high demand and low demand periods and helps hotels to make up for the lost revenue.  

Hotels just need to keep in mind that for seasonal pricing, the base rates need to be calculated with accuracy. Furthermore, seasonal rates need to be set rationally, they need to align with the quality of services being offered and be justifiable. While hotels have the flexibility to decide the jump in the high season hotel prices, it should be done responsibly. This can be done by setting some standard price increases. 

Points to consider while setting the seasonal rates are: 

• Seasons for the particular location
• Shift in demand 
• Competitor's rates

Hotel seasonal rates should be set factoring in these points for maximum results. You can play with packages or offer add-ons to lure maximum bookings.  

How does BOTSHOT help?

Does the seasonal pricing concept overwhelm you? Are you unable to practice rate management accurately? Well, you do not need to worry. BOTSHOT to your rescue!

BOTSHOT’s website builder, CreateWith is a multi-tasker hotel automation product that allows hotels to maximize profit with: 

• Rate Management 
• Dynamic Pricing 
• Inventory Management 
• Channel management (all OTAs) from a single place 

CreateWith is a revolutionary product that facilitates a hotel to centralize its multiple management systems and streamlines them. This removes the room for ambiguity and errors and helps the hotel maximize its revenue and expand its business.