HTH 587

HOSPITALITY FINANCIAL PERFORMANCE AND

ANALYSIS

INDIVIDUAL PROJECT

NAME: WAN NUR AISYA BT CHE WAN ABD AZIZ

MATRIC NO.: 2019591163
GROUP: HM2424Aa

SUBMITTED TO:

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 TABLE CONTENT

1. TABLE CONTENT ………………………………………………. 2

2. EXECUTIVE SUMMARY ………………………………………. 3
3. INTRODUCTION TO PRICING…………………………………. 4
4. STRATEGIC PRICING IN HOTEL INDUSTRY………………... 5
5. STRATEGIC PRICING FOR STAR RATED HOTEL…………… 6
6. ISSUE OR CHALLENGES OF STRATEGIC PRICING………… 7
7. CONCLUSION …………………………………………………… 8

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EXECUTIVE SUMMARY

The purpose of this project is it requires the students to analyse the progress of
financial in hospitality and tourism related firms. Students also need to choose one topic in
the financial tool. Therefore, I choose pricing as the financial tool for this individual project.

In this project, I learned a lot about the strategic pricing. From this, I also know more
detailed about the pricing which is what is the strategic pricing, what is strategic pricing in
hotel industry, what strategic pricing that have been used for star-rated hotel, and the issue or
challenge that involved in strategic pricing.

The method that we used in this project is surfing the internet by using the platforms
of Google, Google Scholar, Research Gate and others websites. It is for the search of the
material and to understand more detailed about the pricing strategy. This method is very
useful because the information is well explained and easy to find.

In conclude, I also recommend that to applied the pricing strategic in your business.
By getting some of the research and analysis, I learned a lot about the pricing and how to
doing a great in hotel business. This project is done and I could learn a lot of things and
having a great experience by doing this project.

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1.1. Introduction to Pricing Strategies

An important tool but also a complex and arduous task for managers is setting the optimal
price strategy (Kim et al., 2014). Some of managers have been training for how to make
strategic pricing decisions (Nagle et al., 2014), it means that a lot of firms make pricing
decisions as reaction to market changes (Rao and Kartono, 2009). In the aspect of hospitality,
dynamic pricing plays a vital role (Abrate et al., 2019; Viglia et al., 2016). Moreover, as well
as strategic the room unavailability and review ratings, the dynamic prices will lead to higher
hotel revenues (see Abrate et al., 2019).

Therefore, to firm’s that want a long-term success, setting the optimal pricing strategies
are essential (Danzinger er al., 2006). It can lead to loss of market share and a decrease in
profitability, if the managers apply the wrong strategy (Danzinger et al., 2006; Hung et al.,
2010). There are many pricing strategies and Noble and Gruca (1999) categorized them into
four pricing situations, which is new-product pricing, competitive pricing, cost-based pricing
and product-line pricing. Apart from these strategies, there are others possible strategies, such
as break-even pricing, price signalling, image pricing, premium pricing, second market
discount, periodic discounts, geographic pricing, perceived value pricing and internet pricing
(Rao and Kartono, 2009). Therefore, strategic pricing plays an important role in hotel
industry.

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1.2. Strategic Pricing in Hotel Industry

Strategic pricing plays a vital role for the hotel business. According to Kimes (2009),
strategic pricing made by two constructs that lead to maximizing the revenues for the
business. To those that working in the hotel industry, the top priority is by maximising the
revenue, and to achieve this goal usually requires the right pricing strategy, at the right time
(Revfine, 2018).

Based on Yield Planet (2018), once the revenue strategy is acquired, it is important to
precisely price the perishable room inventory. Pricing strategies allow the hotels to charge
different room rates for the similar rooms depending to their customer’s preferences. For
example, a senior citizen tourist searching for a discount that has different in needs,
characteristics and a willingness to pay compare a corporate tourist has. As a result, they will
pay a much different price but book the exact same room.

According to Al-Shakhsheer (2017) because of the overcapacity, hotel players are

required to lower the room rates in order to improve the occupancy. Strategic pricing allows
hotel to be more proactive and provide guidelines, also plans for the whole hotel sales team to
effectively sell the products. To stay in business and successful growth, the hotel cannot
reach it if they have zero strategies. In order to success, they need the pricing strategies.
Pricing strategic is a very dynamic element. You need to more flexible and adjust the price
plan according the market changes, happening in the city or even at your own hotel.

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1.2.1. Strategic Pricing for Star-Rated Hotel

During this ever-evolving global economy, the key to a successful revenue

management strategy is by adopting a systematic approach to pricing, so that, when making
any business decisions, a proper thought on your hotel pricing strategies is compulsory. Your
business can be disastrous, if your hotel getting a wrong pricing strategy. These are several
strategies pricing that used in star-rated hotel.

First things, that usually used in star-rated hotel is pricing based on the occupancy.
Occupancy based pricing strategy are one of the effective ways if you want to increase room
revenue. Based on the demand and supply, you can set the hotel room rates. Whenever there
is a demand, you can increase the room rates for more business ROI. And, when there is off-
season you can lower the room rates, so that you can fill your rooms and gain profit even in
the off-season.

Next, is pricing based on forecasting. Forecasting is an important factor to consider

for setting the price of the rooms that are available in the future dates. To make a proper
forecasting, there must be some previous data such as occupancy data of previous month,
different types of room sales as per demand, promotions or season. You can change the room
rates based on the upcoming demand or expected occupancy. Example, if you can gain more
revenue in last September, then you can set the pricing for the coming September to gain
more profit for the business.

Other than that, is price that based on the upselling. Upselling is beneficial during the
booking process. By this, you can offer the upgrade options to your customers while they are
making choice of the hotel room. It also encourages the customers to spend more time during
the booking. Example, you can encourage your customer to pay slightly more for a better
room with better facilities.

Lastly, is pricing based on price per segment. Price per segment is one of the most
commonly used pricing strategies in hotel industry. This is where you offer the same product
at different prices to different types of your guests. While the open market prices should be
subject to rate a parity strategy, prices for corporate segments can be lower, especially if they
commit a certain number of rooms or meals. Another choice would be to sell multiple rooms
to travel agents for a lower rate, so they can include the rooms in the packages.

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1.3. Issue or Challenges of Strategic Pricing

As we know, these days due to Covid-19 pandemic crisis, it has drastically changed the
hospitality and revenue management landscape. Domestic and international travel restrictions
have shifted from unconstrained into the constrained demand optimisation. Even though, the
restrictions lifted, your customer confidence may be low towards your hotel. Due to this,
diversification is only one of the most powerful recovery pricing strategies.

Now, a lot of the others hotel are researching and targeting their new audiences. And their
only goal now is to identify the groups of customers that are ready, willing and able to travel.
The domestic leisure segment will likely need to recover, with the ‘stay-cationer’ ready to
explore their own countries. Furthermore, some firms of corporate travel will continue in
industries where a physical presence is unavoidable.

For the hotel businesses, they are now having a critical choice. Whether, they should
decrease the prices in the hope it can stimulating the demand or just resist and hold their
prices to avoid a general market drop. Otherwise, they need to face with the risk of eroding
hotel brand image and pulling down the whole market. Therefore, they need to plan or
develop a new post-covid19 hotel pricing strategy.

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1.4. Conclusion

Strategic pricing plays an important role for all organization and businesses. A business
or firm can develop a number of pricing strategies, it will usually base on corporate
objectives. Done with selecting the pricing objectives, you can determine the pricing strategy.
Careful selection of pricing will lead you to the effective strategies. If the pricing strategies
you applied seems to contradict with the pricing objective, then you should check again the
questions posed in the introduction and your marketing plan.

For my opinion, I recommended this pricing strategies to the hotel business. It is because
from these, it can help us to gain more revenue or profit if we have a strategic pricing plan. In
a nutshell of pricing strategies, by setting the price for the business’s products or services are
an important roles and parts for our hotel business to success. From the understanding of
distinct between cost and price which business charge the suitable and best price. In other
words, customer willing to pay a price for your business, from that we can maximize the sales
volume and profit margin.

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REFERENCES

Abrate, G., Nicolau, J.L. and Viglia, G. (2019), “The impact of dynamic price variability on
revenue”, Tourism Management, Vol. 74, pp. 224-233.

Abrate, G. and Viglia, G. (2016), “Strategic and tactical price decisions in hotel revenue
management”, Tourism Management, Vol. 55, pp. 123-132.

Abrate, G., Fraquelli, G. and Viglia, G. (2012), “Dynamic pricing strategies: evidence from
European hotels”, International Journal of Hospitality Management, Vol. 31 No. 1, pp. 160-
168.

Al-Shakhsheer, FJ., Habiballah, MA., Al-Ababneh, MM., Al-Sabi, SM. (2017), “Financial
Implications of Competitive Pricing Strategies; Evidence from the Jordanian Hotel
Industry”, Business Management Dynamics, 7 (6), 19.

Bojanic, D. (1996), “Consumer perceptions of price value and satisfaction in the hotel
industry”, Journal of Hospitality and Leisure Marketing, Vol. 4 No. 1, pp. 5-22.

Danziger, S., Israeli, A. and Bekerman, M. (2006), “The relative role of strategic assets in
determining customer perceptions of hotel room price”, Hospitality Management, Vol. 25
No. 1, pp. 129-145.

Hung, W., Shang, J. and Wang, F. (2010), “Pricing determinants in the hotel industry:
quantile regression analysis”, International Journal of Hospitality Management, Vol. 29 No.
3, pp. 378-384.

Kim, W.G., Han, J. and Hyun, K. (2004), “Multi-stage synthetic hotel pricing”, Journal of
Hospitality & Tourism Research, Vol. 28 No. 2, pp. 166-185.

Kimes, S. (2009), “Hotel revenue management in an economic downturn: results from an

international study”, Cornell Hospitality Report, Vol. 9 No. 12, pp. 6-17.

Nagle, T., Hogan, J. and Zale, J. (2014), “Strategic pricing: coordinating the drivers of
profitability”, in Nagle, T., Hogan, J. and Zale, J. (Eds), The Strategy and Tactics of Pricing:
A Guide to Growing More Profitably, Chap. 1, 5th ed., Pearson Education Limited, Essex,
pp. 1-16.

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Noble, P.M. and Gruca, T.S. (1999), “Industrial pricing: theory and managerial practice”,
Marketing Science, Vol. 18 No. 3, pp. 435-454.

Rao, V.R. and Kartono, B. (2009), “Pricing objectives and strategies: a cross-country
survey”, in Rao, V. (Ed.), Handbook of Pricing Research in Marketing, Edward Elgar
Publishing, Northampton, pp. 9-36.

Viglia, G., Mauri, A. and Carricano, M. (2016), “The exploration of hotel reference prices
under dynamic pricing scenarios”, International Journal of Hospitality Management, Vol. 52,
pp. 46-55.

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