Pricing basics
This Pricing basics Info Guide tells you how to set your prices to improve your profits.
When setting prices, you need to balance the needs of your customers with your profit requirements. To set the right prices, you need to know your:
Product
Target customers
Competitors
Costs
Timing also plays a key role in pricing.
Prices vary depending on the type of product offered. Your customers are seeking a memorable stay. You need to constantly reinvent your product offering, eg, by making tweaks to appeal to your preferred target markets to encourage repeat visits, and to survive.
If you deliver a high-quality product tailored for your target audience, you can charge more than if you are just focused on value for money.
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Before you can provide customers with the product and service that they want, you need to know:
- who your customers are.
- what price they are willing to pay.
- what experience they expect in return for the price charged.
You can then set more competitive prices.
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To provide a satisfactory customer experience, consider the following:
What will make your accommodation more appealing to your target customers?
What barriers might prevent potential customers from staying in your accommodation?
Businesses benefit from finding ways to collaborate with other businesses in their locality to build the overall number of customers to the area. Work with other businesses to create packages and special offers, refer customers to each other and collaborate on joint marketing. Sample packages include:
- Accommodation plus an activity such as a guided walk or cycle, an adventure activity, a trek on horseback, a round of golf or a boat trip
- Accommodation plus a lesson/series of lessons, eg cookery, painting, music, crafts, dance, theatre or language
- Accommodation plus an attraction or entertainment such as admission to a park, entry to a local festival, or to see a show, exhibition or talk.
For example, if your self-catering cottage or hostel is located in an isolated rural area with poor infrastructure, people may be discouraged from renting it. To overcome this barrier, provide a free pick up-drop off service.
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Remember!
Competition influences the maximum price for which a product or service can be sold.
Establish within your target customers a perception about your accommodation that will differentiate it from that of your competitors. Stand out from your competitors by marketing your point of difference, eg, scenic location or proximity to language school or sources of entertainment.
Any advantage that you have over your competitors will help to make your accommodation business more appealing than competitor businesses. Your competitive advantage may be a unique superior service that only you can offer, eg bicycle facilities or storage space for equipment or gear used for activities. You can also gain competitive advantage if extra value is included in the price you charge.
Identity the unique benefits of your accommodation business, together with the level of service or standards you provide, and communicate this information to your target customers.
Visit other hostels, self-catering apartments/cottages, caravan parks or camping parks, and find out how their customers respond to the kind of customer experience that you are trying to create. Build networks with other businesses that you currently view as competitors.
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Estimate all the costs involved in providing your accommodation, including running costs, in order to ensure that your pricing makes a profit.
For more on costs and profits see:
Cost control
Profit basics
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Seasonal business
Business activity levels fluctuate between high-season and low-season – many accommodation providers only open during the summer season. You can charge higher prices during peak season, or during special-events. You may be able to charge a higher price in winter if your competitors are closed for the winter months.
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Consider these key points when deciding what price to charge:
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