As everyone is working on post COVID strategies at present, one of the most asked questions we are faced with is what needs to happen with our rates. We all know that our number one focus in phase one of the strategy will be to recover demand as much as we can, but to what extent do we push rate into this conversation or to what extent will rate help us in this regard?

To answer this, I believe we must ask ourselves why we discount rates from time to time. What is the purpose of this initiative and how would this benefit us now? Whether we reduce rates or freeze rates, the same deliverables needs to happen for it to be a fruitful initiative. The logical deliverable would be to stimulate demand, right? BUT will a customer decide to travel because they can get the same rate in 2021 as in 2020, or because they can get the accommodation marginally cheaper? My instinct is that the customer won’t even know that they are getting a better deal in many cases. But most travellers, where disposal incomes have reduced considerably, will not be able to travel no matter what the price reduction is.

The more affluent traveller will know that a slowing economy and the significant change in exchange rates means that certain destinations will be very affordable to travel to.

How to price accomodation post-COVID19

The reason for travel will also change significantly and the value proposition of each company will become far more important than ever before. Travellers will want to know that they are safe to travel and that we will do everything we can to keep the world’s best interests at heart. Travellers will be much focussed on Value for Money, and what they will get for their hard-earned money.

Keeping all of this in mind, what do you think will happen when travel does not increase after the adjustment in prices? I believe people will panic and keep adding specials and continue to erode the rate. In the end we will have adjusted our value pricing long term and offered deeper specials than we would have given generally – and ultimately prolong the recovery period significantly.

Does it not make more sense to keep contractual pricing as it is and offer promotional pricing, as a country, for a shorter period to make the destination more attractive? Once demand is back on track we can revert to normal pricing – reducing the recovery period considerably.

Revenue Resolutions can help you implement the ‘How’, with 28 years of hospitality experience, of which 17 years has been invested in Revenue Management. Contact Theresa Prins on 071 364 6381 (theresa@revenueresolutions.co.za) for more insightful information or to assist you set up your Revenue Optimisation strategy.

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