Should hoteliers disclose to guests their pricing policies?
05 February 2010
A Cornell University study published this month examined how hotel guests perceive fairness in terms of differential room pricing. The report concluded that the best way to combat perceived unfairness in pricing - without sacrificing revenue management strategy - is to increase the transparency of pricing methodology. Guests, the study infers, are more comfortable with the price they pay for their room if they understand why they pay that price, and under which conditions they might have encountered a different price.
We do agree with the premise that hotels - and revenue managers in particular - should make a concerted effort to disclose the demand-based, time-sensitive nature of room pricing along with the various “rate fences” a hotel might choose to set. Hoteliers must also ensure that cancellation and change policies are clearly explained - prior to booking -to prevent guest upsets.
For revenue management to be most effective, it must have the latitude to make real-time, demand-based rate adjustments. Though the Cornell study certainly doesn’t advocate a return to static pricing schemes, it does imply that the best path to increasing the perception of fairness among customers is to increase the level of familiarity with pricing practices. In our mind, this is not necessarily achieved (or achievable) through a wholesale disclosure of complex pricing procedures associated with automated revenue management systems.
In today’s market, non-transparent pricing benefits no one. Cornell’s study confirms that consumers resent them, and hotels gain little from keeping guests in the dark about their pricing strategies. We agree with the report’s prescriptive remedies of proactively listing the conditions by which a consumer might obtain a better rate. We further believe that the appropriate avenue for this is the hotel website.
Consumers may be becoming more accepting of differential pricing, but it remains the task of hoteliers and revenue managers to encourage this comfort level while maintaining an effective, demand-based pricing strategy. This month’s Cornell study indicates that these two concepts are far from mutually exclusive, and we couldn’t agree more.
