Pricing, Discounting and Trade 

by Volunteer Board member Garth London Whakaipo Lodge Taupo

I must start with the comment that if you came to the 2024 Roadshow you would probably already have a good grasp of the subject. Hosted by BBANZ supporter and past president Donna Brook from “HOSTER”, Donna gave a great presentation about this and so much more, so we must commend her courses to you. The subject is vast and I could write a book about it. If your interest is piqued, I recommend that you get along to conference on 12-13 June next year and network. There is so much knowledge amongst our members and you will learn a lot.

This blogger will start by taking a market driven approach to setting your price. I am deliberately not taking a “cost-plus” approach, however I talk about the importance of cost later.Any blog on this should include that PRICING is one element of the 4 Ps of marketing, the others being PRODUCT, PLACEMENT and PROMOTION. Pricing is largely dependent on the other 3 Ps. Your product includes location, reputation, quality of amenities, range of services, your online presence and most importantly YOU. All BBANZ members are hosting. In our segment and higher-end properties the importance of YOU cannot be understated and may even be the most important thing you can offer. BBANZ’s “Essence Award” in the BBANZ Award Program recognises this. If you want to win a lovely trophy and enhance your reputation please enter.

Placement is how you reach your potential guests. Simply, the more places you are, the more reach you have. This is not talking about promotion which is a separate topic. There are fundamentally 3 ways in our industry to do this. These are channels to market. Firstly, your own website. It is the best way to get guests and will add the most value to your business as it is commission-free and helps to build your “brand”. Secondly, online platforms, such as BookingCom, AirBnB, Expedia and many more. These generally charge around 15% commission. Lastly, the travel trade, which comprises ITOs (IBOs), Wholesale and Retail. Trade generally likes a commission of at least 20% and agents may push for 25%. How much you pay is your commercial decision. The more you give them the more they will give you. However,remember there are many other reasons they will be placing with you. Quality Assurance is becoming a requirement with trade as it ensures that you are at least meeting your legal obligations. If you have not completed the BBANZ QA Program I highly recommend you do. If you work with trade,agents will want the commission based on your published pricing so you need to have commission built in as a cost.Further, you will need to be able to simultaneously manage pricing and availability across all online channels and to do this you need a channel manager to integrate with your website and booking engine. This reduces the risk of double bookings and much more. Fortunately “FREEONLINE” is a sponsor of BBANZ and they can provide you with a booking engine, and channel manager and even build your website.  

Trying to understand your prospective guest can be challenging. What demographic are they or might they be? Where do they come from? How old are they. How are they travelling? Most B and Bs service the “Free Independent Travelers” market (FIT). A more sophisticated approach would ask what motivates them and their decision making when they are purchasing?
In marketing speak this is psychographics. Is it price? Mostly not. If you don’t believe this ask yourself how important is clean and tidy? Are they just looking for a bed for the night or are they looking for an experience?  Would offering breakfast add value? Where might they dine and how far do they have to travel to a restaurant? How important is it for them to engage with locals? This simple pleasure is becoming more difficult with many large establishments staffed by temporary internationals who have little understanding of local. 

Discounting in accommodation is common, especially amongst larger establishments that have a lot of rooms. Many of these are using “Dynamic Pricing”, which means adjusting pricing to meet demand and availability in their market. This is mostly managed by software and it’s not a practice I would recommend to BandB operators. The reason is our stock(room numbers) is extremely limited compared to the large operators making it difficult to compete using this tool. In fact in my experience (trial and error) discounting in our segment makes no difference to occupancy. Taken to extremes it is a race to the bottom.

Having explored pricing strategy by looking at market, it’s also important to stress that we should understand our costs. They have increased significantly over the past 3 years. I read recently that most 5-star hotels have one staff member FTE per room. This works out to $240 per day just for staff. This does not include marketing, commissions, linen, consumables, IT subs, rates, insurance, repairs & maintenance, power, web hosting, depreciation or the big one, which is your capital investment. Hotels and motels marketing a room for $240 are really taking incremental sales to fill stock. If they were dependent on this rate across all stock all year they would go broke or not do some of the essentials. I’m sure we are all familiar with tired old motels. 
We don’t really have that luxury, hence the blogger’s opinion regarding discounting. If you feel you are not offering value compared to your competitors look to add value, perhaps package add-ons or multiple night stays.

If you are struggling with how to establish your price, a good place to start is by looking at your product and where it sits in the market by looking at your competitors. This means understanding your market and your competitors. How does your product compare to theirs? Look at location, quality of amenities, range of services, your online presence. How does your property differ? This is important as it enables you to differentiate your offer. Who are your competitors and what are their prices? In a market that has become more and more cluttered with short term rental accommodation driven by AirBnB and others, differentiation has become very important. The more differentiated you are the more attention you will get and the more you will be able to charge.

The advice above is by no means comprehensive and again I recommend you engage with your association to learn more. Networking within the association and with your RTO, entering the award program, undertaking the quality assessment program and getting along to Conference, Roadshow and other events put on by BBANZ is a sure-fire way to get more for you and have fun doing it. Best wishes for the coming season.