Hotel Profits Versus Price Point Resistance

Many in the hotel management industry have the attitude that it is perfectly acceptable for them to charge somewhat outlandish prices for items such as food and both alcoholic and non- alcoholic beverages, because they are, after all, a hotel. In many instances, the attitude seems to be that since it is at a hotel, they can charge whatever they please for these items. Their reasoning apparently is that people are used to paying these high prices for the convenience, and that their costs of labor, etc. are high, so they can recoup their costs and enhance their profitability by charging these prices. While, to some degree they are correct, there comes a point or a price point, where they charge too much, and it has a negative overall impact.

1. People do expect to pay more at a good hotel, and especially in a fine restaurant or at a pool bar or restaurant, etc. Therefore, hotel management should set the pricing higher than elsewhere to maximize their profits and recoup costs, but wise managers realize that exactly how high they price things must be evaluated careful to balance maximum profit versus price resistance. If prices are not high enough, these properties miss the opportunity to maximize and enhance their profits. However, many properties also err by marking these prices up far too excessively, and by doing so, they often hurt themselves in the long run, even if it enhances short- term profitability.

2. Excessively overcharging often creates resentment in guests. They often feel used and abused, and resent being taken advantage of. For example, while a hotel that charges sixteen dollars for a basic hamburger at the pool when other similar properties charge, let's say, eleven to fourteen dollars, guests often feel betrayed. They may purchase the overpriced item and thus the hotel wins short term, but will often consume less, eat elsewhere more often, purchase fewer overpriced beverages, and even worse for the hotel, complain to others about the pricing as well as often avoid returning or recommending this property to others.

3. Guests expect high prices, but they do not want to feel abused. Is the hotel nickel and diming the guests "to death?" Are guests being charged for items that they would anticipate receiving as part of the inclusions at a high quality, luxury property? If there's a spa, for example, guests will often use far more services when prices are merely high, as opposed to ridiculously overpriced. At what point, is too high just much too much?

Top hotel management realizes they must balance prices, and take into consideration price resistance, impacts, attitudes, guest perceptions, etc. Wise managers charge sufficiently high prices, but without going being the optimal point. This takes thorough analysis and examination, and an understanding of their niche market, profit percentage, what they need, and when enough is enough. They should maintain pricing where they optimize their profit, but without losing business by doing so. The most profitable properties always do!

Richard Brody,with over 30 years consultative sales,marketing,training,managerial, and operations experience,has trained sales and marketing people in numerous industries, given hundreds of seminars, appeared as a company spokesperson on over 200 radio and television programs, and regularly blogs on real estate, politics, economics, management, leadership, negotiations, conferences and conventions, etc. He has negotiated, arranged and/ or organized hundreds of conferences and conventions. He's a Senior Consultant with RGB Consultation Services, an Ecobroker, a Licensed Buyers Agent (LBA) and Licensed Salesperson in NYS, in real estate.
Richard has owned businesses, been a Chief Operating Officer, a Chief Executive Officer, and a Director of Development, as well as a consultant. He has a Consulting Website ( http://tinyurl.com/rgbcons ), and his company PLAN2LEAD, LLC's site ( http://www.plan2lead.net ), and can be followed on Twitter

Article Source: http://EzineArticles.com/?expert=Richard_Brody

Article Source: http://EzineArticles.com/6790766