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Competitor based pricing for hotels: A complete guide

  Posted in Resources  Last updated 20/11/2023

What is competitor based pricing?

Competitor-based pricing or competition-based pricing is a data-driven approach where businesses use advanced analytics to set their prices based on competitors’ rates. In the hotel industry, this involves leveraging sophisticated pricing algorithms and software to monitor, in real-time, the room rates of comparable hotels.

But it’s not just about matching or undercutting competitors’ prices. This strategy uses statistical models to predict optimal price points that maximise revenue and occupancy. These models factor in variables such as historical booking patterns, seasonality, local events, and even guest reviews.

The goal is to provide hoteliers with a dynamic pricing strategy that responds to both market and property-specific conditions.

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Why use competitor based pricing for hotels?

With the modern popularity of online booking platforms and how easy it is to compare hotel costs for guests, providing competitive pricing no matter where you’re listing is crucial for success. Competitor-based pricing provides that at a foundational level by ensuring that your hotel never loses sight of the competition. Competitor based pricing gives you access to:

Algorithmic pricing

Modern pricing tools use algorithms that factor in a multitude of variables. These algorithms aren’t just about tracking competitors but understanding the entire market ecosystem.

Real-time data analysis

Competitor price intelligence tools fetch real-time competitor pricing data. This means that hotels can make better pricing decisions, faster, responding to market trends and changes quickly and expertly to maintain their competitive edge.

Multichannel insights

Advanced pricing tools incorporate multichannel insights on guest booking trends, giving you insight into the performance of each of your online distribution channels—by revenue and room nights generated—along with the impact of your online marketing campaigns to understand exactly where your website visitors are coming from and what calls-to-action are driving conversions.

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Advantages of a competitor based pricing strategy

Why should revenue managers monitor their competitors’ prices? And why use competitor based pricing? Competitor-based pricing offers several technical and strategic advantages:

Predictive analysis

This isn’t just about understanding the past but predicting the future. By analysing historical data, hotels can forecast demand, ensuring they’re always ahead of the curve.

Dynamic pricing

The ability to adjust prices multiple times a day based on real-time market conditions ensures the hotel remains competitive at all times.

Data visualisation

Modern tools provide intuitive dashboards that visually represent pricing data. SiteMinder, for example, provides a single dashboard for you to stay on top of your local competitors’ pricing without having to manually monitor each throughout the day. This visual representation makes spotting trends and making informed decisions easier for hoteliers.

While there are many other types of pricing models, ultimately competitor-based pricing does what it says on the packet: beats your competition on price.

Comparison of competitor based pricing for hotels
Source: HotelMinder

How to implement a competitor based pricing strategy

Implementing a competitor-based pricing strategy involves a blend of technology and strategy:

1. Data integration

Ensure your Property Management System (PMS) is integrated with pricing tools for seamless data flow.

2. Competitor benchmarking

It’s not just about knowing their prices. Understand their promotional strategies, guest reviews, and overall brand positioning.

3. Algorithm configuration

Tailor the pricing algorithm to your hotel’s specific goals. Whether you’re looking to maximise occupancy, revenue, or both, the algorithm should reflect that.

4. Automated price adjustments

Set up triggers for automatic price adjustments. For instance, if a competitor drops their price by 10%, your rates could automatically adjust to remain competitive.

5. Continuous monitoring

The market is dynamic. Regularly review your pricing decisions, understand their impact, and refine your strategy accordingly.

Modern hotel management isn’t just about hospitality; it’s about harnessing technology to stay ahead. Integrating advanced pricing tools with your existing PMS is crucial. These tools, often cloud-based, offer real-time insights, predictive analytics, and automated adjustments. 

For hotel groups and chains, solutions like SiteMinder’s pricing analytics can be a game-changer. Our software not only provides competitor data but also provides an integrated booking platform, ensuring you have a holistic view of the market.

Image showing graphical representation of competitor-based pricing in a hotel.

Competitor based pricing example

Consider two luxury hotels in London. 

  1. Hotel A uses a basic pricing strategy, adjusting rates seasonally. 
  2. Hotel B employs a sophisticated competitor-based pricing tool. 

Hotel B’s tool, integrated with a cloud-based PMS, fetches real-time data on competitor rates, local events, and even weather forecasts. When a major event is announced in London, the tool predicts a surge in demand and automatically adjusts Hotel B’s rates. As a result, Hotel B sees a significant increase in bookings and revenue, showcasing the power of a dynamic, data-driven pricing strategy.

By embracing the technical intricacies of competitor-based pricing and leveraging advanced tools, hotels can navigate the complex pricing landscape with precision and agility. This approach ensures they remain competitive, maximise revenue, and cater effectively to their target audience.

By Dean Elphick

Dean is the Senior Content Marketing Specialist of SiteMinder, the leading technology provider delivering hoteliers unbeatable revenue results. Dean has made writing and creating content his passion for the entirety of his professional life, which includes more than six years at SiteMinder. Through content, Dean aims to provide education, inspiration, assistance and value for accommodation businesses looking to improve the way they run their operations achieve their goals.

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