The 2023 summer season has just come to an end, and so it’s time to take stock for the outdoor hotel and holiday home industries.
If we are to believe the figures consolidated by the institutes and commented on throughout the summer, there is every chance that your season will be well below expectations. Blame it on the foreign tourists who didn’t turn up, the French who went abroad, the climate change that caused the south to flee for the north, inflation that squeezed household budgets…
On the subject of inflation, what price increase did you make compared to the 2022 season?
A record season that surpassed 2019, a year that was itself a milestone. Same rate ? +3% ? +5% ? +10% ? +20% ? What were the reasons behind these price increases for 2023?
- Answer A: You had sold out 4 months earlier in 2022.
- Answer B: You have significantly enriched the product.
- Answer C: You passed on the various inflationary factors and added a ladleful because 2022 had been good.
- Answer D: You raised prices as you do every year because you have to meet the budget set by management and you can’t reasonably expect to achieve 110% occupancy.
As we regularly detail in our articles, price increases, except in the case of very severe constraints (answer A) or a significant change in the product (answer B), must be measured and applied smoothly during the season. Volume is the main contributor to your sales, not your average price, and even less so the prices in your starting grid.
The importance of pricing management
We always recommend starting with a low price and then working up from there. This gives you a feel for the market. By starting low, demand should logically take off. So we’ll follow all the sites x dates when demand takes off sufficiently to pass on pricing increases more or less quickly. Psychologically, it’s gratifying to pass on price increases, it’s positive, so we do it straight away, we don’t waste any time. Some x-date sites will just be on line and we’ll be happy not to have been on higher prices that would have deprived us of this demand. And for the x dates sites that are too slow, we can really conclude that there’s a demand problem.
On the other hand, if we set a high price and there is no demand, our reaction will be much later and much stronger. In fact, lowering prices is psychologically tantamount to admitting failure. We were wrong about the starting price and we don’t really want to admit it to ourselves. And you’re even less inclined to admit it to your management, especially if they’re the ones who pushed for higher prices. So you keep the price high, telling yourself that demand will eventually come, and the weeks go by and by and by… until you have no choice but to admit that it’s too late, and you lower the price by 20% to 40%. The famous stress management.
Conclusion
If your 2023 season wasn’t a good one, and you’ve probably « turned up the heat » on prices, who among you will dare lower them for 2024? That would mean admitting that we made a mistake in 2023, and we don’t like that very much… And yet that’s certainly what we should be doing, at the risk of seeing our customers turn to other destinations…
Keywords: 2023 summer season, price cuts, open-air hotels, tourist residences, inflation, Revenue Management, Yield, N&C, revbell, hotel, hotels
