Price Positioning is a determination of where a hotel’s prices stand in comparison to prices at similar properties. Price positioning can be used to evaluate daily room rates, holiday rate promotions, spa and food and beverage prices, and more. Some of the most common strategies for price positioning include penetration pricing, skimming pricing, equal pricing, and surrounding pricing.

What is Price Positioning For?

Price Positioning is used to evaluate whether changes to a hotel’s daily rates are needed. The decisions made after determining price positioning can help a hotel or property keep its rates competitive. The goal of successful price positioning is to make consumers recognize your product and/or service as unique and clearly distinct from the competition.

Benefits of Price Positioning

A clear Price Positioning strategy helps revenue managers improve consumer value perception of a specific hotel or property. Evaluating a hotel’s position relative to its competitors tells revenue managers whether your prices are above, below, or at industry average. It also helps managers perform price comparisons for specific seasons or during relevant promotions.

Limitations of Price Positioning

The limitations of Price Positioning depend on which strategy a hotel opts to choose. For example, skimming and penetration pricing are limited because they rely on capturing consumer attention in the short-term. Consequently, a hotel cannot use skimming or penetration as a long-term Price Positioning strategy.

Furthermore, the limitation of surrounding pricing is that a hotel must be able to provide that additional value in terms of facilities, services, or amenities. And the limitation of equal pricing is an inability to break in due to aggressive competition.

How is Price Positioning Determined

Hotel revenue managers typically use a matrix to display price positioning. There are several strategies a hotel can take with its price positioning.

Penetration pricing is used most frequently in newer hotels. It is a strategy to set prices among the most affordable in the market. As its name suggests, it is used for new hotels and properties to penetrate a new market and can be effective if it doesn’t drive down market rates overall.

Equal pricing sets hotel rates at values comparable to the competition. When using this strategy, other factors in a hotel’s value proposition are often used to further attract consumers.

Surrounding pricing is a strategy that puts your most affordable room rates among the cheapest on the market. However, your most expensive room rates are then set closer to the same rates offered by your surrounding competitors. When using this strategy, a hotel must offer additional value through facilities, amenities, or services that competitors aren’t offering.

Skimming pricing is a strategy that sets rates above the highest rates of a hotel’s competitors. Hotels that charge the highest rates often achieve increased profitability. However, the hotel must clearly offer more value than its competition and consumer reviews must back this up for this strategy to be effective.