How to avoid price wars with competitors and manage low-demand periods?

In competitive markets, pricing can quickly become a race to the bottom, especially during low-demand periods. All it takes is one hotel to drop rates, everyone is panicking and leading to a domino effect for the entire Market. Some research from HSMAI shows that hotels involved in price wars can see up to a 50% decline in RevPAR over time…

Why does this happen when everyone’s chasing the same goal: boosting profitability?

Of course, discussing pricing strategies with competitors is off the table due to competition laws. So, what can you do to remain competitive without slashing rates?

Here are some key strategies to avoid price wars and stay profitable during low-demand periods:

1. Stay ahead with your Impact Calendar

The calendar is key! Take note of upcoming public holidays, school breaks, and long weekends like Easter and Anzac Day. By analysing these well in advance, you can anticipate shifts in leisure and business travel. This sounds simple but make sure your forecast reflects your analysis.

Communicate these insights early with your commercial team, so everyone’s ready. Reacting too late often leads to underperformance. Stay ahead by preparing your pricing and marketing strategies early, ensuring you don’t rely on drastic rate cuts at the last minute.

2. Focus on value over price

Price isn’t everything. Guests often seek value, so offer more. Think of package deals, early check-ins, or room upgrades

A Skift and Oracle survey found that 71% of travellers would pay more for personalized experiences. Create bundles like free breakfast, parking, or late checkout to increase perceived value without lowering your ADR.

3. Use Dynamic Pricing

Dynamic pricing adjusts rates in real-time based on market shifts. Dynamic pricing can boost your revenue by 8-12% according to McKinsey & Company. Track booking trends and adjust rates in real-time, offering tactical discounts only when necessary. A Revenue Management System (RMS) with AI capabilities can help you respond quickly to market conditions, ensuring you’re competitive without undercutting yourself.

4. Avoid blanket discounts

Instead of across-the-board cuts, try strategic promotions like long-lead or extended-stay offers for corporate travellers, staycationers, or loyalty members. Targeted offers bring in specific segments without eroding your rate structure.

5. Leverage all channels

Don’t overlook the power of OTAs during slow periods. While direct bookings increase profit margins, OTAs provide visibility and reach. Use OTA promotion

al tools like time-limited deals to capture more bookings. They have many levers that can be activated, but not all of them might suits you. Simultaneously, promote direct booking perks (e.g., loyalty points, upgrades) to retain customer loyalty.

6. Optimize Marketing for Low-Demand

Strategic marketing can drive demand. As an example, target local and regional travellers with campaigns that highlight weekend getaways or off-season experiences. Expedia’s 2023 Traveler Value Index shows that 78% of travellers have been influenced by promotions or personalized ads. Tap into this by running campaigns with tailored messaging to resonate with your audience.

7. Maximize Revenue Through Upselling

Instead of dropping rates, upsell premium rooms or on-site services. Revinate reports that upselling can increase per-guest revenue by up to 20%. Offer room upgrades, spa treatments, or dining packages as add-ons to boost revenue without altering base rates. You could also apply different price by room category by season.

8. Maintain Rate Integrity and Parity

Consistency is crucial during low-demand periods. Avoid drastic rate cuts to protect your brand’s value and maintain rate parity across all channels. Offer perks like free parking or discounted activities instead of reducing your nightly rate. Ensure transparency and consistency across your direct site and OTAs to prevent confusion and preserve your brand’s reputation.

To sum up, staying profitable during low-demand periods isn’t about dropping rates. It’s about being strategic. Focus on creating value, optimizing pricing dynamically, and leveraging all available booking channels. By maintaining rate integrity and strategically stimulating demand, your hotel can stay profitable even during challenging low-demand periods.

At RevInsights Consulting, we specialize in helping hotels thrive with data-driven strategies. Let’s connect to explore how we can help your property succeed, no matter the season.