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Strategic Pricing Case Study
Maintaining Retail Pricing During a Downturn
Pricing Case Study

A mid-size independent hotel that has been historically dependent on group sales business, due to its ideal location less than a mile from the city convention center, was forced to re-think its strategy when the pandemic created rapidly shrinking occupancy levels. The hotel sits in a highly competitive downtown market represented primarily by branded hotels and a combination of smaller limited service and upscale hotels. It consistently ranked 7/7 in occupancy and 4/7 in ADR, had very little corporate account production, and almost no transient leisure business. With group business drying up, the hotel had to find new business and put occupancy on the books fast. To complicate the situation, the competitive set attempted to drive demand by lowering rates. The hotel turned to PTG Consulting for help.

Client
Strategic Pricing Case Study
Industry
Hospitality
Services
PR & Media Relations
The Solution
PTG Consulting began by examining the hotel’s pre-pandemic pricing and found that, for an overage week, its BAR ranked between 4 to 6 out of 7 on most days (Table 1). Also noticeable was the variance of the client hotel’s price compared to the average price in the competitive set. Mid-week the hotel was priced US$20 to US$40 lower than the average price of its competitive set. PTG Consulting quickly identified that the hotel’s retail pricing was too low and worked with the hotel’s team to reset its pricing strategy. Within the first month of the pandemic, when the client’s competitive set began to drastically drop their retail price, PTG Consulting advised setting and holding a minimum rate for weekdays of US$149 and weekends of US$179. Regardless of how low the competitive set dropped its price, PTG Consulting insisted that the hotel hold its rate. A typical week going forward (shown in Table 2) showed the client hotel as number one in price positioning.
The Results
The strategy taken by the hotel successfully negated the competitive set’s attempt to drive demand through lowered rates. This can be seen from the following results.
The client hotel historically thrived on group business, which is now non-existent for the client and represented just 1.2 occupancy points for its competitive set. By driving low rates, the competitive set achieved 10.4% transient occupancy compared to the client’s 7.3%. However, the competitive set’s incremental occupancy came at a cost – a lower price.
Its average rate finished at US$98.10, a decrease of 29.3% from the previous year, which was also US$48.71 less than the client’s ADR. Overall, the transient RevPAR for the client hotel exceeded the competitive set’s, leading to a 104.4% RGI.
What if the competitive set did not lower retail pricing? Would they have been able to generate the same occupancy? Perhaps occupancy might have been slightly lower; however, it is likely that they would have achieved a higher RevPAR overall if they had simply maintained their retail pricing.
104.4% RPI
+78.9% growth
149.7% ARI
+46.9% growth
69.7% MPI
+22.5% growth
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United States