The highest price isn't always the best price

Over the years we've come across completely opposite situations. At some properties we've recommended raising prices because the product was clearly undervalued. At others we've done exactly the opposite: relaxing a rate the owners wanted to protect, but which was holding back occupancy too much and, with it, revenue.

It may seem contradictory, but both decisions actually follow the same logic: understanding what price makes sense for that business at that moment.

Perhaps that's why one of the hardest ideas to dismantle when we talk about Revenue Management is that doing Revenue well means selling at ever higher prices.

Of course we want to improve ADR when there's room to do so. But not at any price. A very high rate that barely finds any demand can be a worse decision than a slightly lower rate that significantly improves the result. And, the other way round, filling rooms while keeping prices too low isn't necessarily a good strategy either.

The question isn't whether the price goes up or down. The question is why.

The best price isn't necessarily the highest. It's the one that makes sense for that product, that demand and that moment.

When protecting the price starts to hurt the result

This happens especially with products that have a lot of personality. An exceptional building, a prime location, very distinctive rooms or an offer that's hard to compare can lead us to think the property should compete in a certain price band.

And this is where a very common problem appears: confusing the value we attach to the product with the price the market is willing to pay for it.

That doesn't mean the product has no value. It may have a great deal. But other factors come into play: what alternatives the guest has, what services they expect at that price, how well known the property is, how it's being distributed or what demand exists on certain dates.

In these cases, relaxing the price doesn't mean devaluing the property. It means accepting that the price also has to respond to what's happening in the market.

And there's another important factor: a room we don't sell today can't be sold tomorrow. That inventory disappears every night. That's why protecting a rate at all costs can end up being a far more expensive decision than it seems.

We've also seen exactly the opposite

There are properties with a good product, satisfied guests and a carefully crafted experience that have nonetheless spent years selling below what they could really justify.

Sometimes it's out of fear of losing occupancy. Or because they've always worked within a certain price band. Or because they pay too much attention to what a competitor charges when that competitor actually offers something quite different.

Here, category can also be misleading. A small property, a guesthouse or an establishment without certain services can offer an experience that guests value more than that of businesses that look superior on category alone.

Category, size and perceived value aren't necessarily the same thing.

When the product has value and the market recognises it, keeping prices low for fear of losing demand can mean leaving a significant part of the business's potential on the table.

In that scenario, our recommendation may be exactly the opposite: raise prices and see how far the product can go.

So how do we know what the right price is?

There's no figure we can calculate once and consider settled.

We look at history, demand, booking pace, occupancy, the market, the competition, channels, availability, room types, restrictions and plenty of other variables. But data on its own doesn't decide either.

It has to be read within the context of the business.

A price can work really well on a Tuesday and be completely wrong for the following Saturday. It can make sense for one room and not for another. It can work for direct sales and leave little margin through a particular channel.

And it can also turn out that price isn't the problem.

If the product isn't well presented, distribution isn't working, the room categories don't properly reflect their differences or the positioning isn't clear, continuing to move rates may only get you so far.

That's why, for us, Revenue has never simply been about deciding how much a room costs.

Price is a decision, not the goal

When we manage Revenue, we're not trying to prove we can sell a room for more and more. We're trying to understand which combination of price, occupancy, distribution and product delivers the best possible result.

And that means changing strategy all the time.

There will be times to protect rate. Others to be more aggressive. Dates when we can push the price well above the usual level, and others when it's better to react early than to wait for demand that may never come.

What matters is that every move has a reason behind it.

The best price isn't necessarily the highest. It's the one that makes sense for that product, that demand and that moment.

It may seem like a small difference, but it changes quite a lot about how Revenue Management is done.

Because we stop asking only "how much can we charge?" and start asking "which decision delivers the best result?".

And that second question almost never has the same answer every day.