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Revenue Management Glossary

Competition-Based Pricing


Competition-based pricing is a revenue management strategy, in which a property uses their competitors’ pricing decisions as the basis for setting their own rates.

How to use it

There are some advantages to using competition-based pricing, including:
-It is very a more simple way of pricing your rooms, requiring much less work than traditional revenue management strategies.
-It can be done manually, without investing in a technology solution to support your revenue management efforts.

There are some disadvantages to using competition-based pricing, including:
-It does not give you a complete picture of the market dynamics so it is not likely to give you the most accurate room rate.
-It is a reactive form of pricing and relies upon the competition to be making the correct pricing decisions, based on market factors.
-To use competition-based pricing effectively, the revenue management team must continually monitor their compset's pricing and adjusting their rates accordingly to remain competitive, which can be very time-consuming.



Related Terms

Dynamic Pricing, Revenue Management, RMS, Revenue Management System, RevPAR, ADR, Occupancy, Pricing Strategy, Revenue Management Strategy, Revenue Manager, Market Demand, Historical Data
“Monitoring your competitions’ pricing is an important part of effective revenue management, but it shouldn’t be the only factor that you use to set your rates. Hotels will secure more bookings and earn more revenue by setting rates using competitor pricing, as well as historical data, seasonality and upcoming events, market demand and other important variables (also known as dynamic pricing). Dynamic pricing is best accomplished using an automated pricing tool or Revenue Management System (RMS), as it will more quickly and effectively collect and analyze the data, and then provide the most accurate pricing recommendation based on all these data sets.”

Gustavo Peña

Gustavo Pena