When it comes to guest personalization, price is only one piece of the puzzle

If there’s one lesson that hoteliers can take away from services like Netflix, it’s that personalization truly pays off - both figuratively and in a more tangible, financial way.

Hospitality is now more diverse than ever, due to a large offering in terms of accommodations, services and, more recently, even pricing. Personalization methods have evolved over the years, and it seems that we are now approaching a new type: the one of hotel pricing.

As The Wall Street Journal mentioned in a recent article, a new hotelier in Miami, Life House, is currently testing an algorithmic pricing system based on customer profiles, history, spending habits and even social media followers. Life House was quick to acknowledge that not all guests are equal, and their profiles can differ significantly, meaning that a “one-size-fits-them-all” approach might prove to be ineffective.

It’s true that we are already used to personalized experiences and services, and travelers are increasingly expecting perks and promotions based on their personal profiles. However, this does raise a few questions for me: Should personalization be extended to pricing? And how would this innovative approach affect rate parity? Also, is it ethical to use a guest's social media following as an incentive to promote a hotel, in exchange for lower rates?

Better benefits

From a personal point of view, I would associate the act of establishing pricing based on past spending with guest loyalty, which is not a new concept, but one that is known to draw quite a few benefits, both for hotels and for travelers.

The large majority of loyalty programs (if not all of them) are based on rewarding recurring guests with points or perks. This new approach focuses on rewarding customers with hard dollars, which enables more freedom in regard to their spending.

This could prove to be a beneficial strategy in the long run, since guests get the feeling of actually saving money when booking this hotel and purchasing its services, instead of only receiving extra perks that might sometimes go unused.

On another note, when discussing the importance of price parity, it’s important to keep in mind that price is only one of the key factors in a booking decision.

During TrustYou’s 10 years in the industry, we learned that reviews can also help mitigate the value of rate parity and influence pricing strategies. One of our studies unveiled that travelers are willing to spend more on a hotel with better reviews. Feedback, in general, is known to influence pricing: The better the hotel is perceived by a large number of travelers, the more reasonable is it to set a higher price.

What Life House also plans to do in terms of pricing is to use algorithms to set special rates for influencers, according to their number of followers/social media influence. It’s already been a few years since influencers have been known to advocate for brands, in exchange for certain benefits or actual goods, so the concept is not necessarily groundbreaking.

However, in this case, we are coming face-to-face with a new way of automatically determining hotel pricing. I would personally not advise on adopting this particular approach when it comes to influencers, because of two simple reasons.

First, due to privacy policies and more recently the new GDPR compliances, getting the necessary personal information from influencers might prove to be a struggle. Accessing their social media following requires consent, and that is one extra step that cannot be done automatically, so hoteliers would have to go the extra mile to achieve this.

However, perhaps if consumers know about the rewards and opportunities available to them if they do provide consent, it could be in the hotelier’s favor to make sure that is clear.

Second, instead of rewarding influencers with discounted rates in order to access their followers and influence the booking decision of future travelers through the influencer’s positive feedback, I would suggest taking a more organic path towards the same outcome.

Investing extra finances in improving the actual accommodation and services leads to better guest reviews and overall feedback. This comes naturally: A quality product will receive more positive reviews from a larger number of travelers instead of just a few influencers who were financially motivated to express a certain opinion. The very concept of social proof shows that consumers are more likely to relate to people similar to themselves, so organic feedback might prove to have a higher impact on a traveler’s booking decision.

At the end of the day, it’s important to always remember that any new strategy, whether it’s service or pricing related, is ultimately directed towards the guests. Keeping their needs and feedback in mind is crucial in order to determine the best and most efficient action plans.

Hoteliers should constantly ask for and encourage honest feedback and adjust strategies accordingly - after all, the success of a hotel business lies in the quality of the services and the satisfaction of the guests.