** Revenue management quiz: the answers **
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Hello and welcome to the channel I display Complete. I hope you're doing well. Today, I'm giving the answers to the quiz that we did exactly a week ago. I've had several entries, so I'm happy to give you the answers. Congratulations to all those who played the game, and who practiced answering the different questions, who posted their answers in comments. Well done to you. Today I will be able to give you a certain number of answers which will in fact help you, because obviously, the object of this quiz was to help you, to give you something to answer different problems that you can encounter, for example how to react when I am asked for a reservation for a duration with a negotiated price, for a long duration with a negotiated price; what are the levers that I must use in periods of low demand, what are also the levers that I must use in periods of high demand, and even with a real concrete case on which we say: “How do I react when I have an orphan date between two stays? » I give you, in this video, all the answers to this quiz.
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The first question we had in this quiz is this: there was a list of good reasons to change your prices, but one of them is a trap; So what is the answer that is a trap? Obviously, I put it in yellow here. The answer which is a trap is: I have no sales for next week. I will explain to you why this answer is the correct one, and I will also explain to you why the others are not the correct ones. I believe that many of you answered question b, saying that the fact that all competitors are lowering their prices was not a valid reason to go and change your prices. I would put a slight downside on that. I can understand why many of you answered that, that just because everyone is lowering their prices doesn't mean you have to go change prices. I still put a caveat on that. Particularly during the pandemic period, there was a collapse of the markets in a certain number of cities. So, the reality is that if indeed 100% of your competitors lower prices, and you stick to your pricing, the problem is that you will find yourself completely out of the market. That is to say that you will stay on the old pricing, the market has collapsed, and you find yourself 30% more expensive than everyone else. And the reality is that travelers are going to see that. They will realize that currently, on the market, a studio is still worth 30% less. So, you will mechanically appear extremely expensive compared to the rest of the competition. And as a result, you're probably going to make no sales or make a lot fewer sales than you could have made. If you are in this situation, where in fact, all the competitors have lowered their prices, in my opinion, what is important is to react so as not to remain completely out of the market compared to everyone else. On the other hand, what is also important to clarify, and I think that this is also what the people who answered answer b had when answering that, is that the idea is not to go completely break your prices in a stupid way, we will say, because you simply have to regain your previous market position. If usually the market price range is 40 to 55 euros, and you are at the top of the basket, you usually have the possibility of selling from 55 to 60 euros, because you are among the best players in the market. city. If the market range suddenly drops from 30 to 40 euros, and you stay at 60 euros, you are completely at risk, because it is very likely that you will not sell anything. On the other hand, find your market range. If the market range is now 30 to 40 euros, then put yourself where you are usually able to put yourself, that is to say between 40 and 45 years old, that is to say above everyone else, but you remain consistent with the new market value of properties currently, at least over this period. And what is important to clarify about this is that this is not a strategy that we are going to let slide. If we see that everyone has lowered their prices, we remain vigilant, we react over the period concerned, but we are not going to tarnish our entire calendar with this new pricing. We remain in the hope that this is relatively temporary. Why is “a” the correct answer? Because in fact, often, there is this behavior that is observed, particularly among people who are starting out, of worrying, of panicking, saying to themselves: “Next week, I have no sales; come on, I'll slash my prices. » This is quite a detrimental way of managing prices. For what ? Because if you cut your prices for next week, you're going to embed in the minds of, especially repeat travelers, that in fact, they have to wait before booking, because if they wait, they're going to get much lower prices. down. However, in a good revenue management strategy, our objective is above all not to communicate this message to people. Our objective is to have reservations taken as early as possible, so as to have good visibility, and so as to be able to react if we see in advance that we are going to have difficulties, or that we will have opportunities. So, we especially don't want to have this logic of constantly slashing prices at the last minute every time we don't have a sale. And then the other point to keep in mind is that if we don't have any sales for next week, while it's a period of high demand, in fact, it's precisely in this context that we must maintain our prices, hold on, and ensure that we are not going to degrade the value, like that, stupidly, while demand is strong, and we know very well that in the end , even at the last minute, people will look for accommodation, and they will turn to the properties that remain, that is to say ours. This is why answer “a” was the correct answer. And then I will perhaps also say a few words about the “c” answer and the “d” answer. It may seem more obvious: when an event is postponed, obviously you have to change your prices, because on the date which no longer has events, we remove the event price, and we move to a more normal price . And on the debt which passes into events, we remove the normal price, and we put an event price. And then on the last point: on airdna, the competitors' filling is better than ours; in fact, when we compare ourselves to the market, when we realize that we are falling behind the trend of the overall market, it is very likely that we have a problem with pricing. So there, we have to study, we also have to understand why we are falling behind. But if we see that in fact, it is really because there is a problem, at that point, questioning the pricing makes sense. You will be able to tell me: “But Élise, when I am behind the competitors on airdna, I always have a problem. There are no situations that I could not have a problem with. » Well yes! I'll point it out anyway, because it's interesting. You could be behind on airdna compared to competitors, and be completely aligned with a real strategy. This is the case during periods of high demand, or event periods, during which we can absolutely have the strategy of setting high prices, even very high prices, and knowing full well that people will sell before us, because 'we are among the most expensive on the market, and we fully assume this situation, precisely because, once again, due to the strong demand, we know that at the last minute, we will sell; We know that at the last minute, we will be fully booked anyway, and we, on the other hand, don't want to do it at any price, we want to do it at a really significant price. So, we wait patiently. We see that the others are filling up, but that's exactly what we expected, and we wait for our turn to arrive with our pricing, which is therefore higher. So, that's it for the first question.
The second question was a very concrete case. I really liked constructing this concrete case, because I think that it is extremely common, and that often, when we are in this situation, we find ourselves a little doubtful, that is to say: "what what do I do about that? » There, we had precisely, for those who discovered the quiz without having seen it last week, a situation on which we suddenly had an orphan date. I'll try to show it on screen. I don't know if you will see my mouse. So there, we had this orphan date of March 4, and the question was: what do we do with this date of March 4, to give ourselves, obviously, every chance of filling the date? So there were several answers. Here, the best answer, in my opinion, is answer “c”. I will detail each of the answers. Answer "a", why is it not necessarily a good idea to remove the two-night minimum stay? Well because the rest of the time, if we take the weekend — I'm sorry, I sometimes look to the right, because I have two screens, and I only see my mouse on the second screen — we have, therefore, other periods which are longer from March 7. We still have availability, and it's really important that we can continue to make reservations in two nights. If we retain the minimum length of stay of two nights, on March 7, 8, and 9, we will find ourselves authorizing one night, and that is not what we want. So, this is not the best solution to optimize. The second solution which was solution “b”: I lower the price for the night of March 4. So that’s an extremely common decision to make in this situation. The problem with that is that if we are in a period in which we know that we have enough demand to be able to choose it, to be able to select it, and we say to ourselves: "So, I don't select only stays of less than two nights. » When we are in this position of selection, it means that we only think about demand. So mechanically, ultimately authorizing one-night stays ultimately means granting something that is not available. And if there is demand, it will find a buyer, in fact. So, lowering the price on the orphan night stuck between two stays could be a mistake. This can, in fact, simply cause us to miss out on money, when there was really the potential to sell at the classic price, because when we put stay lengths of two nights, we are supposed to be in a period when we still have a sufficiently large, strong, or very strong demand. This is why “c” is the best answer, since in fact, answer “c” will allow us to preserve the required two-night minimum stays, but at the same time tell the system “OK to sell on March 4, because he is stuck between two stays. Gap-fill, if it's a term you've never heard, in English, word for word, it means "filling the hole". This is simply a method of telling the system that if I currently request stays of two nights minimum, if I have an orphan night between two stays, I also agree to sell that night alone. For what ? Because what you need to know is that if you don't put a gap-fill, if you simply require a minimum two-night stay, well in fact, your March 4th will never be made available for sale . The computer is stupid, in a sense, and if we tell it that it's a minimum of two nights, on March 4, it asks for a minimum of two nights. There, you may say to yourself: “But that’s impossible!” No two nights are possible. » Yes, but the computer works like that, so that's why it's important, to be able to sell this March 4, to place, in addition to the requirement of two nights minimum, a gap-fill which will allow filling. The fourth point: I am doing a promotion for the night of March 4. Obviously, it's exactly the same problem, it's that we're going to find ourselves lowering the price, whereas if we set minimum lengths of stay, it's because we think we have enough demand, and therefore, the fact of unblocking this night, as there will be demand, there is no reason to lower the price.
I will still check that you don't have any questions over time. Don't hesitate to intervene when you arrive. Also feel free to say hello. It's always a pleasure. I see that people do it when I specify it, but even when I don't specify it, it's still a pleasure to be with you, and to be able to discuss together.
So, on question number 3, I had placed a list of optimization levers, and the question was: what are the levers that should be used, or that can be used in periods of low demand? I've noticed that there can be some misunderstandings, in fact, about what are the right tools to put in place when I think I'm going to have low demand, and what are the right tools to put in place when I think that I will have a high demand. So here are the two questions; for the low demand in question 3, and for the high demand in question 4. The list is as follows: should we set minimum lengths of stay? Non-cancellable, non-refundable prices? Prices adapted for the medium term? Or participate in the “preferred” program on booking? Why is it that in times of low demand, it is not necessarily a good idea to require minimum stay lengths? Well precisely for the reasons that I mentioned just before: because if we think that the demand is going to be low, we ultimately do not have the possibility of filtering the demand. In fact, we don't have the opportunity to choose. We try to take everything that can come our way, to collect all possible reservations to be able to increase our turnover, and as many reservations as possible. So, requiring a minimum number of nights for lengths of stay is in fact a mistake, because it will make us choose, it will make us filter, and yet we are not sure that we will be fully booked. So we have to take everything we can get. The second thing is: have a non-cancelable, non-refundable price. For this subject of the non-cancelable, non-refundable price, in times of low demand… but wait, I was wrong. What did I put? That's a good idea for the period of low demand. Wait. Hop! I put it in yellow. A non-cancellable and non-refundable price is a good idea in times of low demand. And the price adapted for the medium duration too. So. Look, I was wrong. So, I resume the thread of my explanation. Indeed, having a non-cancelable and non-refundable price during periods of low demand makes sense, because it can make us more attractive. This is a period, once again, for which we are not sure we will be complete. So, it is an attractiveness tool which will allow us to collect reservations, certainly at a price perhaps a little lower, but at least, with a turnover which is guaranteed, because people will not be able to Cancel. Sometimes, it is even the opportunity to sell twice, because we will, suddenly, have both the initial reservation, and if it is canceled, we can resell the nights concerned, and we collect the figure business from the first reservation. So this solution is a good solution. In the same way and for the same reasons, adapt its prices for medium-length stays, that is to say a minimum of seven nights, a minimum of fourteen nights, a minimum of twenty-eight nights over a period over which we do not We're not sure we're complete, that also makes sense. Because this will allow us to guarantee a minimum filling, like a reservation mattress. And even if we give a more attractive price, it’s really a winner. You have to put the right reduction levels. Obviously, you should not put less than 50% reduction. If we set the right reduction levels, it is a win-win, overall, in terms of the turnover that we will manage to obtain over this period. And then the last point: participate in the “preferred” program on booking. This is also a great decision. The advantage of the “preferred” program on booking – it is in fact the program that I prefer – is that it costs either zero euros or a slightly higher commission level, but it remains extremely reasonable. I know that in some small towns, booking offers you a 15% commission. Otherwise, overall, we are at 17% commission on booking. The “preferred” program is a program that will allow you to have a yellow thumb on the ad. So, it’s social proof to reassure travelers. And in fact, this program is at 17%. So if you're usually at 15%, you move to 17%, which is extremely reasonable. And if you're usually at 17%, you stay at 17%, which means it's free. So, that's why it's interesting to participate if you're eligible, because there are a few rules to respect. This can help you during periods of low demand.
Now, during periods of high demand, on these same levers, which ones should be used and put in place? And of course during periods of high demand, we will be able to filter the demand. We know that there are a lot of requests, we know that we will be full, we have no doubt about that. So, during periods of high demand, we will select the requests that are the most favorable for us, and obviously, the longest requests are those that are the most favorable. So, we can demand a minimum number of nights, and fully accept the fact that for shorter stays, well we will refuse the request, ultimately, since requiring a minimum number of nights means refusing shorter stays. So that's a good idea. Having a non-cancelable and non-refundable price or having adapted prices for medium-term stays, these are not ideas that will be profitable in terms of turnover, because in fact, we will grant percentage reductions. I should have also clarified on the previous page, that what I mean by “non-cancellable and non-refundable price”, that is to say a lower price. It seemed so obvious to me that I didn't elaborate, but I think it still deserves to be clarified. It's a lower price, if the customer agrees that they don't have the option to cancel. So, sometimes, in hotels we see, the price is 10% cheaper if you accept that it is non-cancellable and non-refundable. This is exactly this mechanism, and we, as seasonal rental companies, all have the possibility of putting it in place, particularly on booking.com. So, a non-cancellable and refundable price, that is to say reduced by a certain percentage, or a reduced price for longer, medium-term stays, is damaging. Because over this period, we know that we are going to sell, we know that we can sell at the price, so ultimately, that makes us miss out on turnover figures stupidly, for free, when we could have filled at amount displayed over this period. And then the last idea: participate in the “favorite” program. In reality, participating in the “favorite” program makes sense all the time, all year round. It’s the social proof that will help convert sales and reassure travelers, especially if you have a 17% commission. Going from 17% to 17% to have this extra bonus, it's really a good decision.
And on the last question, I said that if you are asked for a negotiated price for a longer period than usual, so seven days, fifteen days; Which ideas are best, and therefore, which one should be avoided? On this question, what should be avoided is the “c” answer. I will quickly detail it. The answer "a", for me, is an excellent answer, and it's something that I don't see enough when I'm asked for my opinion on the price to put for this or that type of stay, when customers I Full posters come back to us asking us about the most appropriate price for a medium-term stay. Often what I encourage them to do is ask for the client's budget. That's really important, because we can have surprises, either bad surprises or very good surprises. But know that in a commercial negotiation, the one who gives his price first is the one who loses. So, it is in your best interest to have travelers express a budget or a price before you even ask the question of the price you are going to offer them. The second thing is to look at how much we earned last year on the same date. It is important to keep in mind the income you obtained on similar dates last year with this property. For what ? Because it's going to be a floor. If this year you see that the client's budget is extremely low, and that last year you managed to obtain a relatively consistent turnover over this period, you have no interest in offering a much lower price. , because you are going to succeed, in the same context, I am leaving the subject of the pandemic in this exchange, but in the same context, there is no reason why you cannot succeed in doing the same thing as last year . And everyone's goal is to even do better than last year. So, this means that if the traveler has an extremely low budget, then you have no interest in allying yourself with their budget. The best thing you can do is either offer him at least what you were able to do on your own last year, or what you were able to do last year with a percentage increase. Either way, this is definitely the floor to keep in mind to avoid, in fact, degrading your performance compared to last year. Obviously, all this is different if you have an expectation of earnings this year which is much lower than what you did last year, in a context, for example, of confinement or other exceptional situations. The thing that I think should be avoided is estimating the amount I am willing to give up. That's extremely subjective. In fact, it's not going to be based on any market figures or your potential. It's going to be based exclusively on your impression of what's best, and it's not going to be the right guide to get you to the best performance. Why do I say that? Because sometimes, I have often seen it, that's why I talk about it, people say to themselves: “I set such a price, I can give up 100 euros, I can give up 50 euros. » Except that in fact, this renunciation of 100 euros or 50 euros, when we look at the performance we had last year, we realize that in fact, there is no reason to give up at 100 euros or 50 euros. We had such a turnover last year, we are able to do it this year. You don't have to give up anything at all. If we give up, in fact, the only thing we will gain is to lose money. And the last thing that I think is a good idea is to look at the market range for this length of stay. In the same way that we make our prices, we must always keep in mind what the market ranges are. That doesn't mean that we're going to copy the prices, but we're going to make sure that we're consistent, or that we're well positioned for the medium term. Today, know that you are not alone in doing medium-term training. Many seasonal rental companies address this subject of medium-term rentals, and above all, the Airbnb and booking marketing sites are really working hard on this subject, that is to say they are each trying to get the most out of duvet on their side, because they realized that it is a crucial point for optimizing the performance of seasonal rentals, today, particularly in this famous pandemic context. So look at what others are doing. If you see extremely large numbers, it means that it was not worked for the medium duration. But if you want the numbers that make a little more sense, try to make sure that you're consistent in the market, that in any case, what you're going to offer, if you really want the traveler to book with you, that you are not totally delusional about the amount you are going to offer, either up or down. Sometimes, we may have the impression of being obliged to offer a super attractive price, but in reality, if you see that the traveler has absolutely no other solution than to subscribe to something a little more expensive than its budget, well you have every interest in offering something a little more expensive than its budget. So.
I hope that all this has been able to enlighten you on the best practices to have on all these subjects, which are somewhat complicated subjects in general. So, I hope I have really popularized them.
– Hello Delphine. Welcome to you.
I hope to have really popularized them to help you make the best decisions if you are in this context. I'll see you tomorrow for the next live. Subscribe to I show Complete. See you tomorrow.