By Pamela Carvell, HMA Life President
INTRODUCTION
The concepts of surge pricing and dynamic pricing entered public consciousness after the band Oasis announced concert dates, meaning they would be performing live for the first time in 15 years. UK hotels had already seen huge benefits in 2024 from the ‘Taylor Swift Effect’ and clearly saw this as another money-making opportunity of huge proportions. However, many probably didn’t count on the vast wave of negative publicity they received as customers posted on social media how they had existing reservations for now-Oasis-concert-dates cancelled and then re-available at vastly inflated prices (*1). Fans were quick to exchange experiences online. At the same time, fans trying to secure concert tickets experienced surge pricing, as the price of tickets just kept rising as they held their places in on-line queues, often being completely out of their reach financially by the time they reached the front of the queue(*2).
The reaction of Liam Gallagher to fans complaints was rather predictably to tell them, in posts full of expletives, to ‘shut up’ and said that he was feeling ‘smug’! Has this damaged their reputation? Probably not. They relish being rude and bad tempered and anti-establishment. You could say that these are some of their core brand values, and fans who share these values have been equally smug about securing tickets at any price, or re-selling their tickets for vastly inflated prices.
A competition economist at Grant Thornton suggested that this means the tickets were originally under-priced, as people were clearly willing to pay prices of £3-400. And they added that the problem was lack of transparency regarding dynamic pricing, not the actual prices.
But what about the hotels that also used dynamic and surge pricing in this instance? The branding of a hotel is a very important part of what differentiates it and encourages customers to choose to stay there. And you damage those values at your peril.
BACKGROUND
Revenue Management, or Yield Management as it was originally known, was introduced by airlines in the USA in the 1970’s. It started being adopted by European Hotels in the early-mid 1990’s, with a fairly simplistic approach towards supply and demand. It presented a major challenge re educating staff and customers alike, as to why the same room cost a different price on different dates, or worse still why the same room booked 3 weeks ahead cost a completely different price to the same room booked 24hours out! Revenue Management became the responsibility of newly-formed teams of Revenue Managers, who typically reported to either the Front Office Manager or the General Manager and not to either Sales or Marketing. Marketing traditionalists will always believe that Pricing is one of the Marketing P’s, but the hotel industry chose to make it a stand-alone function. The term Dynamic Pricing gradually became adopted, especially as hotels became more creative with the packages & room types that they made available online, as well as the huge array of channels through which hotel rooms could be booked.
Dynamic Pricing is often used for concerts in the USA, but is a relatively new phenomenon in the UK, hence some of the backlash with Oasis. This was also fuelled by the media adopting the term ‘Surge Pricing, which as George Titlow of Right Revenue points out, was used by them to generate attention-grabbing headlines and promote a public backlash against hospitality businesses, Ticketmaster and Oasis. However, he reminds us that adjusting prices to meet demand is nothing new in hotels or entertainment, with Happy Hours providing cheaper drinks at quiet times, Matinee performances in theatres being much cheaper than evening ones and seasonal or packaged rates having been a mainstay of hotel marketing for decades. He highlights the problem with ‘surge pricing’ is how it is executed and the subsequent perception problem that can be caused by a minority of hotels.
My overriding concern as a Marketer is the impact of having fluid pricing availability within the control of a non-Marketing department, that has the potential to cause long-term damage to your brand. As part of my research for this article I investigated current pricing by a selection of hotels in venues where Oasis will be performing on those dates, and then a month later (but also on a Friday night for comparison). The greatest price difference I found was £435 versus £95 (*3) although the media quoted far more extreme examples than this!
It raises questions such as:
Is there a maximum price that a hotel should ever charge? Or is it as much as someone will pay? Should Marketing, as guardians of the brand, make this decision, rather than RM?
Are there alerts in the system to flag up when demand levels shoot through the roof?
What about regular guests who happen to want to stay when there is a concert on. Should rooms be held back for them, so you don’t potentially damage relationships cultivated over many years?
How can value be delivered against a rate that is perhaps twice your previous highest rate?
THE REVENUE MANAGEMENT PERSPECTIVE
George Titlow feels that the recent negative headlines were not caused by dynamic pricing as a concept, but rather by them being examples of bad practice. There was a lack of transparency and an execution that was unfair, unreasonable and unsustainable.
He feels that hotels are entitled to increase prices when demand is exceptional, but this pricing must be within a considered revenue management strategy, that may include a minimum length of stay (MLS) or packaging that includes extra spend in the hotel e.g. F&B, spa treatments on such occasions.
Sarah Jones, Vice President, Distribution Solutions & Product Communication of SHR reminds us that high-demand events present a unique opportunity to showcase our hotel and brand to new guests, but that once these guests arrive, the experience must reflect the brand promise and deliver a ‘wow factor’ to encourage future stays and generate positive social media coverage.
Hoteliers have a responsibility to owners to deliver against budget, and capitalising on local events is a key component of driving revenue. If historical data is limited, or immediately after events have been announced, manual interventions may be necessary, before the RMS can adjust.
We also must remember that pricing is just one factor influencing booking decisions, and that a very high price, even if driven by an unduly high level of demand, should include other relevant components to deliver the value for money and a memorable experience.
THE MARKETING PERSPECTIVE
On senior marketer gave me a very frank observation: ‘I have never worked in a hotel where pricing was mentioned in the same vein as brand values’. That doesn’t surprise me, but I guess that is part of what spurred me to write this, as pricing and brand values should go hand-in-hand.
Hotels may just want the highest possible rate and believe that the price of anything is as much as people are willing to pay for it. This still raises the issue of there being a rate ceiling above which the hotel is incapable of delivering value for money, and as such will cause damage to their brand, especially in these times of social media where it is so easy for a guest to post a photo of a room that usually costs £120, with the caption ‘Would you pay £350 for this?’
Some of the price differentials that I found are shocking (*3).If a hotel is typically charging £95 for a Friday night, how does the same room in the same hotel deliver value or a mind-blowing experience for the price of £435? Is this something that Operations and Marketing need to consider together? It is easy to adopt the attitude of ‘making hay while the sun shines’ and that the experience is about the concert your guests are attending. But, perhaps you could at least do things to both embrace this, include value and enhance the experience e.g. play the artists music throughout your public areas those days, create special cocktails themed to the artist, one of which you provide complimentary, hire a face painter free to guests, offer complimentary transfers to the venue.
The hotel Revenue Manager may not focus on the morals of pricing, but surely the Marketing department should?
CONCLUSION
Pricing has always been one of the P’s of Marketing, as has Brand, being part of the P for Product. The hotel industry however, leaves most pricing decisions to Revenue Management, and this works well, except in these ever-increasing cases where demand suddenly surges and people who may have never even visited your city before, or heard of your brand, are considering staying with you. Value for money and an unforgettable experience must be delivered, no matter what the price, and this may be challenging if the rate is 2 or 3 times what you normally charge.
George Titlow questions if the guests staying on a ‘surge night’ are our target market, who we will want to attract back for future stays? And that we should reflect how important it is for us to deliver an amazing experience & value versus delivering high short-term profits.
Sarah Jones concluded ‘Disappointment from premium rates combined with a poor experience can lead to lasting negative views online. Balancing revenue maximisation with value delivery is key to protecting and strengthening your brand reputation.’
REFERENCES *
The Maldon Hotel, Manchester cancelled reservations for the dates of the Oasis concerts and then re-sold those dates for three times the price. They explained that this was due to ‘technical issues’, but the situation is currently under investigation by Trading Standards.
Rolling Stone magazine said that Standing tickets were originally available for £148, but as fans queued online for hours tickets appeared as ‘In Demand Standing’ for £400.
Pricing for the concert date, a Friday and then a Friday night roughly one month later. This research was carried out 20th November 2024 on Booking.com. I selected hotels at random.
LOCATION | CONCERT DATE | FRIDAY NIGH 1 MO LATER |
MANCHESTER | 11/7/25 | 8/9/25 |
Motel One St Peter’s | £435 | £95 |
The Midland | £360 | £160 |
Britannia | £384 | £125 |
CARDIFF | 4/7/25 | 1/8/25 |
voco St David’s | £719 | £339 |
Novotel | £499 | £367 |
EDINBURGH | 8/8/25 | 5/9/25 |
Holiday Inn Express Royal Mile | £580 | £312 |
Indigo Princes Street | £699 | £315 |
Author
This article has been written by Pamela Carvell, Life President of the Hotel Marketing Association, the marketing arm of HOSPA. It represents her views, not those of the companies represented on the HMA Committee. It may be reproduced in part or in full, so long as credit is given to her as author and a link to hotelmarketingassociation.com is included.
November 2024
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