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Impact of events on hotel rates: how to evaluate it to maximize profits

Events don't all have the same weight on your hotel's performance. Here's what you need to know to not get caught off guard and always get the most out of them.

How events impact hotel rates and performance | Smartpricing

Can a single event generate $1.5 billion in economic revenue, split between the hotel, restaurant and retail sectors? Yes, and it has already happened in the U.S., where singer Taylor Swift's latest tour literally spiked hotel booking prices between March and August 2023. It has been dubbed the "Taylor Swift effect", and has resulted in an average year-over-year increase of 7.7 percent in hotel prices in the month leading up to her concerts.
In Europe, the same thing happened in May 2023 with the Bruce Springsteen concert in Italiy, and the University of Ferrara calculated the total economic effect: more than 10 million euros generated, of which more than 5 million were spent on accommodation and catering.

Funflation and the influence of events on hotel pricing strategy

Faced with these examples, it is easy to think that it is only exceptionally large events that influence the performance of accommodations. In reality, it is a broader phenomenon, which has led economists to coin the term funflation to define price increases influenced by an event.

While it is true that funflation is largely dependent on inflation in general, experts argue that it also stems from a mechanism similar to revenge tourism: people are more likely to attend events, large and small, to compensate for the sacrifices made during the pandemic.

Anyone involved in rate setting in a hotel establishment knows this: sometimes all it takes is one local event or holiday, perhaps even a niche one, to spike demand. In such cases, getting caught off guard with inadequate pricing ... can create quite a few regrets and a definite economic disadvantage compared to those among your competitors who had anticipated the impact of the event.

That is because it is not enough to rush to change prices at the last minute. To maximize your hotel's revenue, you need to adjust your pricing strategy weeks (sometimes months) in advance of the event.

How to rank events

The first thing you need to do to make sure you don't miss any revenue opportunities derived from events is to determine how many and which events might be relevant to your hotel, and adopt a pre-established technique to adjust your pricing strategy accordingly.
As a first step, you can establish a general classification of events, dividing them into:

Major events

These are the easiest to intercept because they are scheduled months or years in advance, e.g. Olympic Games, giving you plenty of time to prepare your pricing and distribution strategy.

Remember that these types of events generate such strong demand that they go beyond the geographic boundaries of the cities where the actual event will be held, so even accommodations several miles away should take them into account.

Minor events

These are the closest to you and include events of varying size. They are local festivals and fairs, concerts by national or local artists, art exhibitions and cultural festivals, conferences, minor sports tournaments, theater performances, markets, food events, or gatherings of enthusiasts.

In this case you will have to spend more time and attention on monitoring, because often this kind of event is announced a few weeks in advance and timing is crucial.

To avoid having to constantly search for events to update your list, it might be useful to have software that automatically detects events near you, calculating the potential impact on sales.

Unexpected events

This category includes all events that are beyond our control, from the increasingly frequent extreme weather conditions (in Italy alone, events such as hailstorms, cloudbursts, and tornadoes have increased by +132%), to transportation strikes, to the sudden cancellation of events close to the date, to emergencies as the pandemic has shown us.

While it is true that we cannot predict the latter type of events, we can still be prepared thanks to dynamic pricing that can adapt very quickly to sudden fluctuations in demand.

The impact of events by type of hotel and clientele

Events do not always have a positive impact on a hotel's performance. Beyond the unexpected events just mentioned, which always lead to a drop in demand, there are

also other factors to consider, such as the type of clientele or the type of hotel, to assess the possibility of a negative impact.

Here are some examples that apply generally to hotels with business target and leisure target audiences.

Business hotels

This category of hotel is likely to find that corporate events lead to an increase in weekday bookings and ADR, coupled with a subsequent drop in occupancy: an event that starts midweek will have many travelers looking for a 2- or 3-night stay, which exposes you to the risk of having too much availability before and after the event.

In this case, your pricing strategy could apply restrictions on length of stay or cheaper deals for those who choose to arrive on Sunday. An example of an event with a negative impact for this type of hotel is holidays, which could result in a decrease in business travel and negatively affect demand.

Leisure hotels

All events, both minor and major, have a great impact on this type of hotel. Depending on the type of event, the pricing strategy will have to be adjusted: for large concerts, group bookings can be expected, while smaller events might attract families interested in B&B or half-board service.

It is crucial to always keep track of the foreign holidays of your customer segment, as they can influence the demand for accommodation regardless of local events and holidays. In this case, it is useful to prepare early with rates or promotions tailored to this type of guest, focusing on adding extra services such as cooking classes, tastings or cultural activities.

How to measure the impact of events

Once you have mapped out all the events relevant to your facility, it is necessary to assign a value to them in order to devise a proper pricing strategy.

In doing so, it is important to take into account not only the positive impact, but also the potentially negative impact.

A possible classification could be organized as follows:

Positive impact events

Major event:

  • occupancy percentage greater than ...%
  • average revenue at least ...% higher than the average ADR for the period

Minor event:

  • occupancy percentage greater than ...%
  • average revenue at least ...% higher than the average ADR for the period

Negative impact events

Major event:

  • occupancy percentage less than ...%
  • average revenue at least ...% lower than the average ADR for the period

Minor event:

  • occupancy percentage less than ...%
  • average revenue at least ...% lower than the average ADR for the period

To make sure that you are giving the right weight to each event at your lodging facility, it is important to consider several factors such as booking history, forecast, pick up and demand pressure, competition, and customer segmentation. If you want to reread the exact definition of all these terms, you can check out our Revenue Management Glossary!

Analyzing data thoroughly and continuously is also critical to make sure you never take anything for granted. If, for example, experience tells you that a particular event usually performs well, you may neglect to analyze it and not realize that the dynamics have changed from previous years.

Understanding exactly how events impact your accommodation is crucial to optimizing rates and maximizing revenue.

This identification and assessment work, however, can prove to be a challenging task and lend itself to numerous misjudgments that may also depend on your perception and interest in certain events rather than others.

The best way to eliminate hassle and subjectivity is to use a tool such as Smartpricing, a dynamic pricing and revenue management software, which automatically detects important events for your establishment and can hypothesize their impact on your sales, helping you find the most profitable price.

Curious to see how it works? Book a personalized demonstration with a Smartpricing consultant now!