CASE STUDY: Pricing strategy: payment by performance

Action: The PACE team examined the way the hotel company structured, bundled and priced their services to hotel owners. It became clear that the company needed to be more competitive in order to increase their income. PACE conducted a competitive analysis of brand performance against costs to hotel owners and then explored different means of selling components of the services offered. By shifting the emphasis towards payment by performance it became easier for the hotel company to make investment decisions. Performance related pricing both made better sense to hotel owners and gave the hotel company the means to increase their earning potential.

Insight: Performance related pricing was more appealing to hotel owners looking for better results from hotel brands. PACE’s competitive analysis showed that hotel owners valued brands based on the number of reservations delivered, the premium added to the property and overall return on capital employed. On this basis it became clear how the hotel company could better position itself to appeal to owners in a crowded market.

Result: PACE’s analysis showed how the hotel company could increase income without being more expensive in the eyes of hotel owners. The resulting income provided investment for essential digital development to keep up with the market. The proposal gained unanimous board approval and the plan has since been adopted as part of the new strategy. The hotel group is currently the fastest growing group in its region.

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