Service Pricing Strategy in the Application of Hotel Industry

Abstract: Pricing is the only element of the marketing mix that produces revenues for the firm, while all the others are related to expenses. Price is the most flexible element of marketing strategy in that pricing decisions can be implemented proportionately quickly in comparison with the other elements of marketing strategy.
Pricing decisions are not only important, they are also complex. For example, hotel manager should achieve to these goals: maximise stakeholders investment objectives, satisfy
unlike guests, minimise the effect of product perish ability and acquire minimal administrative costs. Also to stakeholders’ interests and the nature of the room product, there may be roompricing issues related to timing, manager responsibility and insufficient market and technical knowledge, administrative costs and a growing availability of pricing information all contribute to making room pricing decisions difficult.
Based on literature review none one of the pricing approaches are a perfect pricing method that at the same time meets the criteria of cost structure, profit margin, competition, elasticity of demand, and supply and demand. Due to the difficulty and complexity of pricing in the real business world, setting and managing prices is one of the most important elements of a
marketing manager’s duty. Another point is that pricing strategies in Iranian hotel is not certainly exist it means that most of the hotels try to sell their services with higher price that the governmental rules allowed them. They set their prices experimentally and it is not based on academic knowledge. So this thesis has an empirical contribution in the hotel and service market of Iran. As the suggestion of Kim in 2004 hotel operators may be better off using various pricing approaches to set hotel room prices instead of using one single pricing approach. So we can see the complexly and difficulty of adopting a pricing strategy for hotel so I use a model that it named Multi-Stage Synthetic Hotel Room Pricing Model that is used to incorporate the
complicated factors affecting hotel room pricing such as cost structure, profit goal, market
ii competition, demand and supply, and differentiation premium. The term synthetic is used because a combination of multiple pricing approaches rather than only one pricing approach is adopted in this study (Tung et al., 1997). That is expanded and added new factors by Woo Gon Kim et al, (2003). This multi-stage synthetic pricing approach has seven stages that the final destination of this research is to calculating market premium price that is based on customers view, market and competitor.
I had to survey, first is hotel Esteghlal customers and the second is hotel Homa customers. I collected 308 questionnaires and analyze them. Based on these data, I calculated differentiation premium of hotel Esteghlal and hotel Homa.
I decide to work on the pricing Strategy of Hotel Esteghlal as my case. Also I need to study market situations to find main competitor of hotel Esteghlal. Hotel Esteghlal is the most famous five star hotels in Tehran that it has luxury customers. One of its competitors in this
segmentation of market is hotel Azadi that it was in the reconstruction during my research, also both of Esteghlal and Azadi hotels are belong to a same chain that is Parsain hotels chain, so I didn’t choose hotel Azadi as a competitor. In other hand hotel Homa (ex Shrayeton) is another
five Star hotel in Tehran that I choose it as a competitor of hotel Esteghlal for my study. I
calculate the average price of hotel Homa to use it as ACP (average competitor price).