Pricing on different types of market
The price policy of a hotel enterprise depends on the competitive environment, which is determined by the type of market. Each type of market has its basic, characteristic features, which include:
• the number and size of hotel businesses on the market;
• the degree of similarity or difference between the products they produce;
• the current entrance barriers to entry into the industry and the difficulty of getting on the bear;
• forms of competition (chain, non-price);
• the adequacy of market information.
Proceeding from the peculiarities of product pricing and the competitive situation, four types of market usually distinguish on which the hotel enterprises operate: markets for perfect and imperfect competition represented by monopolistic competition, oligopoly and a pure monopoly.
If there is a perfect competition in the market, the demand for its hotel products is elastic on the chain, as there are a large number of competitive hotels and a lot of consumers on the market, ready to buy hotel products. As a result, an equilibrium market price for similar hotel products is established in this market and the enterprise does not have the opportunity to increase the price of its own offer, as customers easily move to its competitors, where prices are lower. With this type of market, marketing activities do not bring tangible results. In the hotel industry, perfect competition is rare, but it can be found in certain regions where there are a small number of hotels.
With monopolistic competition the market has a lot of hotel companies that compete with each other, offering consumers their products that differ in a wide range of prices. This market is characterized by a sharp competition between enterprises for market share, differentiation of hotel offerings, relatively low barriers to entry into the industry, which contributes to the wide use of marketing tools, including advertising, promotion, etc.
The company determines the price of its products taking into account the market demand for them, the prices of competitors and their own costs of production, using different pricing strategies.
Monopolistic competition is widespread in the hospitality industry.
In the presence of oligopoly there are a small number of large enterprises that depend on each other, who try to prevent new rivals, use non-price strategies and are sensitive to changes in the pricing policy and marketing efforts of each other. Any reduction in prices for products of one enterprise immediately causes a reaction of other market participants, so prices in this market are not flexible.
With non-competition, enterprises attract consumers by improving the quality of their products, trying to avoid direct confrontation.
In the hotel business, oligopoly is rare.
With pure monopoly , there is one company in the market that can impose a price on its products to the consumer, but it can also determine the optimal price level. The strategies used by these enterprises are often based on the principle of price discrimination of consumers. In this case, other types of price strategies can be used.
In the hotel business, it is difficult to recognize a pure monopoly, as there are many substitute products on the market.
It should be noted that the pricing in the reviewed markets has significant differences, but in their pure form in the hotel business these markets are practically not met. So, a hotel enterprise for one product can act on one type of market, and on another - on another.
In order to more specifically determine the direction of pricing in a competitive environment, you can use the following matrix, which is constructed in the following coordinate system: the perceived value of the product for consumers and the number of competitors in the hotel industry (Figure 6.1). Each coordinate has two positions, as a result of which four situations are distinguished with their own pricing features:
1) a monopoly or a differentiated oligopoly;
2) perfect competition;
3) undifferentiated oligopoly;
4) monopolistic competition.
The perceived value of a product
Number of competitors
I. Monopoly or Differential 11th Oligopoly
3. Monopolistic competition
2. Undifferentiated oligopoly
4. Perfect competition
Fig. 6.1. Pricing in different competitive environments
Consideration of the data presented in Fig. 6.1 situations shows the following.Situation 1. Monopoly or a differentiated oligopoly is characterized by the presence on the market of a small number of competitors and high susceptibility of consumers to the value of hotel products. In this situation, the hotel company is relatively free in setting prices for its products, but this freedom has limitations imposed by the perceived value of its products and its position relative to its competitors. This situation is common in the global car rental market, and in the hotel industry is rare. Situation 2. Undifferentiated oligopoly is distinguished by a small number of competitors in the market with a strong interdependence between them and low susceptibility to consumers of the value of hotel products. These conditions limit hotel companies in setting prices for their products and usually they are set up following the market leader. In the hotel industry, this situation is also rare, but it occurs in selected United States regions that are not well provided for by hotels.
For example, in Perm, 2.5% of the total number of customers falls to the hotel "Ural."Situation 3. Monopolistic competition is typical for hotel companies that produce products that are highly perceived for consumers, with a large number of competitors on the market. In this situation, the hotel company has some freedom in setting prices, which is limited by the intensity of competition. Monopolistic competition is widespread in the hospitality industry and, above all, it concerns resort hotels. These enterprises are hardly distinguishable by category, but they have significant differences but additional services.
Situation 4. Perfect competition is distinguished by the presence on the market of many competitors and low susceptibility of consumers to the value of hotel products. These characteristics practically deprive the enterprise of independently accepting price decisions for its products. In this situation, prices are usually set on the basis of supply and demand. In the hotel sphere, perfect competition is rare. However, the situation in the markets of motels and small hotels in large tourist centers is close to this situation.
In view of these situations, the hotel company can take a more balanced approach to setting prices for its products.
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