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ENIn an increasingly competitive hospitality industry, understanding and implementing effective business strategies is crucial for every business to maintain its position and achieve breakthrough growth. This reality led to the creation of the "Decoding Business Growth Strategies in the Hospitality Industry" series, a "compass" designed to help managers, hotel owners, and sales teams gain a deeper understanding of the key factors determining success. In this series, pricing strategy was chosen as the starting point because it is the most direct and rapid lever impacting revenue, and it forms the foundation for effectively implementing other strategies such as distribution, marketing, and enhancing customer experience. A smart pricing strategy not only optimises profits but also creates a sustainable competitive advantage in the long term.
Industry Landscape & Pricing Strategy Variables for 2025
Following the post-pandemic boom, 2025 is not expected to be the peak revenue year for the hotel industry, unlike 2022–2024. The market will continue to grow, but at a noticeably slower pace, while operating costs continue to escalate. Concurrently, competitive pressure from online travel agencies (OTAs) and intermediary platforms remains intense.
Phocuswright's comprehensive report indicates that global hotel industry growth in 2025 will rely more on operational efficiency and optimised pricing strategies, rather than on a surge in demand. Artificial intelligence (AI) and advanced data analytics are identified as the most crucial "variables", shaping how hotels set prices and allocate rooms.
For newly established or recently operational hotels, this carries a key implication: the "discount to fill rooms" model is no longer effective. Pricing strategies must be based on market data, brand positioning capabilities, and long-term growth trajectories, rather than chasing short-term sales.
Key Pricing Strategy Trends for 2025
1. AI & Dynamic Pricing Become the Standard
New-generation Revenue Management Systems (RMS) now integrate AI, enabling real-time demand forecasting, analysis of numerous variables (seasonality, events, market fluctuations), and instant price adjustments for each customer segment. According to Duetto, AI, personalisation, and data digitisation will be the three main pillars of pricing strategy in 2025. [caption id="attachment_5782" align="aligncenter" width="640"]
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2. From "Revenue at All Costs" to "Profitable Revenue"
The new trend replaces the "revenue at all costs" philosophy with "revenue with margin" – meaning every unit of revenue must generate actual profit. Managers must not only look at ADR (Average Daily Rate) or RevPAR, but also analyse variable costs, TRevPAR (Total Revenue per Available Room), and revenue from ancillary services.
3. Ancillary Services & Experience-Based Pricing Strategies
Ancillary revenue – from breakfast, spa, local experiences, and airport transfers – is becoming a sustainable growth anchor. Instead of competing by lowering room rates, hotels can increase perceived value through all-inclusive experience packages, thereby boosting profit margins and strengthening brand image.
4. Channel Management & the Price Parity Challenge
The situation where OTAs list lower prices than official websites is becoming increasingly common, leading to a reduction in direct bookings and eroding brand trust. This requires hotels to develop a channel strategy combined with parity monitoring tools to detect and implement timely adjustments.
Challenges for Newly Established 4–5 Star Hotels
For hotels entering the market, especially in the 4–5 star segment, one of the biggest challenges is the lack of historical data. Without information on seasonal demand, booking habits, or prices customers are willing to pay, the sales department will struggle to accurately forecast and set optimal selling prices. This often leads hotels into prolonged "trial and error", which is time-consuming and impacts business efficiency. Another common mistake is over-relying on low prices as an initial customer acquisition tool. Continuous price reductions while operating costs escalate will quickly erode profit margins – a reality clearly analysed by Duetto in numerous global hotel industry reports. On the other hand, while this strategy may quickly fill rooms in the short term, it carries the risk of diminishing brand positioning. Once customers are accustomed to low prices, raising them later becomes difficult and can elicit negative reactions. Especially in the luxury segment, price not only reflects service costs but also shapes perceptions of quality and prestige.
Furthermore, many new hotels also face limitations in sales channel management. Without controlling rate parity (price consistency across channels), they often allow OTAs to sell below desired rates. This not only damages reputation but also directly impacts revenue from the hotel's direct channels. Moreover, it makes hotels increasingly dependent on intermediaries, forcing them to accept high commissions and lose control over data and direct customer relationships. In the long run, this can weaken competitiveness, making it difficult for hotels to proactively shape their brand and implement independent sales strategies.
Finally, human resources and revenue management tools (RMS) also pose a significant barrier. Many new hotels lack professional Revenue Manager teams or have not invested in suitable RMS systems, leading to revenue management being overlooked. Without strategic guidance and supporting tools, hotels will struggle to optimise profits and capitalise on opportunities to increase prices during periods of high demand.
The consequence of all these issues is reduced profitability, difficulty in establishing a market presence, and low customer retention rates. Meanwhile, for the 4–5 star hotel segment, brand reputation and customer experience are vital factors determining long-term success.
Conclusion – Message for Hotel Owners & Managers
The year 2025 marks a significant shift in the hotel industry towards the era of "smart pricing," where prices are no longer fixed figures but the result of comprehensive data analysis, the application of artificial intelligence (AI), and strategic distribution channel management. In a fiercely competitive landscape, pricing decisions cannot rely solely on intuition but must be supported by accurate, flexible forecasting systems that optimise long-term profitability. For 4–5 star hotels, especially newly operating establishments, building a standardised data foundation, implementing a Revenue Management System (RMS), and developing ancillary revenue streams will be key to increasing business efficiency, maintaining brand position, and sustaining a competitive advantage. With extensive experience in implementing pricing strategies for numerous luxury hotel brands, NewSun Hospitality not only provides tailored solutions but also offers a comprehensive consulting roadmap, accompanying clients from current state analysis and strategy design to operational optimisation. ???? Contact NewSun Hospitality today for in-depth pricing strategy consulting and transform competitive advantages into tangible business results. References:
- Duetto — “Key Hospitality Trends for 2025” (AI, personalization, rising costs, revenue metrics). duettocloud.com
- Duetto — “Main challenges for revenue management in 2025” (stabilizing revenue, flattening growth). duettocloud.com
- Phocuswright — Travel Forward / Travel Innovation trends (market growth & technology trends 2025). phocuswright.com
- eHotelier / industry insight — OTA undercutting direct rates (rate parity challenges). insights.ehotelier.com
- AltexSoft / industry guides — dynamic pricing models & RMS vendors overview. AltexSoft
