Hotels make money by understanding how pricing of their rooms can be used to gain proper or extra profitability. Caterers can use some of what hotels have learned about pricing to enhance their own profitability. Three simple, yet powerful, pricing concepts used by hotels that will help caterers:
• Projecting volume. Hotels understand that when the Super Bowl comes to their town, prices need to be raised dramatically to take advantage of the guaranteed demand for their sleeping rooms. While the actual physical specs of a room never change, the cost to the user depends on outside influences that create high, low or medium demand.
• Action: Like hotels, caterers should charge more when demand for their services increases. In general, Saturday catering should be priced higher than the same type of event on a Wednesday. Prices for weddings should be higher during the most requested and busiest months.
• Challenge: Caterers usually live by the rule of “A bird in hand is worth two in the bush.” To most caterers, the thought of not booking an event at a lower or normal price in lieu of waiting to book it at a higher price as the date gets closer, is unthinkable. This is making a decision on emotion rather than on business logic. It is scary to most caterers. Maximum profitability eludes caterers who sell too early and resist pricing their services on expected or projected high demand.
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