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Hotel Room Pricing and Rate Optimization: How It Can Increase Profits


Hotel Room Pricing and Rate Optimization | Hotelogix

The hotel industry has become more and more competitive. The lingering effects of the pandemic, the potential for new lockdowns, the concern that is still keeping some travelers at home, coupled with the surge of “revenge travel” that’s occurring across the US…all of these things add up to just one fact. You must pay more attention to hotel room pricing more than ever before. In fact, if you aren’t able to optimize your hotel room pricing and other rates, you are immediately less competitive.

Why Is It Important for a Hotel to Have a Pricing Strategy in Place?

Why do you need a pricing strategy? The primary purpose is to increase profits, but you can only do that by increasing your ability to compete with other properties in your general area. Of course, creating a pricing strategy is no simple matter. It requires doing more than just basing your projected earnings on last year’s occupancy rates.

The truth is that hotel room pricing and rate optimization require changing both the way you do things and your mindset when it comes to pricing structures. Below, we’ll explore key takeaways to help you achieve both of those goals.

Changing Your Stance toward Pricing

Chances are good that you use one of two pricing models for your hotel. Both of these are common and can be found around the world, and both are outmoded and must be replaced if you are going to compete based on hotel room rates.

The Same Price Strategy

Some hotel managers still rely on the same old pricing strategy that dominated the industry decades ago. That is, they have a standard rate for each room during the week, and then they have a weekend rate. Chances are good there are also holiday/peak season rates at play.

The BAR Method

The second method relies on the BAR or best-available rate. In this situation, the BAR is the lowest publicly-available rate, and all of your variances are based on that. For instance, you might offer a loyalty discount at 15% less than the BAR.

Both of these methods are outdated. Neither provides the ability to adjust to the factors that dominate today’s hospitality industry nor do they allow you to work with the multiple channels you must use to market your property and reach potential guests. So, what should you do instead?

Embrace Discount Systems

First, you need to embrace discount systems. Potential guests are looking for unique elements that match their needs and their experiences. With different hotel room pricing discounts, you can meet and even exceed those expectations. What discount systems might you use, though? Here are some examples, but understand that the sky’s the limit here. The more options you have, the better you’ll be able to match a guest’s expectations and specific stay.

1. Long-Term: Long-term guests can be some of the most lucrative available, but you should incentivize them with special rates available only for those who stay a minimum number of days at the property.

2. Early Bird: Early bird discounts can apply to guests who book stays before the peak season, but you can also find other ways to make this type of discount program work.

3. Package Discounts: You can offer significant discounts on both room rates and other prices when you offer packages. These allow your guests to save while booking their room but also benefit from access to your other services, like breakfast, the spa, or even an all-inclusive stay in terms of meals and beverages.

4. Application Method: You can also mix things up by applying discounts in different ways. For instance, you could offer a night-based discount, a discount on all nights, a frequency-based discount, a party-based discount, and much more.

These are just the tip of the proverbial iceberg. You can create discount systems that reflect anything you want and feel is pertinent to your property and your clientele and their needs and expectations.

Your Pricing System Must Be Able to Calculate Different Revenue Heads

From the outside looking in, hotel room pricing is the primary source of profitability. However, as a hotel manager, you know that’s not true. There are many other sources of revenue that add up and, in some cases, rival your hotel room pricing for value to the bottom line. It’s important that your pricing system is able to calculate different revenue heads to ensure that you’re able to track performance and increase profits.

Some of the most common revenue heads you’ll need to consider include the following:

  • Room revenue
  • Food and beverage revenue
  • Spa/wellness revenue
  • Service-related revenue, such as bike or kayak rentals
  • Concierge-related revenue
  • “Experience”-related revenue for guests booking special stays that include tickets to events or something similar

Of course, finding a hotel pricing software capable of handling that diversity of tasks is a challenge in and of itself. Thankfully, Hotelogix is there for you.

Introducing the Hotelogix Price Manager

At Hotelogix, we’re continually pushing the boundaries of what our hotel management software can do. Our Price Manager can manage different kinds of rates and discounts and intelligently manages your revenue heads. We make it simple to manage your room rates, room changes, and upgrades.

You can set room rates per season, per package, per stay, and more, and then easily manage all aspects of your pricing from a single interface. It’s now simple to handle rates for last-minute upgrades, the addition of meals, the cost of airport transfers, and so much more. Not only that, but it dovetails with our other front desk modules, including room distribution.

In Conclusion

Ultimately, today’s hospitality industry is more competitive than ever before. You must be able to compete on more than your location. It’s crucial that you speak to potential guests in a language that they understand, and that means taking a personalized approach to each stay. With the right hotel room pricing strategy, you can exceed your guests’ expectations and deliver an incredible stay that they’ll remember (and that will encourage repeat visits).

However, failing to move away from the “same old pricing strategy” is a critical mistake. Hotel managers and decision-makers can be overwhelmed with the need to manage multiple discount types and revenue heads, but the right hotel pricing software not only simplifies the process, but it can also automate it and save you time and hassle while ensuring you’re able to compete on even footing.