How to Set Your Hotel Room Rates?
The main goal of the revenue management team is to sell hotel rooms at the best and highest rate possible. It doesn’t matter the hotel size or its level of service, reservations or revenue management teams share the responsibility of setting a pricing strategy to maximise occupancy and revenue.
There is limited guidance to help hoteliers set their room rates, and that is why we've prepared this content for you. To determine your room rates, you should consider a number of factors including location, star rating, market segment, competitors, and so on.
Below we describe 7 essential strategies that you and your revenue team should follow every day to set the best room rates in an effective manner:
1- Check your performance on the previous day
Start your day by reviewing your hotel’s performance on the previous day. Make sure to check your occupancy, revenue, average room rate (ARR) and no-shows. Also, compare the figures of the day before with the last years’ performance. To help you with this work, you can use the daily statistic reports from your PMS system. For example, PACE reports are helpful for identifying future trends like pick-up room nights and revenue.
2- Know your market segment
It is essential to set a pricing strategy which is in line with your market segment. Always keep in mind which consumer groups you are targeting and their different booking behaviours. Some of these segments may include ad-hoc group series, transient leisure, weddings, corporate bookers, business groups, conference and events inhouse, conference and events out of house, contract room (for instance, airline contracts).
3- Benchmark your rates against competitors
Know your competitors set and analyse your pricing against theirs. When selecting your competitive set, you should consider the following: offering, amenities, price, location, size, star-rating, and target customer. By comparing your prices with other hotels, you get a sense of what type of rooms are selling and at which rates. It will also give you an idea of how your city is performing in a specific period. STR Global and OTA Insight are helpful tools to benchmark your rates against competitors. They are basically an online rate shopping where you can keep track of your competitors' pricing.
4- Collaborate with other teams
As much as you can, set a time to meet with other teams, especially the sales and marketing team, to discuss opportunities at your hotel. Understand the marketing campaigns running at the moment, including offline and online strategies, and optimise the campaigns based on occupancy level.
5- Set your rates for the next 3-6 months
Review your room rates at least once a day and get an idea of which dates might be an issue. Based on that, decide if you need to update, increase or decrease the future rates. Your hotel should have inventory loaded for at least 6 months out, and everyday you should review pick-up and update rates accordingly.
6- Always check that your rates are the same on all channels
Always double-check if your PMS sent the updated rates to all your distribution channels to provide the same rates in every channel. Bear in mind your users’ behaviour when they are looking to book a hotel with you. Check if all rates are updated and visible to them, and make sure there is rate parity across all your channels, specially on your booking engine. With Google Hotel Ads for instance, you can quickly and easily check your rate parity.
7- Make your direct channel the best option for your customers
Always remember that selling your rooms through your brand website is cheaper than selling through OTAs. Make sure to make your direct channel more attractive for your online bookers to encourage them to book direct. You can do that by offering a little extra to your guest which they can see value for money. For example, you can offer free drinks, discount on their booking, cash back, loyalty points, etc.
These are the 7 strategies we suggest you to do every day to best set your hotel room rates. If you want some further help to create your rates' names and descriptions in your booking engine, take a look at this comprehensive guide with steps to write rates' content that generate direct sales! If you want to learn more, contact P3 and we'll be happy to assist you!