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The Art of Hotel Room Pricing

Ever wondered how hotel room prices are set?  It is in fact possible to phone a hotel directly, online, or via a travel agent—and come away with three different quotes.  There are several factors that affect hotel room pricing:

  • Availability and demand for rooms
  • Location of hotel (city vs. suburb vs. resort)
  • Season
  • Nearby competition
  • Time of booking
  • Perks or services included in price
  • Type of hotel (corporate vs. leisure)
  • Hotel’s set rate tiers

Considering the last bullet first, let’s take a look at the various types of tiers, or pricing categories:

Rack rate is the set, standard walk-in price of a given room. This is the highest price.

Corporate is the discount price offered to either a travel agent or other business with which the hotel has an arrangement based on volume.  This rate can be a considerable percentage savings off of the rack rate.

The negotiated rate is based on a guarantee from a partner that a certain number of nights will be spent there.  For example, an association’s members may have a preferred rate with a particular hotel chain worldwide. Said members need only reference their affiliation to benefit.

Group can be defined as government or corporate in terms of rates, or just a one-time arrangement, like a contracted rate for a wedding or conference.  Special group rates tend to be discounted from the rack rate.

Revenue management analysts are professionals in the hotel industry who dedicate their time to constant monitoring of room pricing among competitors, percentage of booked rooms, and the other factors listed above to ensure that a hotel’s revenue is optimized.  They look at the number of rooms booked versus demand and make a determination to raise or lower prices in a way that keeps the hotel competitive and maintains the hotel’s revenue, as well as making sure that the occupancy remains as balanced as possible.  Here’s the important thing to know: a room’s price can change based on any combination of the above factors.  With this in mind, we suggest the following three tips for booking.

BOOK EARLY, and note whether your dates or destination coincide with a major happening in the area at that time.  Ask for whatever discounts qualify at that time.

SEARCH OR ASK FOR SPECIALS, which may or may not be advertised.  Remember to ask for rates related to any organizations or businesses with which you are affiliated.

If the price remains the same, ask whether certain perks or services may be included in the nightly rate, such as parking, a meal, spa, or laundry.

Most importantly, frequent travelers should SIGN UP FOR EVERY PERKS PROGRAM available via their airline, preferred hotel chain, or corporate partner.  As is often said, “…membership has its’ privileges”.

 

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This is the latest in our new ‘Secret Sauce’ series, where we discuss and demystify key industry topics.  Did you find this article informative?  Drop us a line or come chat with us about it on Twitter at @planit7!

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