Setting Up Your Rate Strategy
When setting up your rate strategy here are a few things to consider. 1. All rates should fit into one of the following buckets:
- BAR (Best Available Retail Rate): the anchor of the rate strategy representing the fair market price based on demand. As demand changes so will the BAR price.
- Package (Room plus Inclusions): floats off BAR at a premium; shows value when compared to the sum of the parts a la carte.
- Qualified Discounts: floats off BAR at a discount offered to a portion of the population that qualifies.
- Corporate Rates: continue to be both flat and floating prices depending on account. Where possible avoid Last Room Availability allowing for yield opportunity.
- Group Rates: should also be based on demand, while group rates normally provide a volume discount; be sure to measure demand first. There are times where group rates should be at or even higher than BAR.
2. Float as many rates off BAR as possible; allowing for ease of measurement and efficient yielding.
3. Take your competitor pricing into consideration; don’t allow it to dictate your pricing.
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4. The consumer determines the right price for your product, be sure to test your pricing, measure the response, and repeat continuously.
5. When Unconstrained Demand is higher than your physical supply shut the back doors in to lower rates. This is the first place to look when your ADR is surprisingly low in high demand periods.
Pricing is a critical element to a solid hotel revenue strategy; take the time to set up your rate plan so that it makes sense and listen to the consumer.