Be Open with your Rate Management

Being flexible with rate management allows hoteliers to think in creative ways that can make hotels more money. The newest iteration of revenue management; understanding the total value of the customer rather than just what they pay on rate.


Time for a quick quiz. Which guest is more valuable? The one that paid $400 for a three-night stay, or the one that paid $500 for the same three-night stay.


It’s a trick question, one that plays into a new way of thinking about hotel revenue. Traditionally, the major industry benchmark profitability has been RevPAR, i.e. revenue per available room. But that statistic only takes in the price of the room, while ignoring other revenue from the guests staying within that room. A better benchmark: Total Revenue Per Available Room (TRevPAR). This figure considers the spending throughout the entire property, which helps hoteliers better balance revenue and occupancy to achieve maximum profitability.


Now back to those guests. When looking at total guest revenue for a room it turns out $500 may not be as profitable as the one paying a lower rate. That less paying guest? He or she may spend hundreds at the hotel bar and restaurant, or on spa services, or even at the hotel’s quick stop market, while the guest that paid more for the room never spent a dollar on site. Oh yeah, and the guest that paid less for the room also happens to stay twice a year, while the other guest has never stayed before, and quite possibly may never stay again.


Now, which one is the more valuable guest? That’s the insight hoteliers are now seeking out in the hopes of further mastering the art of perfect pricing.


Guest-centric revenue management will take this a step further. Using a specialized price for each guest based on their value entices them to book and is based on their own price and product preferences.


You can leverage total guest spend on a property by combining multiple elements of the hotel experience, then marketing premium-priced packages to specific subsets of the customer base most likely to want those packaged deals, which when done right can be sold at a premium price.


A new generation cloud-based PMS hotel operations platform should have the capability of bundling hotel elements to easily create packages for specific days of the year.


Another idea for maximizing rate management, is the upsell. Sell those unused suites for a discounted rate to guests checking in. It’s a quick way to maximize revenue while also creating loyal guests that feel they’ve gotten a deal. Or, if you have a select service property that gets in lots of sports teams, partner with a neighborhood restaurant to bring in food to that unused meeting room you have. Your hotel will pocket extra dollars, while trip chaperones will be relieved that they can keep everyone in the hotel and well fed.


As for that bar, partner with a local distiller or brewer. Guests will often pay more for a localized drink experience. Worried about getting them into the bar? Give select guests free drink coupons. It’ll get them into an F&B outlet or the bar, and most people have more than one cocktail.


Did you know…

Since alcoholic drinks typically have the highest profit margin in the hotel, which can be upwards of 80%, that money can flow right to the bottom line.


Revenue management is an increasingly complex job function. Be sure to partner with a tech provider that gives you the essential tools that allow you to create upsell opportunities by understanding the total value of each guest.


Don’t want to wait for part 9?
Download our eBook: 6 Must-Have Technologies for Hotel Success (According to Best Practices IT Market Research).


Ready to see how a partner like SkyTouch can impact your operations and your revenue? Contact us today and book a demo of the SkyTouch Hotel Operations Platform.