How To Optimise Your Room Rates For Better Returns?

By Rita Lo, Senior Teaching Fellow, School of Hospitality and Service Management, Sunway University

Is your hotel attempting to compete by lowering your room rates to increase occupancy, but are the returns unsatisfactory? What is wrong with your hotel price?

It is time to start evaluating your hotel room rates because your room rate should meet your guests’ expectations. These include your hotel’s brand, market awareness of your hotel, the unique selling proposition of your products and services, quality assurance, and reliability components. Above all, your room rates must be able to generate your anticipated revenue and desired investment returns.

Oversupply of hotel rooms has consistently forced hotels to face dynamic challenges in offering good room rates, which is critical to remaining competitive, retaining existing customers, acquiring new customers, and improving financial results.

Here are some pointers to be considered when optimising hotel room rates for higher returns while keeping your rates appealing to your customers.

Daily Forecasting

Determine hotel room rates using accurate daily forecasting; use digitalisation tools or applications that can help you determine the daily number of vacant rooms and occupancy, and forecasting based on the available information to maximise your RevPAR (revenue per available room). To achieve an accurate price, change the rate daily or regularly. Set a realistic occupancy target by season. Room rates should go along with the occupancy target to generate good returns for your hotel.  

Offers Best Available Rate with Values

Utilise and analyse guest data to grasp all you need to know when determining the best available rates with attractive value propositions for better profitability. This data includes the guest’s average length of stay in the hotel, product, and service preferences, booking period, mode of payment, and any other information. Most importantly, your hotel’s best available rate should create an attractive value add that meets your guests’ expectations without feeling that the hotel is overcharging them with additional fees.

Pricing Strategy

Apply a revenue pricing strategy that suits your hotel and change the pricing strategy depending on the sales period. The key to determining the best pricing strategy should start with understanding your hotel’s operation costs and resource availability. It’s fine to use a cost pricing strategy during low occupancy to attract sales. However, the rates should generate sufficient profit-earning at the minimum cost level. Increase your room rates following demand patterns, such as hiking up at peak times for greater profit.  

Define Online Market Rates 

Generate the best online rates by choosing and building a network with good online booking channels to access more reliable online segmentation. Offer various online room rates for different online booking platforms such as online promo rates, online package rates, international pricing preferences, etc. Next, observe the online market response on rates, as this will help your hotel define the average room rates that are most preferred by the online market. Best online market rates will convert seekers to bookers.

Digitalise Rates Management

The popularity of digitalisation applications has changed the competitive landscape and is a game-changer for business operations. Your hotel’s mobile application must be unique, easy to access anytime, anywhere, offers more valuable points that will encourage customers to repeat booking, and offers a speedy response. The mobile applications should offer various attractive functions such as discounted rate options and rate game options that allow users to collect points that can be converted into room points for booking. The mobile application platform should also link to various web and social media platforms for better publicity and awareness.

In conclusion, be flexible with the way you determine your room rates. More importantly, observe the market trend and focus on your cost management.

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