Hotel Room Pricing

Hotel Room Pricing: Calculation & Optimization Strategies

Hotel Room Pricing is a term that is quite simple and challenging at the same time.

All hoteliers might be familiar with the term pretty well but most of them face huge difficulties in finding suitable pricing.

There is no such thing as a universal fixed rate and hotel room rates are dynamic in nature.

They constantly keep on changing based on different factors. Thus, as a hotel business owner, you must be able to understand such factors and use effective strategies to optimize your hotel pricing strategy. This will help you to increase your revenue as well as increase occupancy rates in hotels throughout the year.

In this article, we will discuss how pricing hotel rooms works and different strategies to optimize room rates and increase bookings.

Understand How Hotel Room Pricing Works?

understand how hotels room pricing works

Pricing hotel rooms is quite a daunting task and requires a significant amount of time and planning to make your hotel pricing strategy successful.

Thus, it is important to understand how hotel room pricing works to gain a competitive advantage while earning profitability.

The way your hotel room rates vary is largely dependent on circumstantial factors and is unique to every property.

The best pricing is determined by what your hotel can reasonably charge based on the services offered. The amount you decide needs to cover your costs while keeping your rooms occupied leaves a margin for profitability.

It largely affects your revenue management system and plays the role of the key decider when we think about long-term success.

The calculation of rates of hotel rooms depends on many factors such as what your competition is charging, the property’s location, amenities in the hotel, size of the rooms, supply and demand in the present scenario, and much more.

Plus, the best pricing strategy could only be obtained once you take note of all the above-mentioned factors and come up with a suitable solution for effective hotel revenue management.

So, there is no such thing as a universal fixed hotel rate, and prices are dynamic in nature and constantly keep on changing accordingly.

How to Use Hotel Room Cost Calculator?

Using a hotel room cost calculator can help you to break down hotel room costs and figure out what room rates you must adopt to maximize your profits.

You can do so by using the cost-per-room formula which is the sum of all the costs involved in running the hotel divided by the total number of rooms you have to sell. This will provide you with an average figure for each room that you should at least charge to meet up the requirements for running your hotel business.

For perfect understanding, watch the video to learn how to calculate room cost in excel:

Explain how to calculate room cost in excel.

So now that you know how to calculate the cost per rented room, you can easily form a suitable pricing strategy.

How to Determine Hotel Room Rates? 

Let us explain how to determine hotel room rates that boost your bookings.

While determining room pricing for your hotel, you need to first establish your breakeven rate.

The breakeven rate is the minimum amount you need to charge from the customers to cover all your running costs per occupied room.

It provides you with the appropriate ideal amount that you can charge from your guest in return for the services provided.

You can determine your breakeven rate by first recognizing your operating expenses and using our hotel room pricing model. This might include finances spent on amenities, maintenance, purchasing food, marketing activities, personnel, and much more throughout the year. Sum it up and divide it by the total number of rooms you can sell.

This will provide you with a suitable hotel room pricing strategy that satisfies your occupancy rate.

Things to Research Before Determining Hotel Rooms Pricing Strategy

There are certain things that you must keep in mind and get well acquainted with while determining your hotel room fare strategy. Thus, we have come up with different things that you can research to increase the efficiency and success rate of the strategy formulated.

1. When Do Hotels Usually Offer Better Rates?

This is quite useful information that you can turn pages for to make your pricing dynamic in nature.

When hotels usually offer better rates will help you to understand market conditions in a better way and also to understand what type of strategy works best under such conditions

. You can keep an eye on your competitors to understand this better as they are majorly operating in the same location with similar types of amenities.

2. How Much Do Hotels Cost Per Night?

Also, you can analyze how much hotels in your nearby locations with similar amenities cost per night.

This will help you to conduct a hotel competitive analysis and gain an understanding of what different strategies others are adopting to attract more customers and also maintain profitability.

3. What Is A Reasonable Price For A Hotel Room?

Reasonable pricing for a hotel room can be obtained by analyzing your breakeven rate.

It is the minimum amount that you need to charge to overcome your running operational costs. Understanding this will help you to suitably pick a minimum reasonable price that you need and can charge.

4. Do Hotels Lower Their Rates?

Usually, you might see that hotels offer lower pricing during the off-season with lower occupancy rates to attract more customers and maintain their occupancy percentage.

This is usually done to optimize their hotel room charges strategy in such a way that the total revenue earned throughout the year is even while maintaining a suitable occupancy percentage.

The vice versa is done in the case of high-demand seasons when hotels usually perk up their rates to maximize profits.

5. When Do Hotel Prices Go Up?

Hotel Prices gradually increase with the increase in demand for hotel rooms and limited availability of supply.

This generally happens in the seasons when there is a significant rush in the number of travelers.

How does Makcorps API Help You to Get Market Rate Insights?

Makcorps- The Hotel Price API is a software solution made especially for hotel business owners to cater to them with accurate market insights.

It is a price intelligence hotel aggregator API that crawls through 200 plus OTA platforms to come up with the most relevant results based on your search query.

You can now effortlessly find and compare different hotel prices using a hotel rate shopper in no time. Also, it helps you understand market price trends in a better way while providing real-time accurate pricing data in a whisk of time.

Strategies For Hotel Room Pricing Optimization To Gain More Bookings

Hotel room rate pricing optimization can be done using the following strategies to get higher revenues and maximize occupancy rates.

Strategies For Hotel Room Pricing Optimization To Gain More Bookings

1. Monitor Competitor Pricing 

Using a pricing strategy that is in accordance with and based on your competitors will help you understand where your property stands in the market.

By analyzing what your competitors are charging you can set your pricing strategy differently to gain a competitive edge.

For this strategy to be successful you need to be sure that the hotels you are comparing with are similar in nature and offer the same type of services.

It is a useful pricing strategy to ensure that your property remains competitive in nature. Read how to do hotel pricing monitoring in a better way to get better results.

2. Use Forecasting Methods

Using forecasting as a base to set your pricing strategy can help you maximize your profits through strategic planning.

Forecast-based pricing relies heavily on historical price data and helps you predict suitable pricing to maximize revenue generation.

But after covid-19 most of the hotels are restricted to short-term data analysis and real-time performance data to eliminate any risk of misprediction and generate accurate results.

Local market trends, travel restrictions, seasonality, economic fluctuations, and other such relative factors help in forecasting demand. To know how to make adjustments in your pricing strategy according to the demand, competition, and other factors, learning yield management pricing strategies for hotels are a must.

3. Use Customers as a Guide

Customers can help you come up with the most relevant pricing strategy when done in the right manner.

How customers perceive the value of your hotel rooms and property is the maximum amount they are willing to pay.

Also, this strategy will help you understand your actual property value in the market, different customer segments, and other factors that largely affect your business.

The best way to come up with a result-oriented pricing strategy is to look from the eyes of the customers and accordingly optimize your functions to attract more customers.

4. Calculate Costs for Optimizing Pricing

Another effective strategy for optimizing hotel pricing strategy is by calculating your operating costs or summing up all your property expenses in running the hotel and gradually dividing it by the total number of rooms available for sale.

After this add up a reasonable amount of margin based on room quality and services offered with desired profit. This cost-based pricing strategy plays an important part in understanding and maximizing profit potential.

Factors That Affect Hotel Room Pricing

Several factors affect hotel room pricing and can help you better understand why prices fluctuate. Some of the major factors are listed below.

1. Seasonality

Based on the geographical location of your property, different seasons determine the flow of travelers throughout the year.

It is quite possible that you either receive more booking requests in a specific period of the year according to the best time to visit the significant place.

So, at a time when the demand for property significantly rises, the prices also get leveled up to maximize profits. Similarly, during off seasons you might want to lower your room rates to attain higher occupancy rates.

2. Star Rating

The type of property also decides its rates. For example, the pricing for a 5-star property would be different from that of a 3-star property. Thus, the level of your rating will largely affect your pricing.

3. Amenities Offered

Another vital factor is the services that you offer that set you apart from the competition and help you earn higher profits.

The better the services offered to the customers, the more pleasant their stay-in experience would be. This can leverage your room rates significantly.

4. Local Market Trends and Competition

This is a factor that is subject to change as per the change in the local market. The trending pricing rate in your nearby locations will affect your pricing as well.

So, you need to keep a check on your competitor’s pricing to ensure that you are not leaving behind. Lesser pricing offered by your competitor can instantly become the center of attraction for customers and will leave your occupancy rates getting diminished.

Conclusion:

So, these were some of the major insights into hotel pricing that can help you climb the ladder of success efficiently.

Also, now that you have learned about different strategies on how you can optimize your hotel pricing strategy, we believe that you will be able to deduce higher results.

Analyze and monitor your competitors regularly to keep a track of new marketing and pricing strategies that might help you stand apart from the competition.

Do not hesitate to experiment and come up with a unique solution for your business as it is purely based on you. After understanding what works out best for your hotel you can always adjust your pricing accordingly. Also, using smart solutions like price intelligence tools such as Makcorps Hotel API will only make your work more efficient, easier, and reliable.  

Similar Posts

Leave a Reply

Your email address will not be published.