For hotels, the days of charging the same room rates to all guests have long since passed.
NB: This is an article from RoomPriceGenie, one of our Expert Partners
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Today, hoteliers recognize that they can generate more revenue by being more targeted in their pricing – by offering different rates to different segments of guests.
With the right rate plans in place, hotels can more effectively manage pricing, occupancy, and overall revenue. This applies to all types of independent lodging businesses, from boutique hotels and guesthouses to hostels and serviced apartments.
Why Are Rate Plans Important?
By offering a variety of rate plans, hotels can attract a broad spectrum of traveler types. Some rate plans may be open to everyone, while others may be restricted to certain travelers or booking channels.
To protect restricted plans, hotels place “fences” around them. These are conditions travelers must meet in order to qualify for the rate. For example:
- To be eligible for a corporate rate, a guest must be an employee of a company with a negotiated rate agreement with the property.
- To be eligible for a loyalty rate, a guest must be a member of the hotel’s loyalty program.
- To be eligible for a group rate, a guest must be traveling as part of a group holding a block of rooms as part of a negotiated group agreement.
Influencing Traveler Behavior
In addition to aligning offers with guest behavior and preferences, some rate plans are designed to incentivize or reward desired traveler behavior with discounts and concessions. For example, booking further ahead, staying longer or more frequently, or paying in advance. Travelers can choose the option that best fits their needs.
As an example, a traveler whose trip is definite may opt for an advanced purchase rate in order to receive a discount, whereas a traveler whose plans are still tentative may decide to pay a higher rate in order to have the flexibility to cancel without penalty. By offering both options, the hotel is more likely to capture both bookings.
How Do Rate Plans Work?
Once a rate plan is established, the hotel enters the details into the property management system (PMS), where it is assigned a rate code. The plan will include a set of tiered rates for each room type. Depending on how busy it is, the hotel may open or close the rate plan and adjust rates up and down – a process called dynamic pricing.
Rate plans are distributed via the hotel’s channel manager to designated booking channels, such as the hotel website, online travel agencies (OTAs), and the GDS. On these channels, travelers can view available rate plans and make bookings in real-time.
How Do Hotels Choose Rate Plans?
To determine which rate plans to offer, a hotel starts by identifying its key target markets. Target markets are grouped into segments based on shared behavior and characteristics.
Rather than try to appeal to all travelers, the hotel determines the segments that represent the best fit for the property and creates rate plans to appeal to them. For example, corporate travelers or guests who book directly.
What Are the Main Types of Hotel Rate Plans?
Some rate plans simply offer a discount off of standard room rates, whereas others include special services such as free breakfast or last-room availability. Below are the most common rate plans offered by hotels:
