bid price rate parity revenue

Hotels around the world are in hot pursuit of efficient revenue management methods that not only price their properties successfully, but also help manage their room availability, accept their most valuable demand across all arrival dates and maximize their revenue on shoulder nights.

And for hotels committed to achieving their maximum revenue potential, an automated revenue management solution can fulfill their wish list with the powerful capabilities of the bid price.

Developed by Dr. Ravi Mehrotra, co-founder and president of IDeaS, bid price helps hotels of any size optimize their revenue potential and has dramatically revolutionized the hotel landscape.

Because of his endless dedication to developing bid price, innovative revenue solutions and pioneering the revenue management discipline, Dr. Mehrotra was recently honored with the Vanguard Award for Lifetime Achievement in Revenue Management by The Hospitality Sales and Marketing Association International (HSMAI).

To help break down the inception of bid price and its impact on the hotel industry, Dr. Ravi recently sat down to answer some questions about the approach that has transformed our industry.

EW: What led you to develop the bid price approach in the hospitality industry?

RM: The bid price approach was initially developed to help hotels determine which business to accept during high occupancy time periods when their market demand exceeds their hotel’s capacity.

It allows hotels to effectively manage their inventory and, with its close relationship to price elasticity and demand, allows hotels to establish the optimal price for their unqualified business and flexible qualified business. While bid price may be known by many aliases (such as Marginal Revenue, Opportunity Cost or hurdle), we commonly refer to bid price as the Last Room Value (LRV) in our revenue solutions.

EW: An LRV isn’t actually a rate or price. Can you explain what an LRV truly is?

RM: An LRV or hurdle, as it can be commonly referred to in different selling systems, is a value assigned to a particular day that helps hotels optimize the available demand in the market.

This value is not the price you should sell your rooms for, but rather the minimum value from your hotel’s established rate plans that you can expect to obtain from the available demand in the market.

This hurdle value helps determine the optimal business to accept and maximizes shoulder night performance so longer length of stays are not turned away over sellout nights.

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