Hotels slash rates all the time to fill rooms. The logic seems sound: lower prices, more bookings, right? Except what often happens is this: you fill your hotel with the wrong guests (the ones who complain the loudest, spend the least, and never come back) while the guests you do want quietly walk past you to a competitor that has the confidence to charge more.
NB: This is an article from Topline Revenue, one of our Expert Partners
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The truth is, being “too cheap” can alienate your ideal audience. Instead of winning loyalty, you end up training your market to see you as a bargain-bin option. Let’s break down why this happens, the hidden costs behind cheap pricing, and how to set rates that actually attract the right guests.
Pricing Sends a Message – What’s Yours Saying?
Price isn’t just a number; it’s a signal. Guests look at your rate and make instant assumptions about your quality, service, and positioning. If your rates are consistently at the bottom of the comp set, you’re not communicating “great value.” You’re broadcasting “budget.”
- A boutique property with $99 rates looks suspicious, not desirable.
- A branded upscale hotel selling under the Fairfield next door makes travelers wonder what’s wrong.
- A loyalty guest who normally spends $200 a night at your comp set may not even consider you if your rates scream “motel” instead of “hotel.”
Undervaluing your product confuses your market. The guests who would happily pay more assume you can’t deliver the quality they expect, while deal-hunters swarm because you look like the cheapest ticket in town.
Shaping the Wrong Guest Mix
Low rates don’t just fill rooms – they shape your guest mix. And not always for the better.
- Price-sensitive guests: They book because you’re the cheapest and leave you the moment someone else drops lower. Zero loyalty.
- Low-spend guests: They eat off-property, skip the upgrades, and avoid your bar tab. Your RevPAR suffers because ancillary spend dries up.
- High-maintenance guests: Ironically, the least profitable guests often demand the most. Discount hunters are more likely to nitpick, complain, and strain your operations.
Meanwhile, your ideal guests (the corporate travelers, the couples looking for a boutique weekend, the loyalty members who would pay a premium) bypass you entirely. Why? Because your rate told them you’re not operating in their lane.
