Most pricing problems at independent properties fall into one of two categories: underpricing driven by occupancy anxiety, or overpricing driven by optimism that isn’t backed up by demand signals or reviews. Neither is “safe.” They just hurt your revenue in different ways.
NB: This is an article from Lighthouse
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- Underpricing feels protective when occupancy is soft, but compressing your average daily rate (ADR, what each room earns per night) often leaves your revenue per available room (RevPAR) worse off, even when you’re running at high occupancy
- Overpricing feels like confidence, but if your rates drift above what your local market and guest reviews can justify, bookings slow and OTAs will undercut your direct rate more aggressively
- With a smaller property, the math is unforgiving – a handful of wrong calls compounds quickly
The goal isn’t to find a permanently “safe” rate. It’s to set rates intentionally, with clear reasoning behind every decision.
What underpricing actually costs you
The biggest misconception about discounting is that it’s a low-risk move. Fill the room, take the revenue, move on. But the real cost of a discount becomes really clear once you factor in OTA commissions, the ADR decrease it creates across your booking window and the higher-paying guests it avoids.
Research shows that hotels pricing 15–25% below their local competitive set tend to gain occupancy but end up with lower RevPAR than comparable properties. You fill the rooms, you just don’t earn what those rooms were worth.
For boutique and experience-led properties, the brand damage compounds over time:
- Guests learn to wait for deals rather than booking at your standard rate, which erodes the perceived value that independent hotels rely on
- OTA dependence deepens, discounting to fill beds creates more bookings through OTAs rather than strengthening your direct channel
- Recovery is slow: once you’ve over-discounted, it can take six to twelve months to rebuild rate and retrain the market to expect your real pricing
Discounting still has its place, but only on genuinely distressed dates, and only when it’s tightly controlled. Non-refundable rates, minimum length-of-stay requirements or advance purchase conditions give you a safety net around the discount so it doesn’t bleed into the rest of your business.
What overpricing actually costs you
Overpricing has its own set of risks, and they’re often more visible to guests than to the hotelier setting the rate.
When your rate sits meaningfully above your competitive set without a clear reason for the difference, guests have better-priced alternatives – and on OTAs, those alternatives are right next to you on the same search results page. Secondary OTAs become more aggressive in undercutting independent properties that price well above the local market average, which erodes both your visibility and your conversion rate.
