Re-Opening Accommodation – Setting Rates

When reopening, the most common question hoteliers are pondering on is “what rate should I offer?”. With demand at its lowest in recent history, we are drawn to a natural response and drop our room rates to match the low demand. However, various studies and experts agree on one thing: Don’t rush to cut too quickly or too deeply, especially resist cutting your future rates.

Despite being hard advice to swallow, rate-cutting has long-term consequences. “Studies have shown that hotels that are the fastest to drop their rates and who drop their rates the deepest can be the last ones to recover when demand comes back,” said Dan Skodol, a hospitality and travel industry revenue management, pricing, and analytics expert. “One reason is that the pricing structure of many hotels is based on a ‘best available rate,’ meaning that all the other rates, such as for business, group, and so on, are tied to it,” Isaac said. “When demand comes back, the more lucrative customers like business travellers and event or wedding planners will be reticent to accept price hikes.”

Along with figuring out a plan for rates that we all will try and test, we also need to consider the bigger picture beyond rates. Some proven ways to attract customers back are:

  1. Value-adds: Encourage direct bookings online with exclusive value add’s (need 3 or 4) such as;
    • F&B offer, such a 2-4-1 or bonus drink with meal
    • bottle of wine on arrival,
    • bottled water,
    • free late check-out (esp. if holding rooms for cleaning)
    • Complimentary upgrades to your premium room types (subject to availability)
  2. Flexible Cancellation policies: Guests will remember their cancellation experience more so than the rate they paid. When circumstances permit, offer flexible policies to cancellations, such as offer hassle-free credits or complimentary amenities for future stays.
  3. Closed user discounts: If the above seems insufficient and discounting is an option you want to explore we suggest closed user discounts that do not dilute your public rates. Some examples of closed-user discounts are: mobile only deals, members rates to specific OTAs, secret flash sales (short term heavily discounted sales targeting need nights), etc.