The LA Times Travel Insider recently wrote this article on hotel pricing. It is very interesting to me that when airlines practice revenue management that travelers accept it, but when a hotel practices it everyone is trying to find ways around it and screams. Keep in mind that making money is the primary reason that anyone goes into business. In fact, if a company is public, they can get in trouble from stock holders by not maximizing the profit that they make. Revenue or yield management has been an industry standard since the early 1990's.
While the article does somewhat explain the truth of how hotels price, what you need to know is that it is not as confusing for most hotels. Hotel rooms like airline seats are very perishable, unlike cans of corn or boxes of diapers. Once the night has past, the hotel doesn't get the opportunity to resale those unoccupied room nights the next night that more customers may want to stay. Additionally, hotels just like airlines have business patterns. Tuesdays and Wednesdays are typically busier in business areas and Fridays and Saturdays are busier for vacation destinations. Hotels will typically offer you a discout to stay on their non-peak days, usually Thursday through Sunday. However, if you are staying on a Tuesday or Wednesday, you will pay top dollar because they have more demand than rooms over that time period.
As far as pricing goes, there are basically two different camps. Those hoteliers that believe in rational pricing - keeping the retail price consistent and opening and closing discount channels - and BAR (best available rate) pricing - pricing each day separately. Hotels that practice rational pricing (Marriott is the champion of this method) offer a weekday corporate rate and one or two weekend price points. This makes it easier for the customer to understand the value that they are paying for the service and know what they are going to get nearly ever time that they are going to visit your hotel. BAR pricing is a bit more confusing to a regular customer as the price on one Tuesday may be different from a price on another Tuesday (Hilton and Starwood Hotels tend to follow this philosophy).
I could write loads on this, but drop me a line if you would like to see more about this.
While the article does somewhat explain the truth of how hotels price, what you need to know is that it is not as confusing for most hotels. Hotel rooms like airline seats are very perishable, unlike cans of corn or boxes of diapers. Once the night has past, the hotel doesn't get the opportunity to resale those unoccupied room nights the next night that more customers may want to stay. Additionally, hotels just like airlines have business patterns. Tuesdays and Wednesdays are typically busier in business areas and Fridays and Saturdays are busier for vacation destinations. Hotels will typically offer you a discout to stay on their non-peak days, usually Thursday through Sunday. However, if you are staying on a Tuesday or Wednesday, you will pay top dollar because they have more demand than rooms over that time period.
As far as pricing goes, there are basically two different camps. Those hoteliers that believe in rational pricing - keeping the retail price consistent and opening and closing discount channels - and BAR (best available rate) pricing - pricing each day separately. Hotels that practice rational pricing (Marriott is the champion of this method) offer a weekday corporate rate and one or two weekend price points. This makes it easier for the customer to understand the value that they are paying for the service and know what they are going to get nearly ever time that they are going to visit your hotel. BAR pricing is a bit more confusing to a regular customer as the price on one Tuesday may be different from a price on another Tuesday (Hilton and Starwood Hotels tend to follow this philosophy).
I could write loads on this, but drop me a line if you would like to see more about this.
Hotels have rates down to a science: Here's the formula - Los Angeles Times: "'The core concept of yield management is to provide the right service to the right customer at the right time for the right price,' the report says."
UPDATE-
Check out more on this recent concern regarding hotel revenue management over on HotelChatter. I'd be interested in hearing your responses, please email me to share them if you post there.
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