Rate Plans For Hotels
Creating a Rate Plan is simple, implementing it is another story.
When it comes to revenue management, nothing is more powerful than the right rate plans. They provide valuable forecasting for your hotel’s finances and when used correctly create a fantastic hotel marketing strategy.
But in reality they can be devilishly tricky to manage.
With the right rate plans for your hotel you can maximise your revenue and provide a valuable boost to direct bookings. So let’s discuss the bare basics of rate plan creation, and share some tricks to manage them properly.
- Flexible Refundable Rate Plans
- Standard Promotional Rate Plans
- Geolocated Offer Plans
- Dynamic Discount Plans
Measure your ROI From Your Rate Plans
What are Hotel Rate Plans?
Hotel rate plans are the differing set of prices that guests see when they go to book rooms at your hotel on specific dates. These rate plans can be viewed either directly on your booking engine, or via a Metasearch Engine or OTA.
The numerous number of rate plans is broadly determined by two separate determinations:
- The requirements of the guest
- Whether it’s off-peak or on-peak season
Other factors can also come into play including:
- Refundable rate plans
- Non-refundable rate plans
- Flexible-refundable rate plans
- Geographical segmentation
And many, many more factors. But we will explore those further down below.
In a brief definition:
Rate Plans are conditioned prices of rooms and services at your hotel
Evergreen Rate Plans
Evergreen rate plans should be in place in every hotel at all times throughout the year. These ones should be maintained regardless of location or guest type.
BAR Plan
Your BAR is the single most important rate plan within your hotel. It stands for Best Available Rate and will support almost every revenue management decision that you make.
You can have multiple levels of BAR based around seasonal demand. If you’ve ever tried to book a hotel room in Edinburgh during the Fringe Festival, you’ll have noticed vast increases in BAR across every hotel.
If your hotel’s location is in a large metropolitan area with varying levels of demand throughout different times of year, then you should create several levels of BAR based around the demand that your hotel faces.
However, bear in mind that the more levels of BAR you have, the more complicated Rate Plan integration will be.
B&B Rate Plan
Few people expect to stay at a hotel without breakfast provided.
Speaking from experience, this is often a negative mark against staying at a particular hotel and can turn potential guests onto other hotels within your compset. It is especially important for international travellers and young families who require the certainty of a good breakfast.
If you already offer complimentary breakfast as part of your hotel’s brand identity, then be sure to add on an additional version of breakfast. You can name it “deluxe”, “*your hotel name* breakfast” or even “You’ll be so full you won’t eat until dinner”. No matter your choice, this rate plan is a must have for all year round.
Advance Purchase Rate Plans
Guests love saving money, hotels love guaranteed revenue.
The Advance Purchase rate plan works as an excellent hook to book early at your hotel, and lets you rest easy that your hotel is guaranteed income. Essentially you offer guests a set discount of the BAR price if they book in advance. This booking is considered non-refundable and non-cancellable.
For example, if a guest books at least 30 days in advance, they will receive 15% off the BAR price for their reservation. You can also play with the levels and add additional tier – if they book at least 14 days in advance then can receive 10% off.
Your revenue management is guaranteed, the guest has saved money. You can capitalise on that feeling of success and exceed your guest expectations.
Specialised Rate Plans
Specialised Hotel rate plans depend largely upon your individual circumstances and can be grossly affected by your most common guest type.
Flexible Refundable Rate Plans
While the Advance Purchase rate plan does offer both parties a good deal, the absoluteness of the non-refundable aspect can be improved upon. From a marketing standpoint, the flexible-refundable rate plan can actually improve your number of guest bookings.
With flexible-refundable rate plans you can offer the same principle as an advance purchase rate plan, but with a difference. For example, if the guest cancels 21 days in advance, they are refunded 65% of their money back, but if they cancel 7 days in advance, then they receive only 20%.
These are arbitrary numbers, and the actual cost calculations will vary from hotel to hotel, but they do offer an extra level of attraction to customers. On the downside, they are complex to coordinate, but can still offer hotels security by calculating guaranteed revenue and possible revenue.
Standard Promotional Rate Plans
These are blanket rate plans applicable to certain individuals belonging to specific group types.
Usually a standard promotional rate plan will offer guests a 10% discount when booked directly and withe ID card presented on arrival. Particular groups for these plans can involve AAA members, military personnel, government employees etc.
The rate of this plan will be determined entirely by the frequency of these particular groups, and based on the profitability of your BAR plan.
Geolocated Offer Plans
The potential for this kind of rate plan is enormous, yet it’s tricky to get right.
As masters of revenue management will know, you’ll need a dynamic pricing module that can target different locations with your custom-designed rate plan.
But why would you do this?
Let’s say for example that your idyllic, luxury getaway is frequently bombarded by British tourists twice a year. Hard work though it may be, your revenue spikes thanks to the massive amounts spent in the bar during this period.
Post-covid, many hotels have made use of this rate plan to attract back their regular, most profitable guests. With a bit of forward planning you can also curate this geolocated discount to encourage the same group of tourists to come slightly before and slightly after your usual rush in order to increase the length of maximum revenue.
Dynamic Discount Plans
Dynamic discount rate plans account for booking factors in order to attract certain types of guests or to fill empty rooms when bookings have gone quiet.
These dynamic discounts require massive amounts of forward-planning and monitoring of their revenue pay-off, however they do maintain a steady income to your hotel. An example of their potential complexity would include one, or multiple discounts from a list such as this:
- LoS promotion (Length of Stay)
- Booking discounts (for example – mobile booking)
- Last minute discounts (based off booking lead time)
Each of these discounts provides a varying percentage discount off the BAR plan.
LoS Promotions
Length of stay promotions are excellent for filling shoulder days and keeping those rooms filled up instead of empty.
If a week-long stay is coming to an end, but you have plenty of rooms spare for the following few days, a LoS promotion can help keep some of them filled. Hotels simply offer 10% off an extra two nights, or 15% off an extra three nights.
Discounted rooms keep earning you money, empty ones do not!
Booking Discounts & Last Minute Discounts
These two discounts are closely intertwined, despite being technically separate.
As last-minute bookings are usually done on-the-go, they are more frequently made via mobile devices. Hence why these two discount options are combined so very often.
To take advantage of on-the-go travellers you can offer a massive 15% discount for guests that book within 24 hours of their stay via their mobile devices. The discount may be large, but it’s still smaller than an OTA commission!
However, this last-minute discount also comes with a warning sign for your revenue management. If you are more frequently relying on these rate plans, you should reanalyse your advance yielding strategies.
How to Price Rate Plans
If we could define every factor that plays into your pricing strategy, we’d be here all day. However, what we can do is show you an excellent place to start and the primary steps you need to take to fix your rate plans.
Study Your Compset
Your compset isn’t just a group of rival hotels that you need to outmanage. They are a valuable source of information.
Scan their presences online, it only takes a minute or two to learn what their standard BAR plans are, and the types of other rate plans that they use. If something sticks out among their rate plans, then it is up to you to work out if it’s providing valuable revenue for them, and if you can manage something similar.
Hospitality Industry Report
We cannot get enough of data, and luckily the hospitality industry is a veritable goldmine of statistics, records and other such.
You can compare your compset’s rate plans to hospitality industry reports in order to ascertain if their revenue management strategies are justified. They may not be something to copy, but rather something to avoid!
Trends Report
As long as your hotel has a history, and not a brand new build, your trends report will be the last stage of designing your rate plan. Your occupancy history and room rates provide insightful data with which you can set your new BAR plans.
World News
It’s not enough to focus on your hotel when the outside world plays such a big role in tourism and travel.
World news, however trivial, contains large indicators of potential growth and trends among holidaymakers. Whether it’s a boost in ADR growth for a certain quarter, or a particular currency strength rising in a country with citizens that overwhelmingly flock to your area as tourists.
Once you’ve combined all this information to ascertain your ideal BAR, you can then base multiple rate plans off your BAR. Whether your calculations involve “BAR x 0.95” for 5% discounts, or “BAR+€10” for that extra breakfast add-on.
Mapping Your Rate Plans
While the rate plan calculations are tricky enough, you still have to map your optimised rates across multiple channels.
We’ll cover a full tutorial on this at a future date, however you have several primary steps that you have to take care of.
PMS
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- Your Property Management System (PMS) must contain all of your finalised room rates. Make sure to input them all accurately.
OTAs
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- You must enter each and every rate plan with the OTAs separately. Different OTAs all have different systems, so this is where things can become time-consuming and repetitive.
Mapping
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- Finally, once you’ve added everything to the extranet and the OTAs, you can map out your rate plans so that your Channel Manager can take control. From that moment, your channel manager can effortlessly synchronise bookings and prices with OTAs. We personally recommend Siteminder as the most professional and easy-to-use channel management software available!
Updating Rate Plans
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- If some rates aren’t providing a valuable return, you can modify and update, or remove them entirely. Both of these processes involve you editing the plans in your PMS and with each OTA that those rates appear on.
Measure your ROI From Your Rate Plans
Each rate plan that you create and install across your channels should have a unique rate code. With this unique code you can measure the ROI of your rate plans in two metrics: room nights & ADR.
To avoid becoming overwhelmed with rate plans, and potentially confusing customers, begin with a set of between 4-7 with some backups ready. Measure the room nights & ADR of each rate plan over two separate time periods and compare the results.
The best rate plans contribute over 10% of your total business. Anything less than that is one that needs to be taken down, redesigned and tried again at a more suitable time.
Our Take on Rate Plans
Rate plans are more than just about revenue management, they are also a vital part of your hotel marketing strategy. They should accurately support and increase your income, but they also drive guests into your rooms and therefore come under your hotel marketing strategy.
But that’s just a small part of a hotel marketing strategy, you have booking engines, SEO for Hotels and Brandjacking and many more that come into play when it comes to increasing hotel direct bookings.
Get yourself a free hotel marketing audit by filling out our online form. Simply drop us your contact details and we’ll perform an in-depth analysis of your hotel’s online presence and get back to you in a short one-on-one meeting at your convenience.
Or if you still have some questions about revenue management and rate plans, why not talk to one of our hotel specialists? Remember to check out our other hotel marketing blogs to make the most of your hotel’s potential!
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