Establishing Room Rate

Establishing Room Rate is a combination of science and art.

Be Aware Establishing Room Rate For Business Hotel, Not The Same as for Establishing Room Rate for Resort, as we are moving along we will learn together

Establishing Room Rate

How the setup and tools are completely different.

Some think and very satisfy with the following procedure of calculating a room rate :

• Calculate the hotel’s desired profit by multiplying the desired rate of return (ROI) by the owner’s investment.
• Calculate pre-tax profits by dividing the desired profit by 1 minus the hotel’s tax rate.
• Calculate fixed charges and management fees.
• Calculate CPOR (Cost Per Occupied Room).
• Or Sniffing marketplace and shop call and figure out the average that might be matching the Owner’s desired profit .

All above Just First step of failure. Building Philosophy, and strategy need to appreciate your job, you have been hired cause they do not know. KNOW HOW.

Here underneath what MOST International chain doing to set up rate, in order to create value

Simply what comes after would be Based on first step you take forward as Revenue associate.

Just sequencers and IS A MUST be taken carefully.

Let’s See How International Hotel chain Build their own values.

Here are The Most accurate procedures of Establishing Room Rate

logical sequence of steps to Establish Room Rate Accurately. This will be corner stone that lead to create  Strategy

Establishing Room Rate – First Step Analyze the Competitors 

Property Visits with Checklist

• • We need to know and to Determine who ‘s your direct competitors?
  • If you are in heave busy marketplace you need extra sources You should Dive deep and heavily on your
  • STAR or other market share reporting competitive sets
  • You need to check market share reporting Competitors set.
  • Be sure to include only true competitors
    
    1. The best way to find your true (not “ego”) competitors is to:
    1. Check Guest’s Comments
    2. -Ask 30-50 customers at check-in, “If you didn’t stay here tonight, where would you stay?”
    3. Determine which hotels, if they took a pricing action, would prompt your team to evaluate your property’s price positioning.
    4. Determine to which non-Marriott hotels you “walk” your guests most often.

Establishing Room Rate / Second Step 

 – Competitors Evaluation Assessment

• • Once we have done with physically tour the property of each direct competitor.
  • You need to create tool to Evaluate and Value your direct competitor.
  • This tools gives you overall impressions by filling in the checklist.
  • Assessment tool allows you to enter your evaluation of each competitor’s overall quality in comparison to your property through the “eyes of the customer”.
  • Start with your evaluations first, independent of price considerations.
  • Features”. and service/amenity

IMPORTANT NOTES

• • The variables on which you will be scoring each competitor include
  • Location,
  • Level of Service,
  • Impact of Chain Image,
  • Overall Maintenance and Upkeep,
  • Guest Room Features.
  • For each variable, each competitor should be compared against the benchmark (your) property.
  • If you determine the competitor is of the same quality, they are graded with a 0. If the competitor ranks better or worse, they should be graded with a +3, +2, +1 or a -3, -2, -1, accordingly.
  • Add up the scores for each competitor and enter the totals in the far right hand column marked “Overall Rating”. (If you enter the scores directly in the worksheet, scores will automatically be added up for you.)
  • This score becomes the “Overall Value Assessment” for the competitor which you will use when completing the Rate/Value Matrix.

Establishing Room Rate-

Performance Appraisal / Third Step

Here is the combination of science and art.

Assess Property Performance involve

• • This include Rack Rate /Walk -In Rate (ADR) Efficiency
  • Review Benchmark Rate Sensitivity.
  • Reviewing Demand Chart  each period and shows year over year trends 
  • Determining Seasonality  ‘Peak, Shoulder, Low
  • Weekday and Weekend Room Nights, Mix, ADR.
  • Revenue market segment
  • Check and Review the Price Turndowns.
  •  You need to analyze Rate sensitivity in conjunction with occupancy.
  • As occupancy increases, a higher price turndown ratio is more acceptable.