Transient Benchmark Rates

Transient Benchmark Rates Constant headache and same repeated question how Hotel pricing is determined?

The pricing strategy adopted by most international hotel chains is based on rational rates that aim to provide fair value to customers while maximizing revenue.

These chains typically follow a systematic approach to setting prices, taking into account various factors such as customer demand, segmentation, hotel types, seasons, and regional differences.

While each hotel may add its own unique characteristics and pricing philosophy, there are certain common principles observed by these chains.

One key aspect of the pricing strategy is to target specific customer segments and offer them the best price/value relationship for their money.

This involves understanding the needs and preferences of different customer groups and tailoring pricing accordingly. By doing so, hotels can enhance customer loyalty and satisfaction.

Revenue maximization is another critical objective of the pricing strategy. Hotels consider pricing as one of the three key revenue management processes, along with inventory allocation and selling strategy.

By offering a range of rates to customers, hotels can optimize revenue beyond what would be possible with a single rate. This flexibility allows them to capture different customer segments and respond to market dynamics effectively.

Balancing long-term goals, such as building customer relationships and brand equity, with short-term revenue maximization is essential. Hotels recognize the importance of maintaining customer loyalty and brand reputation in the long run.

However, they also need to ensure that pricing strategies contribute to immediate revenue growth and profitability.

When establishing a pricing strategy, hotels engage in a comprehensive analysis that considers both internal and external factors. Internally, they evaluate financial goals, historical pricing data, and the overall pricing structure of the property.

Externally, they assess market supply and demand, competitor actions, and customer responses to pricing.

The pricing process involves defining a pricing structure, which determines the number of rates offered by the hotel and the conditions under which each rate is available.

This structure ensures that rates are appropriately positioned based on timing and circumstances. Additionally, hotels set the primary price point(s) for their property, which serve as reference prices for customers.

In terms of rate strategy, international hotel chains differentiate between transient/walk-in business and group business.

Transient business typically follows benchmark rates, while group rates are determined by a separate set of criteria and vary depending on the specific group.

Overall, the rational rate philosophy of international hotel chains emphasizes customer value, revenue optimization, and a strategic approach to pricing that considers both internal and external factors.

By implementing effective pricing strategies, these chains aim to achieve sustainable growth and maintain a competitive edge in the hospitality industry.

Rational pricing forms the cornerstone of Most International Hotel’s Chain pricing strategy.

To fully understand This is very pricing philosophy, one needs to understand the fundamentals of rational pricing.

Rational pricing involves:

• Market-positioned benchmark rates

that are based upon customers’ price sensitivity and ability to pay and that are positioned relative to the market.

• A rational reason for each rate.

• Room pool quoting,

which enables the Reservation Sales Agent to qualify the room pool before the rate is given and provide the best available rate for the room pool type.

• Seasonal pricing.

• Discounting

where length of stay patterns generate incremental revenue.

Benefits associated with International Hotel Chain rational pricing philosophy?

The benefits of a rational pricing strategy include:

• Increased RevPAR (Revenue per Available Room)

Driven by selling more room nights at non-discounted rates.

• Consistency and Price Integrity:

Differences in rates can be easily explained to guests, and the differences are relevant to your guests.  In addition, customers are always quoted the best price first, eliminating the need for haggling.

• Competitive differentiation and increased market share.
• Increased ability to adjust rates for varying demand times and be proactive with shifts in demand.
• Increased brand loyalty and pricing integrity in the eyes of the customer.

Transient Benchmark Rates strategy Who should be involved ?

The hotel’s General Manager or its Above-Property Revenue Management should lead the hotel’s pricing strategy process.  Participants should also include stakeholders representing the property executive committee, sales and revenue management. These may include:

• General Manager
• Assistant General Manager
• Leaders from these functional areas (local, cluster, and regional):
  • Sales
  • Revenue Management
  • Front Office
  • Finance

We will try to summarizing as much as we can without neglecting the MOST important details if it needed as we mentioned before there are Five-Step Process Setting your Hotel’s Transient Benchmark Rates as below

Transient Benchmark Rates Configure your room rates’ pricing settings.

This is a quick introduction how international Hotel Chain setting up and establishing room rate, this is exactly one-to-one as in Hotel Revenue Management Certificate by Cornell, and managing front Office Operations by American Hotel and Lodging Association (AHLA) later on we will explore together a real room rate establishing

Setting your Hotel’s Transient Benchmark Rates is a Five-Step Process:

• Step 1: Analyze the Competition
• Step 2: Assess Property Performance
• Step 3: Analyze Market Share
• Step 4: Project Future Demand and Supply
• Step 5: Summarize, Validate and Recommend

Remember that pricing should never be based on the analysis of one trend or the results of one tool.  Pricing should be considered from the perspective of:

• The Customer
• The Hotel

The Market and the Competition

Keep reading Next Post we will breakdown each step with examples