Hotel Revenue Management Glossary

Need to know what a hotel term means? Look it up in the Xotels Glossary. We explain definitions of terminology industry lingo from hotel revenue management, ecommerce, marketing and distribution.

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Term Definition
Margin

What is the meaning / definition of Margin in the hospitality industry?

Within revenue management in the hotel industry, Margin is often used to refer to the commission or fee OTA are making on your room rate. 

Market led pricing

What is the meaning / definition of Market Led Pricing in the hospitality industry?

The term Market Led Pricing refers to a pricing strategy, that orients itself upon the current market conditions, such being competition, consumer needs etc. Market led pricing is also known as a competition-based strategy, market-oriented pricing compares similar products being offered on the market. Then, the seller sets the price higher or lower than their competitors depending on how well their own product matches up.A market-based pricing strategy is also known as a competition-based strategy. In this pricing strategy, the company will evaluate the prices of similar products that are on the market. It is important to only consider those products that are similar to the product being offered. Depending on if the product has more or less features than the competition, the company sets the price higher or lower than the competitor pricing.

For example, if this product has an extra feature over the competitor’s product, the company could either decide to price it the same, therefore making it the better value or could price it slightly higher to account for the additional feature.

Many companies that launch a product into a specific market will price their products around prices of other products currently released. Although this kind of pricing may work for some companies, it isn't optimised and could be improved.

The term competition based pricing, also known as competitive pricing refers to the process of a company pricing its product/ service (in hotels rooms, food & beverages) according to the competitors.

Therefore, this rather happens with commodities or products that have less "status" differentiation. In the luxury hotel market for example, competition based pricing may actually hurt the hotel in the long-term as their clientele actually chooses for them due to their price being related to their exceptional offerings.

On the other hand, Budget hotels & hostels deal with price sensitive clientele whereby the price stands in the foreground. These establishments are able to increase demand easily by lowering their price as customers are "hunting" for bargains. Therefore, within highly competitive cities budget hotels are constantly orienting themselves on their competitors. This drives down prices, in favour of the consumer.

Competition based pricing comes with advantages and disadvantages for companies, following this pricing strategy.

Advantages:

It avoids price competing on prices lower than competitors

It is able to drive business in times where "some" business is better than "none"

Disadvantages:

May harm brand image

May lead to losses, due to not focussing on covering the overhead costs and increasing margins.

Price reduction will automatically increase demand if product is not up to par.

May get you distracted from other business tasks

It doesn't work in all markets

It's difficult for small businesses, as larger companies are more capable of reducing cost per customer.

Synonyms: Market based pricing, Competition based pricing, Competitive pricing
Markup

What is the meaning / definition of Markup in the hospitality industry?

Within revenue management in the hotel industry Markup is used to refer to the amount an OTA increases your net room rate, to set the sell rate.

Synonyms: mark-up, markup, mark up
MaxLos - Maximum Length of Stay

What is the meaning / definition of MaxLOS - Maximum Length of Stay in Hotels in the hospitality industry?

At a hotel, sometimes the number of nights an individual guest, couple or family can stay has to be limited, even if the hotel is intensely focused upon maximising revenue! This can apply to a group booking, too, particularly if arrival is planned for a certain date and where a group booking discount has been offered and availed of.

Synonyms: Maximum Length of Stay, maxlos
Merchant Model

What is the meaning / definition of OTA Merchant Model in the hospitality industry?

In hotel revenue management when talking about a Merchant Model, we are referring to the commercial model of an OTA (online travel agency). The main characteristic of a Merchant Model OTA is that the guest pays the OTA at the time of booking a room, and the OTA afterwards pays the hotel when the actual stay occurs.

Synonyms: Merchant Model, Merchant Rate, Merchant Rate Program
MICE - Meetings, Incentives, Conferences and Exhibitions

What is the meaning / definition of MICE in the hospitality industry?

The acronym MICE stands for Meetings, Incentives, Conferences and Exhibitions. It refers to a group of tourism that plans, books and organises conferences, seminars and other events. The industry is nowadays often also referred to as the meeting industry and event industry, to avoid the affiliation with rodents.

The MICE industry is one of the hospitality industries most profitable sectors, as MICE travellers typically spend large amount of their budget on-site. MICE groups use the hotels banquet facilities the most, making them highly important for many hotels. Some hotels are even geared towards this type of business, such as conference/ convention hotels. These bookings are usually planned a year or two in advance to give proper notice to the hotel and outlets.

Synonyms: Event industry, Meeting industry
MinLOS - Minimum Length of Stay

What is the meaning / definition of MinLOS - Minimum Length of Stay in Hotels in the hospitality industry?

At hotels, the number of nights a guest can stay is not necessarily always up to the paying customer, even if they have lots of money to spend on both rooms and in-house serves, such as food, beverages and recreational activities! Often, a hotel will seek to control the number of nights an individual, couple, family or group book in for, for various reasons.

Synonyms: MinLOS, Minimum Length of Stay
Modified American Plan

What is the meaning / definition of Modified American Plan or MAP in the hospitality industry?

The term Modified American Plan (MAP), refers to a booking option that includes the room night, a free breakfast and a second meal either lunch or more typically dinner. This option is offered for multiple reasons. One of which being that it allows hotels to offer more price conscious guests and families the ability to anticipate their costs.

Furthermore, if the hotel is not in the vicinity of other restaurants the Modified American Plan allows customers to ensure two meals a day at an attractive price not available in other locations. The free meals are validated at the hotel’s restaurant or sometimes at nearby establishment in partnership with the hotel.

Synonyms: MAP
Motel

What is the meaning / definition of Motel in the hospitality industry?

The term motel is used to describe a roadside hotel designed primarily for motorists. It specifically targets guests which are travelling by car. The hotels often allow customers to park directly outside of their rooms for convenience.

MPI - Market Penetration Index

What is the meaning / definition of MPI in the hospitality industry?

MPI stands for: Market Penetration Index

MPI is a calculation to measure your hotel´s occupancy compared to the average market occupancy levels (also referred to as market share).

Synonyms: Market Penetration Index, MPI

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