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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Pricing Strategy

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

Price is the value that is put to a product or service and is the result of a complex set of calculations, research and understanding and risk taking ability. A pricing strategy takes into account segments, ability to pay, market conditions, competitor actions, trade margins and input costs, amongst others. It is targeted at the defined customers and against competitors. Having a Pricing Strategy is a standard practice within most Revenue Management strategies.

There are several pricing strategies:

Premium pricing:

Premium Pricing is a price strategy aimed at setting a high price for a premium product. Such premium pricing is done in order to highlight the higher value, greater rarity and status affiliated to a premium product.

Examples: Luxury Handbags, Clothing, Cars and Watches

Penetration pricing:

Penetration pricing, is a pricing strategy aimed to gain market share quickly, often for a new product in need of promotion. It is widely understood that although the price might be low in the beginning it is widely understood that with time the price will rise for the product as soon as market share objectives are achieved.

Examples: Phone Contracts, Television, Internet

Economy pricing: Is a pricing strategy aimed for the masses, with very low marketing and advertising costs. This is generally done for products that generally aren't in need of great promotion.

Examples: Generic goods competing with name brand products at supermarkets.

Skimming strategy: Price Skimming, is a pricing strategy which charges high prices for a product or service in the beginning. Thereby targeting early adopters which are interested in paying a maximum price for being the first to access a product. This is often done if a product is the first of its kind, as it allows to charge high prices until competitors arrive in the market - which thereafter will lower the prices for all market participants.

Example: iPhone releases, the First Flat Screen TVs and many other electronics and new technologies.

These are the four basic strategies, variations of which are used in the industry.

Privat Rate

What is the meaning / definition of Private Rate in the hospitality industry?

A type of discount hotel rate that is negotiated with a travel agency and vendors and then sold to the public. The rate is discounted to allow the vendors and travel agents to generate a profit from the selling of a hotel room.

These discount rates allow hotels to fill rooms which they cannot sell. This allows them to recuperate some cost that they would have lost if they had not sold the room. Online travel agencies in the past have been known to offer hotel rooms less than the hotel’s selling price due to this tactic. An example of such platforms is Kayak.

Private Label Chain Code

What is the meaning / definition of Private Label Chain Code, in the hospitality industry?

Private Label Chain Code is a 2-letter code, which is used mainly by the GDS to identify chain operated hotels. Similar to a 3-letter code used in the aviation to identify airports, many hotel chains and hotel groups have their own Private Label Chain Code.

PROFPAR

What is the definition of PROFPAR in the hospitality industry?

PROFPAR stands for: Profit Per Available Room

PROFPAR is a KPI calculation of profit earnings for each room available in the hotel. PROFPAR is based on operating profit, which accounts for movements in both revenues and expenses.

Synonyms: Profit per available room, profpar
Property

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

Property is such a general term, isn't it? Domestic property, commercial property, property for sale, rented property, lost property!

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