{"id":23146,"date":"2019-03-27T13:32:02","date_gmt":"2019-03-27T13:32:02","guid":{"rendered":"https:\/\/www.xotels.com\/uncategorized\/hotel-pricing-strategies-using-room-types-as-a-strategic-yield-tool"},"modified":"2025-11-18T14:58:27","modified_gmt":"2025-11-18T14:58:27","slug":"hotel-pricing-strategies-using-room-types-as-a-rate-yield-tool","status":"publish","type":"post","link":"https:\/\/www.xotels.com\/en\/revenue-management\/hotel-pricing-strategies-using-room-types-as-a-rate-yield-tool","title":{"rendered":"Hotel Pricing Strategies: Using Room Types as a Strategic Yield Tool"},"content":{"rendered":"

Hotel revenue management consulting<\/a> underscores the pivotal role that hotel rooms play in driving revenue and maximizing profitability. Revenue managersmust be capable of leveraging your hotel rooms effectively to empower you to segment and position your product strategically<\/strong>, setting yourself apart from competitors. When appropriately segmented<\/strong>, it enables the development of a robust revenue management strategy<\/strong> founded on a comprehensive demand-based yield or rate grid. This strategic approach ensures optimized pricing strategies<\/strong> tailored to varying market demands, ultimately enhancing overall revenue performance.<\/p>\n

Room Type Segmentation<\/h3>\n

In a previous article<\/a> on our blog we already discussed creating multiple room types to improve the commercial positioning of your hotel. Using your rooms to merchandise your hotel, will result in auto-upselling by guests, we concluded.<\/p>\n

But there is more to it. It allows you to build up a comprehensive rate grid<\/a> with a multitude of price points. Having a wide range of room types at our disposal, with a well defined product variation, allows us to reach different buyer (aka potential guest) budget level.<\/p>\n

Let\u2019s be realistic, not everyone has the same level of money available. And some people are simply looking for the best rate, while others are willing to pay a little extra to get a bit more. If you are questioning this just look at the cell phone or car industry. We almost all have a different type or model, all with a different price. There is a psychology behind it …<\/p>\n

\"Hotel<\/p>\n

Let them auto-upsell themselves \u2026 Choice will increase your ADR!<\/p>\n

This exercise, easily adds 5% to your top line room revenue \u2026 we have tried it again and again over the last decade, always with success …<\/p>\n

Fully Dynamic Pricing<\/h3>\n

In the early days of revenue management yield managers used to work with price BAR levels. However this practice in the age of dynamic pricing is a bit outdated. It limits you to work only within a predefined set of rates.<\/p>\n

But what if there is demand to sell your rooms can sell at a higher price? Or what if you need to go lower during distressed periods?<\/p>\n

We prefer with a fully flexible pricing matrix, which allows for any rate (and of course you can set a minimum if you feel this is necessary). Working with an open pricing grid, allows us to find the balance between supply and demand with any rate possible.<\/p>\n

Auto Yielding to Push ADR<\/h3>\n

The advantage of having multiple room types with different rate levels is that as the category sells out, your pricing jumps automatically to the next level. This replace the need for the old-fashioned rate levels. In essence your room-types become your rate levels. So if you get a wave of reservations, the system will do its work for you, and increase your average room rate<\/a>.<\/p>\n

Overbooking Room Types to Drive Occupancy<\/h3>\n

But you can also decide to use your room categories to capture extra occupancy in a low demand period. You can decide not close your basic room categories, and oversell them to capture extra volume. This way you don\u2019t have to adjust your pricing, and stay-through rates are not up and down for each day of the week.<\/p>\n

If you are using a revenue management system<\/a> you should account for this in your room type overbooking levels. Most of the PMS\u2019s we work with have a yield grid as well, where we can set the overbooking level for each room type day by day. I.e. setting a room category to 150% allows us to overbook it by 50% of the inventory for this particular room category.<\/p>\n<\/div>

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Dynamic Supplements<\/h3>\n

Room type supplements are another pricing tool that can help you drive the REVPAR<\/a> of your hotel. The difference in price between rooms should not be linear throughout the year. To maximize your revenue of your hotel, you need to maximize the revenue on all your room types.<\/p>\n

This means you need to sell them for the top price when you can, and sell as many as possible at the same time. Rate increments can be configured in either percentages (%) or by value (\u20ac\/$) supplements. Either could work for your hotel. And you can set them up based on the following parameters:<\/p>\n