How To Price Your Room Rates

How To Price Your Room Rates

Room rates can be one of the most difficult things to get right when you’re running a hotel, guesthouse or holiday cottage. Set the rates too high and you risk pricing yourself out of the competition. On the other hand, low rates could attract the wrong customers.

There are many different variables to consider. Here is a list of my recommendations.

  • Base your room rates on other similar properties around you.
  • Work out how much money it costs for you to let a room or cottage and work out your desired profit margin.
  • Use past owners and then increase it by insignificant amounts each year.
  • Ask your guests what they think you should be charging.
  • Ask an expert.

I reached out to the Managing Director at SiteMinder, Dai Williams, and asked what advice they would pass on.

“One of the most pressing issues today’s hoteliers face is trying to keep up with their competition in a highly dynamic marketplace, whilst also staying on top of their room pricing strategy. Online bookings are growing at such an exponential rate, especially here in Europe, that hotels now need technology that works just as fast as a consumer makes a booking.

“When pricing rooms, it’s important hoteliers optimise their rates. A key principle here is to understand how competitors are pricing their product and use the market to their advantage rather than be dictated by it.

How To Price Your Room Rates

“These strategies not only mean hoteliers are making informed, up to date decisions, they also mean hoteliers can be both proactive and flexible enough to react when market dynamics change.”

Dai has touched on a very valid point. For those who don’t know, Siteminder has a product called Prophet that helps hospitality owners price their rooms. It does this by taking into account what other properties are charging in their local area.

When pricing, the first thing I would consider is how much money it costs you to let out that room for one night. Take into account all of the following:

  • Heating
  • Electricity
  • Washing
  • Staff costs
  • Breakfast costs (if included in the price)
  • VAT (if you pay it)
  • Commission costs to the OTAs
  • Any other costs

Add it all together to work out the total cost. Then, work out how much profit you need to make per room to hit your yearly goals.

I would start from the rate that you want to be making at a peak time in the year, for example, during the tourist season in August. Use that as a base rate. That way, you can reduce your rate during the off-season or when you have a lot of availability and want to offer a deal.

How To Price Your Room Rates

Once you have your ideal room rates, find out what similar properties in the area are charging and adjust accordingly.

If you don’t want to lower your room rates, then add something to your property that makes you stand out. A selling point, such as brand new TVs or USB ports for charging of smartphones, can make all the difference between a guest staying with you and a guest staying at your competition.

If you find yourselves stuck on a pricing structure or have frozen your prices for years, then you need to act now.

I would love to know what methods you’re currently using to price your rooms or cottages. Comment below and let me know!

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