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Old Apr 21, 2010 | 9:44 am
  #2  
Jalinth
 
Join Date: Mar 2007
Location: YVR
Programs: Aeroplan Former E
Posts: 1,022
Hotel rates run into the same problem as many other goods. If you consistently have "on sale" rates, everyone starts expecting them, meaning that in 6 months, you might only be able to sell your rooms at 60, 60, 60 rather than 100,100, 40. And 100, 100, 0 produces a better result.

One reason places put rooms on opaque site is to keep pricing power up. I could easily see hotel management being evaluated on both raw revenue and gross margin (revenue per room less direct expenses) as the owners want to capture the high gross margin during peak periods. Also, hotels have significant fixed costs (land, building, interest, property taxes, etc...) so your hotel rates need to be priced to cover these off in the long run. So your long run "break even" rates might be $80, even if $10 will cover off your variable costs (staffing, lights, etc...). If you have high and low seasons, then you might aim for $50/$60 in the low to cover a bit of the fixed costs but then this means that your high season rates will have to be even higher to break even.

Last edited by Jalinth; Apr 21, 2010 at 9:50 am
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