The accommodation industry is rising again after the pandemic. The lockdown has led to trends like workation and staycation that helps travelers to unwind and take a break from their hectic life. It has become rather tricky for hotel management to supply this growing demand with the most incredible amenities that can satisfy the needs of their customers. It is even difficult to manage the revenue which involves setting up a competitive price while still earning profits, and discount rates to attract customers and ultimately give value to their customers. We all know that hotel rates keep on fluctuating due to various reasons, therefore hotel owners must decide on hotel rack rates for different room types
Hotel rack rate definition
Hotel rack Rate, also known as published rate is the maximum rate for a particular room type in a particular hotel. It is the standard room rate for a specific season that the hotel charges to their guests. The hotel can further apply certain discounts on this rack rate like group booking discounts, off-season discounts, loyalty program discounts, or more. This price is usually set quite high so that the discount seems generous and attractive to the customer.
What influences hotel rack rates?
The hotel industry can become quite competitive both in terms of revenue and guest satisfaction. Sometimes, even a minute disadvantage can lead you to lose a customer. This crucial decision is often given to the hotel owner, hotel management, or revenue management team. They need to strategically decide on the hotel rack rate by considering various factors:
1. Seasonality
This is the most important factor and can highly influence the hotel price. In the peak season, the hotel management raises their price by more than 100%. It is a simple demand and supply concept. When the popularity of a particular destination increases, they drive a large number of tourists. With a limited number of hotels, the tourists are willing to pay higher prices for the same accommodation. For example, during summer, hotels near beaches receive a lot of booking requests, and they can charge them relatively higher.
2. Location
The location of the hotel at a desired place in the area can influence its price. Say, a hotel near the marketplace, tourist hotspots, or a major attraction tends to have a higher rate. The hotels at prime locations which are easy to locate provide convenience to the tourists. The rooms can have different charges within the hotel due to their location. A room with a sunset balcony view will have a higher price than a room with some other view. The tourists seek comfort during their trips and hence are indifferent to paying higher for good locations.
3. Ratings
It is important to maintain a good customer base in the hotel industry. Most tourists often look at the ratings before booking their accommodations. They tend to believe past guests’ opinions about the hotel. A 5-star rated hotel can charge significantly higher than a 3-star rated even with the same amenities and location. The hotel management must critically evaluate their staff’s behavior with their guests to provide world-class service to them to receive good customer feedback. This is the main USP of luxury branded hotels. Their main focus is the satisfaction of their guests. They maintain their reputation to attract more customers. This helps in building the brand image as well.
4. Amenities and services
The range and quality of the amenities and facilities in a hotel have a direct impact on the Hotel Rack Rate. Hotels equipped with swimming pools, gyms, kids’ playing areas, 24/7 room service options, in-bed breakfasts, and other key services tend to charge higher rates to the guests. Tourists seek all-at-one-place hotels while planning their trips. Providing basic and unique amenities differentiates you from your competitors and attracts a large number of tourists.
5. Room type and size
There are multiple types of rooms available in all hotels. They may vary in size or the amenities like an attached bathtub or private beach. A deluxe suite with special furnishings can be charged with extra amount than a standard room. Some hotels even provide attached rooms for families.
6. Competition
The hotel rates charged by the competition in the same market may also influence your rate. If they are giving the same amenities and services at low prices, You’ll need to lower your prices. Similarly, if they are charging higher rates, this might be due to some event or seminar which you might not be aware of. One needs to be well informed about the competition and the industry to not miss out on any opportunity.
Setting up a Hotel Rack Rate is a very crucial decision as the promotions, loyalty programs, and partnerships depend on them. If the Rack Rate is strategically placed, one can attract many guests with the help of effective sales strategies while maintaining a stable bottom line for the hotel.
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Strategies for placing hotel rack rates
1. Past: It’s always best to learn from your past to gain in the future. Critically analyze your historical data to derive useful insights and trends in customer behavior. This helps in tracking occupancy and stay patterns. Ask your customers for feedback to have a scope for improvement.
2. Present: Analyze your competitors closely. Instead of giving a complete package, provide a basic standard price and offer add-ons. This helps in attracting guests at lower prices and when you offer high-class services on add-ons, they are usually willing to pay for them to make their stay comfortable and convenient. Always prioritize your guests’ needs first to maintain excellent customer reviews.
3. Future: Research recent events, activities, and seminars happening in your locality. Such events attract many tourists and you have an opportunity to earn more. Group booking increases the demand for rooms and hoteliers have a room to charge more. Never miss out on an opportunity to market your hotel. Nowadays, various social media influencers can enhance your market presence. Hoteliers can invite them at discounted prices and develop a positive web presence for themselves.
Overall, hotel rack pricing is a complex process and hence must be strategically placed to attract tourists while still maintaining higher profits. Hoteliers must stay focused at all times and should never miss out on any opportunity to earn higher revenues.
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Hotel Rack Rate FAQs
What are hotel rack rates?
Hotel rack rates are standard or published rates charged by the hotels. It is the maximum rate and hoteliers provide various discounts on these fares to attract customers.
Why do hotels charge different rates for different rooms?
This can be due to several reasons. The major reason is to attract a dynamic audience to earn during different seasons. The location and amenities of the room may also affect the pricing.
What are the different types of discounts offered on hotel rack rates?
The hoteliers may provide loyalty program discounts, group booking discounts, or off-season discounts.
Who determines the hotel rack rates?
Hotel rack rates are generally determined by the property owner, hotel manager, or revenue management team of the hotel chain.
