Are you dynamically changing the price-gaps between your room types?

Are you dynamically changing the price-gaps between your room types?

How much more should a superior room cost than a standard room? How much cheaper should the economy room be? What about the family room?

The answer is, of course, that it depends. We know you were probably hoping for a more definitive answer here, but maybe we can ask the right questions to help you reach the best answers.

Every room you have will have a target audience. Single rooms are good for business travellers. Family rooms are good for families. 

For a business traveller, the gap in value between a Single and a Family room is not that large. A business traveller will not pay much more for a larger room.  Conversely, for families, there is a big advantage to the family room because a) you only need to buy one room and b) you can all stay together. For this reason, a family would be prepared to pay quite a large premium to have a family room. 

So how big should the gap be? A simple measure would be to look at how many people book that room? If you are consistently struggling to fill certain room types, or conversely at certain times they are always full; then you have probably got the gap wrong. Our first advice would be to look at the booking  patterns over the whole year and see what people are booking. 

For example, if half of your rooms are standard doubles, but 75% of customers are booking standard doubles, you may need to raise the price of these standard double rooms relative to the other rooms.

But let’s get back to the subject of Family rooms. The gap between a double and a family room should be quite high at times that the family room will be in demand – because you are providing a lot of extra value to the families. But note that it is only at certain times. There might be a lot of demand during the school holidays, where the price gap should be large. But on a winter weekday maybe it should be almost the same price as a Double room.

As another example, typically singles should be more expensive relative to double rooms on weekdays and cheaper on weekends – because the target market of business people prefer Singles and couples prefer Doubles.

You can use this knowledge when setting gaps. In RoomPriceGenie you can do this with the bulk adjustment calendar. You can also set maximum and minimum prices by room types that vary at different times.

In addition, in RoomPriceGenie we also offer a Room Type Yielding feature that automatically adjusts your prices relative to each other if you are getting a lot of bookings for one room type on that day. If you are a user, you can ask your customer service person about this and they will switch it on for you.

In summary:

  • Work out your target market for each room type and how much you think they would pay extra or want a discount.
  • Regularly review how many reservations you get for each room type and whether your gaps are correct
  • Set different gaps if demand changes at different times
  • Use individual room yielding to get even better results
 

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