Revenue Management Glossary

Bid price

Definition

A bid price is the lowest rate that a property will accept on a room on a given night, which helps to balance demand, occupancy, and revenue. The bid price is not a static value; in fact, it can change according to a variety of factors, including current and forecasted demand, booking patterns, the booking window and the performance of the competition. Generally, if a hotel still has unsold rooms as the arrival date approaches, the bid price will decrease in an attempt to attract more bookings.

How to use it

By setting a bid price, hotels can control which segments of demand they are willing to accept at different times. For example, if a hotel knows that a large music event is taking place during a certain week, they might increase their bid prices on group bookings to drive more business from the leisure segment during this highly profitable time. Bid prices are also often applied to listings on the OTAs and other online distribution channels, making it easier to determine which channels and segments are profitable based on the rates they are able to secure.

Formula

N/A

Related Terms

ADR, RevPAR, Occupancy, Revenue Management, Revenue Management Strategy, Dynamic Pricing, RMS, Revenue Management System, Shadow Pricing, Group Displacement Cost, Group Displacement Model, Group Booking, Long-term contract
“Bid prices are useful for establishing effective revenue management strategies and maintaining profitability over the long-term. Using bid prices helps hoteliers make better, data-based decisions when evaluating potential group bookings or long-term contracts, ensuring that they are always accepting the booking that offers the best financial outcome.”

Hannah Lee

Hannah Lee
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