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Revenue Management Woordenlijst

Schaduwprijs

Definition

Shadow prices are the minimum acceptable price at which a hotel should sell a room in order to ensure the highest RevPAR, factoring in the opportunity cost of not selling that room to a potentially higher-paying guest. In other words, the shadow price helps hotels decide whether to accept a booking at a given rate or hold out for a more profitable reservation. Shadow prices are also known as group displacement costs or bid prices. Like bid prices, the shadow price is not a static number, as it changes based on real-time market conditions, booking pace and the competitive landscape; as such, an automated pricing tool is the best way to effectively set your shadow price, no matter how the market changes.

How to use it

When evaluating whether a group bookings or long-term contract is financially beneficial, hotels should use shadow prices to evaluate the impact of displacing transient guests who might pay more for the same room. Like with the bid price, if a potential booking offers a rate below the shadow price, the hotel may reject the booking as it makes more financial sense to sell the room to a transient guest.

Formula

RevPAR = Average income per night ÷ Total number of rooms
OF
RevPAR = Average Daily Rate (ADR) x Occupancy Rate

Related Terms

ADR, RevPAR, Occupancy, Revenue Management, Revenue Management Strategy, Dynamic Pricing, RMS, Revenue Management System, Bid Pricing, Group Displacement Cost, Group Displacement Model, Group Booking, Long-term contract
“Shadow prices are useful for establishing effective revenue management strategies and maintaining profitability over the long-term. Using shadow 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.”

José Miranda

Jose Miranda