Establishing Room Rates

Braidwood Hospitality Management work with our clients, small and medium sized hotels & resorts, to source and analyse the data collected from a hotel’s identified competitive set, removing the guesswork and assisting each Owner/Operator with establishing room rates with confidence. In follow up, we routinely ‘shop’ our client’s competitive sets to ensure our clients remain competitively priced.

Everything starts with Rack Rate! Establishing seasonally adjusted competitive room rates along with relevant discounts applicable to each transient & group market segment is critical to growing market share, revenue, average rate and RevPar.

Two of the most common approaches to pricing your hotel rooms are as follows. In both examples seasonal pricing will also play a factor.

Market Based Pricing – The assumption behind this approach is that a hotel can only charge what the market will bear; therefore, price is dictated by the competition and is an approach that allows the local market to determine the rate. This approach fails to take into account what a determined sales effort can accomplish.

Top-Down Pricing – This approach is often used by hotels entering a new market or trying to identify a gap which is unfilled and still requires an element of cost-based pricing in order to ensure that the prices being charged are realistic and will result in an overall return on investment.

ADR-REVPAR

Braidwood Hospitality Management helps our clients position their hotel at the right rates, targeted at the right group of customers and backed up with a team of qualified hospitality sales managers able to drive occupancy in the slow periods at competitive rates; maximizing rate and revenue in periods of high-demand using Yield Management techniques resulting in increased top-line revenue, improved bottom line and increased profits.

Investors and others determine a hotel’s success and competitiveness using certain market penetration factors. Two of these factors are Average Daily Rate (ADR) and Revenue per Available Room (RevPar). Braidwood Hospitality Management helps our clients, small & medium sized hotels & resorts, establish a rate structure and a Yield Management Strategy designed to grow fair market share, ADR, RevPar and revenue.

Average Daily Rate (ADR)
Average rate is a bi-product of the hotels total daily room revenue divided by the total number of rooms sold that day. Total room revenue is a product of the rooms sold, times the rate established for each of the hotels market segments. It is important therefore, that room rates are positioned competitively to attract customers from all identified market segments. The right blend or market mix will produce the desired ADR.

Revenue Per Available Room (RevPar)
RevPar is one of the most important measurements in the hotel Industry today. RevPar is an acronym that stands for Revenue per Available Room. This is different from average rate in that it is a measure that divides revenue by the number of available rooms, not the number of occupied rooms. It is a measure of how well the hotel has been able to fill rooms off season, when demand is low even if rates are low, and how well they fill the rooms and maximize the rate in high season, when there is high demand for hotel rooms. Who looks at RevPar? A lot of people do, including hotel owners, lending institutions, and management companies.

RevPar example: A hotel with 70 rooms has 25,550 available rooms to sell in a year.  If that same hotel achieved an annual occupancy of 75-percent it would have sold 19,163 rooms that year. Assuming in a given year that this hotel has room revenue of $1,300,000 its average rate would be $67.84 and the hotel’s RevPar would be $50.88. RevPar is a better measurement because it shows how well the hotel was able to fill rooms (regardless of price) in low-demand periods, and how well they did filling rooms at the highest rate possible when demand is high.

Braidwood Hospitality Management helps our clients position their hotel at the right rates, targeted at the right group of customers and backed up with a team of qualified hospitality sales managers able to drive occupancy in the slow periods at competitive rates; maximizing rate and revenue in periods of high- demand using Yield Management techniques resulting in increased top-line revenue, improved bottom line and increased profits.

Business & Leisure Packaging

Braidwood Hospitality Management provides the expertise to small & medium sized hotels & resorts in the design, pricing, and production of the necessary hotel collateral, advertising or direct mail pieces required to reach their target markets. We include this important element for clients who contact with us for hospitality sales, marketing and creative & media solutions.

The opportunity to create a package for any hotel is limited only by ones imagination. All hotels have the opportunity of creating business and leisure packages targeted at clients with special interests. Business and leisure Packages that include Whale Watching to Stopovers, from Shopping to Honeymoons, from Fishing to Fly-Drive offer potential for increased market share and revenue. These are usually built around a room and include certain basic elements with optional offers available such as entry to an attraction of other added benefits allowing the end user to customize their experience.

Yield Management

Braidwood Hospitality Management assists small and medium sized hotels & resorts with yield management training and assist with the development of a comprehensive yield management strategy.

Yield management is simply the process of frequently adjusting the price of a product in response to various market factors, such as demand or competition. Airlines first introduced and understood the value of this application offering deep discounts with advanced bookings; increasing price or closing discounts as the individual flights sold out. It is not uncommon for a business traveller, who has purchased a last minute ticket, to be paying hundreds of dollars more that the passenger in the next seat who purchased a ticket months earlier!

It is a process of rate and inventory management that acts as a filter influenced by demand and competitive factors. When demand is strong, a hotel would filter or close discounted inventory and rates, conversely when demand is weak hotels will open discounted inventory and rates. It is an important tool used by management to drive rate and revenue in periods of high demand and occupancy and revenue in periods of low demand.