Hotel rates types: discover the best pricing for your hotel

The basics: Bottom Rate and Rack Rate

Before referring to all the types of hotel rates you could create, it is necessary to introduce a basic concept essential to establish the price range within which we can move and create the various types of rates to be offered to our customers, we talk about Bottom and Rack rates.

The first term refers to a minimum rate, a base price below which we will never fall, even in low season, as selling our rooms at a lower price could represent a mere economic loss. The bottom rate is then determined by internal dynamics, on the basis of the costs to be covered and the profit margin.

On the other hand, the Rack Rate is set by the relevant authorities and represents the ceiling beyond which we cannot push the sale price of our rooms without incurring sanctions that would in any case force us to reset our sale price.

Once the minimum and the maximum limits have been identified, we can then decide how to set hotel rates and what to offer our customers.

The main hotel rates

We have decided to divide the different types of hotel rates taking into account three main parameters: target audience, treatment and flexibility.

The target audience

According to who is interfacing with the accommodation to book, we can divide the rates into two macro categories:

1. B2C – Business to Customer
   The end consumer is the one who searches for rates and completes the connection process for himself to any of the direct booking sites (Booking Engine) or through the OTAs (Booking.com, Airbnb, and the other sites for renting vacation rental homes and hotels)
2. B2B – Business to Business
   In this case, there is a third person between the accommodation and the end consumer who, like a bridge, provides a connection, as an intermediary in the booking process. Classic examples of intermediaries are travel agencies or tour operators, with whom specific contracts are concluded for the sale of the rates.

The rate that reaches the end consumer is often increased by the tour operators by a value, called a mark-up, which corresponds to their percentage of profit.

The treatment

In this paragraph, instead, we outline the various types of rates according to the treatment and the services included in the rate. Namely:

• Room Only
  The cost of the room only includes the overnight stay in the chosen room/apartment.
• B&B
  The breakfast is included.
• HB – Half board
  It is the rate that in addition to the breakfast, also includes another meal choosing between lunch and dinner.
• FB – Full Board
  The rate including breakfast and both main meals.
• All Inclusive
  This rate is usually found in tourist resorts where, in addition to the main meals and the breakfast, drinks and snacks are included.

The flexibility

In this paragraph, we describe instead the various kind of hotel rates on the basis of the treatment and the services included in the rate. Namely:

1. Not Ref – Non Refundable
   These are the hotel rates that cost less than the standard rate (usually about 10 per cent off) exactly because they represent rates that cannot be modified nor cancelled. Reservations of NR rates, in fact, are collected immediately and no refund is paid to the end consumer in case of cancellation.
2. FLEX
   The exact opposite of the type of rate just described: flexible hotel rates, as the name suggests, guarantee the guest freedom to change and to cancel the reservation, according to cancellation policies established by the accommodation, which are far less restrictive than those related to the Standard rate.

A more complex type of hotel pricing: the package deals

Package deals are special hotel rates with various features that are an advantage for the guest and are often available for limited times of the year.

A package deal is so-called because in the selling price are included specific services that make the offer in question special, usually enabling the guest to obtain a complete experience at a very advantageous rate, therefore cheaper than the cost that the standard rate would be with the addition of single extras, otherwise the guest can also take advantage of services that are not available during other periods of the year.

We can therefore define package prices as special hotel rates, as they can include the features we have mentioned in the previous paragraphs – Not Refundable, breakfast included, HB – together with other ancillary services that complement and enhance the customer’s experience – a sightseeing tour, an aperitif with a SPA path, etc.

What Octorate offers you

For a careful analysis of your property’s history with the aim of setting rates that suit the type of room and the time of the year, useOctoRMS: Octorate’s Revenue Management System can suggest the best hotel sale rates starting from the minimum rate that you set up!

To top it off, a dashboard of advanced statistics to monitor your sales strategy and increase your revenue! (see the article about the RevPAR).

In addition, Octorate allows you to set up a tailor-made configuration so that you can offer your guests a wide range of opportunities!
With the Rate Plans function, you can set countless rates according to their degree of flexibility and the type of treatment, create package deals with included extras with which you can use useful  upselling e cross-selling strategies and a price correction that will automatically vary the sale cost of the type of room associated.

Sell your hotel rates without commission charges thanks to the Booking Engine, your fully customizable booking engine compatible with any type of website.

Would you like to find out more? Book a free demo!

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