The PACKAGE Rate

 

We will build a Flexible Room Rate packages will be easy :

• Calculate the savings to the customer
• Allocate package revenue to departments and amenities
• Provide a record of all packages offered
• Test potential package offers

4 steps

Step 1 define season names or date ranges for up to five pricing seasons.

Step 2 - Enter Room/View types at your property. Then, enter both benchmark rates and cost per occupied room, by season. 

Step 3 - Work with other departments to create a list of all property-related components as well as their retail price and cost to the property by season. Both retail price and cost to property should exclude any gratuity, as that will be calculated separately.

 - A property-related component is defined as a non-room package component that can be discounted. In other words, this component's generated revenue is allocated back to a department managed by the property.

 - For those components that are service related, and cost cannot easily be calculated, enter the lowest price that would be acceptable for the component. This is your discount threshold.

Step 4 - Work with other departments to create a list all outside vendor components along with the retail price and cost to the property by season.

 - An outside vendor component is a non-room package component that cannot be discounted; its revenue is a fixed amount allocated to the vendor and is not managed by the property.

 

Second Step

Once the Inputs tab is complete, the rooms and components entered can be combined to create packacges. This spreadsheet will automatically calculate:

1) Package Price

2) Cost to Customer 

3) Finance Allocations

4) Profit or Loss From Each Room and Component

In the Package Template, follow the instructions in blue to create a package. Make sure that all cells that are highlighted in yellow have been filled in.

Instuctions for Completing Package Template:

Step 1 - Enter package name, rate program, select room/view types that this package will apply to, and enter the number of nights (paid and comp) of the package.

Step 2 - Enter the percent discount off of retail that you would like to use each season to price the package.  There are two discounts entered, the first for the room and the second for property-related components. The first discount will be applied seasonally to the benchmark rate entered on the Inputs sheet for each room/view type selected in Step 1. The second discount will be applied seasonally to all property-related components selected in Step 3 (below). 

Step 3 - If the package being created should not be offered during a season, use the corresponding hide season button.

Step 4 -  Select the property-related components and the outside vendor components included in the package and determine if each component is Per Night (PN) or Per Stay (PS).  If it is Per Night, the guests will receive the component during each day of their stay; if it is Per Stay, they will receive it only once during their stay. All components selected will have the same percent discount entered in Step 2 applied seasonally to the retail price that was entered on the Inputs tab. If a component requires gratuity, the gratuity percent should be entered in the yellow column to the right of the component price. No discount is applied to the gratuity.

Step 5 - Select the property-related components and the outside vendor components included in the package and determine if each component is Per Night (PN) or Per Stay (PS).  If it is Per Night, the guests will receive the component during each day of their stay; if it is Per Stay, they will receive it only once during their stay. No discount is applied to these components, and any gratuity should be included in the full retail price and cost entered on the Inputs tab.

Step 6 - Review the calculated recommended package rate which is based on selections in steps 1-5. Now, choose an option for calculating the actual package rate. The first option is to accept the recommended rate. The second option is to manually type in your own rates based on the recommendations generated by the tool, such as rounding the recommended rate to the nearest whole number. The third option allows you to set a daily premium amount increase over daily room rate. You can use the recommended room rate premium for guidance in setting this number. This option should used if you are building the package in MARSHA to mirror off of room rate.

Step 7 - Review the pricing for the pacakge along with the revenue distribution and profit and loss sections to determine if the pricing is financially acceptable while showing a value to the guest.  Also, compare the pricing recommendations to pricing being offered for similar packages by your competitors.

Step 8 - Once you have completely entered a package and are satisfied with its expected profit, click on the "Save Package" button. This will copy the package to a new tab, which will carry the same name that was entered in Step 1.

Step 9 - Return to the Template tab and click on the Reset Template button in order to create a new package. Please note, the drop down boxes must be manually reset.

Step 10 - Build the packages in PMS. Please note, the calculations and drop down boxes will continue to work within each saved package tab. This allows the user flexibility in changing a package's price, season, components, discounts, etc... throughtout the life of the package.

 

The Fun Part is Daily Revenue Distribution Methodology: 

Room Revenue Distribution: 

First, the tool takes the full retail package rate and backs out all hard costs (outside vendor components and gratuity). Then, the total retail room rate is divided by the retail package rate without hard costs. This percentage is applied to the actual package rate, with its hard costs backed out. This dollar amount is then divided by the number of paid nights of the package.

 

Room Profitability:

This number is calculated as the difference between the daily revenue distribution and the cost per occupied room entered on the inputs screen.

Comp Room Note:

If a comp room is part of the package, you will see two more rows on the Package Profitability that shows 1) The pro-rated room rate, including comp rooms. This takes the cost per occupied room for any comp room(s) and spreads it to the daily room profitability. and 2) Total Package Profitability with Comp Room Cost, which shows total package daily profitability with the comp room's cost taken into account.

Property Component Distribution:

This works similarly to the Room Revenue Distribution in that the retail property component price is used as a percent of total retail package rate (excluding hard costs). This same percentage is applied to the actual package rate to come up with the revenue distribution of a property component. It is divided by paid nights for the daily distribution.

 Property Component Profitability:

This number is calculated as the difference between the daily revenue distribution of the component and the corresponding component cost entered on the inputs screen.*

Comp Room Note:

If a comp room is part of the package, and there are Per Night property components, then the cost of these components on the comp night is distributed across all paid days to allow for the component cost to be covered.

Outside Vendor Components:

 These are hard costs where any Revenue Distribution is based on the cost of the component to the property.

 

View detailed dataset analysis on my GitHub portfolio for booking patterns

Check out my detailed hotel data analytics projects on GitHub Portfolio

        📊 Forecast Accuracy: Forecast vs Actual

       📈 Segment Trends: Revenue Mix by Channel

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Total Hotel Pricing Philosophy

 

Pricing Strategy in Hotel Revenue Management

Introduction: Defining the "Right Price"

In hotel revenue management, pricing is a dynamic process that focuses on selling the right product to the right customer at the right time and price. However, identifying the "right price" requires a strategic approach that considers various factors like market conditions, customer segments, historical data, and competitive positioning. The goal is to maximize revenue while building long-term customer relationships through fair pricing practices.

A well-developed pricing strategy:

• Maximizes both short- and long-term revenue.
• Encourages customer loyalty by offering value for money.
• Aligns financial goals with customer expectations and brand identity

Core Elements of a Hotel Pricing Strategy

1. Rational Pricing Philosophy

Rational pricing is based on customer segmentation according to needs, behaviors, and willingness to pay. It involves:

• Setting variable market-based prices to maximize revenue and profit.
• Providing customers with rates that reflect value, are competitive, and meet their expectations.
• Ensuring pricing consistency across all booking channels (central reservations, website, or front desk).

Key Aspects:

• Benchmark rates: Position standard rates (corporate, transient, group, or leisure) relative to the market.
• Discounts: Offered only to eligible customers or during low-demand periods.
• Single Image Inventory: Prices remain consistent across channels, ensuring transparency and fostering trust.

Example: A loyal guest should receive consistent treatment and the same rate whether they book directly with the hotel or through a travel agent

2. Mix of Business

This component determines the optimal combination of customer segments to generate maximum revenue and profit while avoiding displacement between segments.

Steps for Optimization:

• Analyze historical and future demand trends.
• Balance group and transient bookings, ensuring group discounts do not cannibalize higher-rate transient demand.

Identify profitable business segments that provide a strong base during low-demand periods.

3. Seasonal Trends in Pricing

Seasonality significantly affects hotel demand, and pricing strategies must reflect these fluctuations to remain competitive.

Key Considerations:

• Dynamic pricing: Adjust rates proactively based on seasonal demand changes.
• Segment-specific pricing: Tailor rates by segment and sub-segment (e.g., transient vs. group customers).
• Continuously evaluate market conditions and competitor pricing to stay relevant.

Example: A ski resort may offer higher rates in winter, its peak season, and discounted rates during off-peak months.

 

4. Customer Relationships: Balancing Short- and Long-Term Strategies

Hotels must balance short-term revenue maximization with long-term customer loyalty.

• Short-term focus: Maximize revenue during periods of high demand using dynamic pricing.
• Long-term focus: Foster loyalty with consistent pricing strategies and discounts for frequent customers or large-volume bookings.

Examples:

• Offering discounts to repeat guests, even during high-demand periods, to encourage future stays.
• Maintaining fair rates for long-term contracts to build trust with corporate clients.

5. Brand Philosophies and Guidelines

A hotel’s brand plays a critical role in defining its pricing strategy. Brands convey value, consistency, and quality that customers expect.

• Align pricing strategies with brand standards to build trust and loyalty.
• Prevent market share cannibalization by maintaining distinct price/value propositions for different hotel brands within the same group.

Alignment of Pricing Structures Within and Across Segments

The relationship between rates must be logical within each segment (e.g., transient or group) and across different segments to avoid confusion. This ensures:

• Premium rooms are not priced lower than standard ones.
• Group pricing aligns with function space and catering fees to maintain consistency.

Example: A mid-tier property should not price its rooms at luxury-tier rates while offering catering services at budget-tier prices.

Pricing Tools for Effective Revenue Management

1. Benchmark Rate Evaluator Tool: Helps set market-positioned benchmark rates.
2. Group Pricing Process & Guidelines: Define appropriate group rates based on demand.
3. Extended Stay Pricing Tools: Optimize long-term booking strategies using tiered pricing.
4. Function Space Reports: Manage event space rates and restrictions.
5. Market Share Reports: Assess competitiveness and adjust prices accordingly.

Practical Guidelines for Setting Benchmark Rates

• Adjust rates based on customer price sensitivity and ability to pay.
• Set separate benchmarks for weekday vs. weekend segments if relevant.
• Maintain a reasonable spread between rates to avoid confusing customers.
• Day-of-week pricing practices are generally discouraged unless business conditions suggest otherwise.
• Ensure net rates are accurately defined to prevent losses when using intermediaries.

Example:

• Corporate Rate: CORA
• Leisure Rate: LRTA
• Concierge Rate: REGB
  These rate programs are grouped under different categories (A–G), each offering unique value and managed dynamically to optimize revenue.

Conclusion: Crafting an Effective Pricing Strategy

Developing an effective pricing strategy is both an art and a science, involving a delicate balance of internal goals (revenue, brand alignment) and external factors (market demand, competition). Hotels must ensure that pricing decisions reflect value, remain competitive, and align with customer expectations across all channels.

By adopting rational pricing principles, leveraging the right business mix, and aligning seasonal trends with brand guidelines, hotels can:

• Increase both RevPAR (Revenue per Available Room) and RevPAS (Revenue per Available Space).
• Foster long-term customer loyalty.
• Build a sustainable competitive advantage in a dynamic market.

Ultimately, success in hotel pricing lies in achieving consistency, value, and customer trust—ensuring that the right rate is offered to the right guest at the right time.

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Pricing Strategy

Revenue management involves selling the right product to the right customer at the right time and price. But how can a hotel determine what the "right price" is?

Setting the "right price" is a continuous and complex process essential for a hotel’s success. It requires rational, customer-friendly pricing that accounts for variations in demand, market segments, hotel types, and seasonal trends. A good pricing strategy not only maximizes revenue but also builds customer loyalty by offering value for money.

A well-crafted pricing strategy helps increase revenue, making it a core component of revenue management alongside Inventory Allocation and Selling Strategy. Effective pricing provides a variety of rates, enabling hotels to earn more than they would with a single rate for all guests.

Ultimately, hotels must strike a balance between short-term revenue maximization and long-term customer relationship building. Pricing decisions should align with financial goals while fostering brand equity and customer trust.

Pricing: An Interpretive Process

Developing a pricing strategy is not an exact science. It involves balancing internal factors—such as financial objectives and historical data—with external factors, including market demand, competitive behavior, product strength, and customer feedback.

A hotel's pricing process consists of two key components:

1.      Pricing Structure: The number of rates offered, along with rules determining when and under what conditions each rate is available.

2.      Pricing Level: 

Establishing the main price point for the property. A critical element here is determining the Benchmark Rate,  

 which serves as the foundation for pricing decisions.

Hotels must create tailored pricing strategies for both transient and group business. While the benchmark rate guides transient pricing, group rates depend on different criteria and vary between bookings, as explained in the Standards section.

Rational Pricing: A Cornerstone Strategy

Rational pricing is the foundation of Marriott's pricing philosophy. To fully grasp this concept, it’s essential to understand the key elements of rational pricing:

·   Market-aligned benchmark rate: 

A rate reflecting customers' willingness to pay and positioned appropriately within the market.

·         Logical rate structure: Each rate has a defined, rational purpose.

·         Menu quoting: Reservation agents can quote all available room types and rates.

·         Seasonal pricing: Rates vary based on the season to match demand fluctuations.

·         Elimination of non-qualified discounts: Only qualified, fenced discounts are offered.

·         Volume discounts: Discounts based on booking patterns that drive incremental revenue.

·         Time-based discounts: Restrictions or yield-managed discounts based on the time of booking and arrival.

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