Setting Transient Benchmark Rates for an Extended Stay Hotel
To establish optimal pricing for an
extended stay hotel, it's essential to define a distinct benchmark rate for
each length of stay (LOS) tier. Each rate should reflect market demand and
competitive pricing for the respective LOS tier. For the first tier, it may be
necessary to set separate weekday and weekend rates.
What is a Benchmark Rate?
- A benchmark rate is the standard, non-discounted
rate available whenever rooms are open for booking, with minimal
restrictions.
- This rate is market-driven, offering a competitive
price/value to guests, and serves as the basis for premium and discounted
rate positioning.
- Benchmark rates aim to capture the bulk of
non-qualified demand and should be set to maximize revenue and occupancy.
- Separate benchmark rates should be defined for each LOS
tier and season. Weekday and weekend rates may also differ within the
first tier.
Key Considerations for Setting Benchmark Rates:
- Decreasing Rate Structure: As LOS increases, the benchmark rate should decrease
to incentivize longer stays. For example, Tier 2 should be discounted
relative to Tier 1, and so on.
- Market Dynamics:
The discount between LOS tiers should be based on local market factors.
There is no set percentage discount; instead, the percentage should be
tailored to market conditions.
Benchmark Rate Programs for Your Brand:
- Different brand programs like CORA and REGA
apply to Residence Inn and Towneplace Suites, respectively. Ensure these
programs are defined within your MARSHA system.
Using Extended Stay Pricing Tools:
The tools like the Tier
Evaluation Report and Extended Stay Benchmark Pricing Evaluator Tool
assume a unified LOS tier structure across all rate programs within the hotel,
with a maximum of four LOS tiers being captured.
Defining Seasonality:
Seasonality plays a critical role in
pricing strategy. Identifying your hotel’s high, low, and shoulder seasons
allows for accurate demand forecasting and pricing adjustments.
Why Reevaluate Your Benchmark Rates?
Benchmark rates should be
reevaluated regularly to ensure they reflect current market conditions. Pricing
should be a dynamic, year-round process, adjusted as necessary to capture
transient demand.
Five Steps to Setting Transient Benchmark Rates:
- Analyze the Competition
- Assess Property Performance
- Analyze Market Share
- Project Future Demand and Supply
- Summarize, Validate, and Recommend
Always consider pricing from three
perspectives:
- The Customer
- The Hotel
- The Market and Competition