Transient Benchmark Rates

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Five Steps to Setting Transient Benchmark Rates:

1. Analyze the Competition
2. Assess Property Performance
3. Analyze Market Share
4. Project Future Demand and Supply
5. Summarize, Validate, and Recommend

Always consider pricing from three perspectives:

• The Customer
• The Hotel
• The Market and Competition

A benchmark rate is a standard, room-only, non-discounted rate that is always available as long as there are rooms, with restrictions no more stringent than other transient rates

This rate, which is part of the property’s pricing structure, is market-driven and offers great price/value to customers.

 It is designed to capture the majority of non-qualified demand at the property.

The benchmark rate serves as the foundation for both premium and discounted rates, optimizing hotel revenue and profits.

 Distinct benchmark rates should be established in Channel Manager as well for weekdays, weekends, and different seasons.

Check the guidelines on Determining Seasonality.

Establishing Room Rate Structures

Hotels consider multiple factors when determining room rates. These factors typically include:

1.     Rates charged by their primary competitors.

2.     The age of the hotel, including any recent renovations or upgrades.

3.     The perceived value of the products and services offered.

4.     The location of the property.

5.     The cost of the hotel and the expected return on investment (ROI) required by owners or investors.

6.     Any competitive advantages that distinguish the hotel from others in the market.

Room rates are usually set on an annual basis, relying on previous year rates, marketing studies, inflation trends, competitor actions, renovations, and the goal of increasing overall room revenue. Changing an established rate structure is a detailed and deliberate process, which is why rates are typically reviewed once per year. Seasonal properties are an exception, establishing rate structures for each individual season.

The room rate structure assigns specific rates for different market segments, ranging from the highest premium rates to the lowest discounted rates. Historically, the central rate in any structure is the regular or rack rate, which serves as the standard rate offered to all reservation systems, including travel agencies, airlines, and car rental partners. Other rates are calculated as adjustments—either increases or discounts—relative to the rack rate.

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Sample Room Rate Structure

Below is an example comparing a Resort Hotel and a Select-Service Hotel:

Market Segment	Resort Hotel	Select-Service Hotel
Concierge / Premium Suite	$135	Not available
Regular / Rack Rate	$119	$75
Corporate Rate	$109	$69
Special Corporate Rate	$100–$75	$65–$50
Super Saver Discount	$89	$55
Weekend Discount	$75	$50
Government / Military Discount	$65	$40

Notes:

• The Concierge or Premium Suite rate is the highest because it includes extra amenities and services, similar to first-class airline service.
• The Rack Rate is the standard rate the hotel aims to achieve for all rooms.
• Corporate rates are slightly discounted rates extended to business travelers, often negotiated with companies based on volume.
• Special corporate rates are negotiated for companies that book large numbers of room nights annually, with discounts increasing as volume grows.
• Discounted rates, like Super Saver or Weekend rates, are intended to fill rooms during slower periods and maintain occupancy.

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Differences Between Resort, Full-Service, and Select-Service Hotels

Hotel Type	Description & Services	Typical Rate Structure Impact
Resort Hotel	Offers extensive amenities such as concierge, spa, multiple restaurants, recreation, and premium rooms.	Higher rack rates, premium segment rates, multiple discount options.
Full-Service Hotel	Provides a wide range of services like restaurants, room service, meeting rooms, and concierge, usually in urban or business destinations.	Rack rates are standard, corporate and volume-based discounts common, moderate premium segments.
Select-Service / Limited-Service	Offers fewer amenities; usually includes basic rooms, small lobby, breakfast only, and minimal staff services.	Lower rack rates, fewer premium segments, simple discounting.

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Rate Setting Principles

• There is a logical hierarchy in rates. Discounted rates are often a fixed dollar amount or percentage lower than the standard rack rate.
• Hotels balance two objectives: maximize revenue on high-end rooms while stimulating occupancy with lower rates on slow periods.

Rate reviews occur at least annually, but management may adjust mid-year based on market changes, renovations, or upgrades