Understanding Hotel Rate Structures: Full-Service & Select-Service Hotels
Quick Navigation
Hotel Types
Not all hotels operate the same way. Understanding the differences helps Revenue ,and Seals Team set rates, serve guests, and tailor services effectively:
- Full-Service Hotels:
- Select-Service Hotels:
- Downtown Hotels:
- Resorts:
Establishing Rate Structures
There are several factors when setting room rates. This process ensures the property remains competitive while achieving financial goals.
Key considerations include:
- Rates of primary competitors
- Hotel age, including renovations and improvements
- Perceived value of products and services delivered
- Location and accessibility
- Cost of operation and expected return on investment (ROI) for investors
- Competitive advantages over other hotels
Market Codes, Rates
Room rates are generally set for one year, taking into account previous year rates, marketing trends, demand, supply, inflation, competitors, and planned improvements.
Seasonal properties may establish rates for each season individually.
The structure involves setting specific rates for different market segments, usually anchored around the rack rate, which is the standard rate quoted across reservation channels including travel agencies and airlines. Other rates are calculated as increases or discounts relative to the rack rate.
Sample Rate Structure: Full-Service vs Select-Service Hotels
| Rate Type | Full-Service Hotel | Select-Service Hotel |
|---|---|---|
| Concierge | $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 Rate | $65 | $40 |
The concierge rate represents the highest tier due to extra services, similar to first-class airline perks. Rack rates serve as the standard for most reservations, while discounted rates cater to corporate clients, seasonal occupancy fluctuations, and special promotions.
What is a Benchmark Rate?
Benchmark rate is the standard, room-only rate that is always available whenever regular sleeping rooms are open at a property.
Unlike other rates, any restrictions applied to the benchmark rate are never stricter than those on other transient rates (except for Extended Stay properties that also sell REGA/CORA rates for weekend arrivals).
This rate is market-based, representing excellent value for guests while positioning the property competitively. The benchmark rate captures the majority of non-qualified demand, serving as the foundation for setting both premium and discounted rates. When properly positioned, it helps maximize hotel revenue and profit.
Hotels should define separate benchmark rates for weekdays, weekends, and each season, following seasonal guidelines in Channel Manager. For extended stay properties, rates should also be tailored for each length-of-stay tier typically ranging from one to four nights, five to eleven nights, twelve to twenty-nine nights, and thirty-plus nights, based on market demand and competition.
Rate Logic Explained
There is a logical order between rates. Discounted rates are typically a fixed dollar or percentage lower than the standard rack rate. The goal is twofold:
- Maximize revenue from higher-end rates on premium rooms.
- Increase occupancy with lower-end rates during slower periods.
For example, corporate rates usually make up the largest segment of rooms sold, particularly in full-service hotels. Special corporate rates depend on volume and can be negotiated directly with companies. Discounted weekend or super-saver rates are designed to stimulate demand during low-occupancy periods.
Hotels periodically review rates throughout the year, particularly after renovations or when market conditions change. The overarching challenge is balancing revenue maximization with customer satisfaction, ensuring rates are fair while achieving financial goals.