16 June 2017

How to Build & Analyse Successful Rate Plans

By Niall Lenihan - Account Manager

How do you design a successful rate plan for your hotel? Why are some rate plans more successful than others?

When you create rate plans, try and tap into your inner hotel shopper psyche. Is your customer planning to visit your hotel for business, or pleasure? What are their expectations when they make their initial date search? When they're visiting your hotel website, what do the images they see on the homepage represent? What do your images and copy in the Bedrooms, Food and Beverage, Golf and Spa pages represent?

Every rate plan has purpose. However, not every rate plan has a valid purpose. Is the rate plan there to, for example, keep your chef happy that you're promoting the restaurant, or is there a real financial value for the hotel in having it there?

Below are 4 examples of the most profitable rate plans hotels typically offer, along with a breakdown of why they're valuable and how to use them.

1. Room Only: Book Direct to Find the Best Available Rate

Offer a room only rate with a Best Rate Guarantee to your own website. In short, no matter the scenario, guarantee for guests that the best available rate for your hotel will always be when they book direct. Here's a study from Cornell that gets into the specifics of how customers prefer to see BAR displayed on your site.

A word of warning: offering this rate plan to any third parties or other openly available sources opens up the opportunity for them to margin test your rate to secure a booking through their own website.

Margin testing is when an OTA tests the margins of the rate you are providing them, usually by taking 2% - 4% off the rate and selling the rate cheaper online. The hotel will still receive the correct rate for the booking, but the OTA will have taken the hit in commission by 2% - 4%. This percentage won't concern them, as in most cases they are still making a further 12% and in some cases 15%. You can eliminate this risk by only offering "room only" rate plans directly on your official hotel website.

2. Bed and Breakfast: Save €5.00 When You Book Your Stay with Breakfast Online

Bed and Breakfast rates are one step up from Room Only rates. They are the first opportunity to upsell your guests, so be creative! Be descriptive when you tell your guests what is included.

Make sure to incentivise them to book Bed and Breakfast instead of Room Only. This can be achieved by potentially having a lower breakfast supplement online as part of the price differential between Room Only and Bed and Breakfast. For example, you might sell your breakfast as part of the package at only €10.00, instead of the in-hotel cost of €15.00. Make sure to let the guest know in the description what the saving is.

Depending on your hotel's location – for example, city centre versus near the airport – the rate plan including breakfast and savings may be all the more important. Make sure you've got 'Breakfast' in the headline.

3. One Night Escape: Dinner, Bed and Breakfast – Enjoy a Welcome Drink on Us.

Every hotel wants guests in their restaurant. Guests in your restaurant also come with the potential of indirect revenue spend in the bar before or after their meal – but how do you evaluate this?

There are two ways to look at it. A busy bar means other guests will come in. A good atmosphere at the start or end of their evening will attract some guests in for a nightcap, and secondly, it may attract walk in guests. Offering that free welcome drink gets people in for their first drink, and the savings may convince them to stay for a second.

Why should a guest book the dinner package in your hotel, then? Again, it comes down to incentive.

At this stage, consider reviewing your dinner supplement. What's the allocation the Food and Beverage department gets from a dinner package?

Consider a guest who has stayed in your hotel previously and dined in the restaurant. They might remember that the early bird is €30.00 per person for a three course meal. Then, if the supplement is €60.00 on top of the Bed and Breakfast rate, they know they are paying the same rate they'd be paying if they walked into the restaurant.

Offer a welcome drink as part of the package to your direct booker, or potentially a €20.00 Spa or Golf credit if that option is available to you.

4. Advance Purchase: Pay Now and Save 10% - Exclusive Hotel Website Offer

Advanced purchase rate plans are, of course, an extremely popular rate plan across all hotels. However, there are certain aspects you must identify and focus on if you are offering this package, or planning to.

  1. If offering Room Only rate plans on all your distribution channels, try applying the Advance Purchase discount to the Room Only rate plan on your website. This reinforces the idea that guests can only secure the best rate guarantee by booking direct. If Room Only is only available on your own website, consider applying the Advance Purchase to the Bed and Breakfast Rate instead.
  2. What are your property's lead times for bookings? If you tend to get long lead bookings – 50+ days – have a minimum booking window of 60 days for an Advanced Purchase option. If it's shorter, e.g. 30 days, put in something more like a 7 day Advanced Purchase option.
  3. Alternatively, become a trend setter in your market and offer two options: a 15% discount for bookings 60+ days out, and 10% discount at 30 days.

Conclusion

Regardless of the type of rate plans you're creating, the name of the rate plan is paramount. Make it is as descriptive as possible. Remember, a lot of your guests are likely visiting your website via a mobile device, so the rate plan description may not be clear or as obvious as it is on desktop. Take a look at your analytics to find out how many visitors you get on mobile, and make sure you look at your rate plans on your phone so you know how they display.

The rate plan names we've used above are strong messages for why a guest should book direct when searching for their next hotel stay. You should reinforce this message throughout all your online advertising, and even on your home page with a call-out box or a different feature to draw attention.

Niall Lenihan

Niall is a graduate of the Shannon College of Hotel Management, and for his final year completed a Bachelor of Commerce degree in Marketing in the National University of Ireland Galway. Previously to his work at Net Affinity, Niall worked and lived in London for 5 years working in hotels specialising in Revenue Management and Business Development for the Doyle Collection, The Dorchester Collection and finally the InterContinental Hotel Park Lane. He returned to Ireland in 2014 and worked as a National Account Manager for Orbitz Worldwide and Availpro. Niall’s hobbies are golf, rugby and travelling – his favourite city is New York.

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Revenue ManagementGlobal

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