By Sofia Dhanani
Gold Medalist in Journalism from the Vice President of India
Setting a hotel room rate sounds simple until you have to do it for 30 different nights, several room types, multiple booking channels, changing demand, competitors, local events and guests with very different expectations.
A hotel owner may look at a competitor’s website, see a room advertised at $79, and immediately think, “I should charge $75.”
Another owner may calculate that a room costs approximately $40 to operate and decide, “I’ll charge $60.”
Someone else may notice that bookings are slow and conclude, “Let’s reduce the price.”
Each of these approaches contains some useful information. None, by itself, is a complete pricing strategy.
The more useful question is:
What is the right price for this room, on this particular date, under these particular market conditions?
That question changes everything.
There is rarely one permanently correct room rate. The appropriate price can change according to demand, occupancy, season, day of week, remaining inventory, booking window, room type, guest segment, competition, local events and distribution channel. The master prompt specifically frames hotel pricing as a moving decision rather than a fixed number.
For a small hotel, this does not mean pricing has to become complicated. It means the owner needs a repeatable method for making pricing decisions instead of guessing.
What Does “The Right Room Rate” Actually Mean?
The right room rate is not necessarily the cheapest rate.
It is not necessarily the highest rate either.
It is not automatically the rate charged by your closest competitor, and it is certainly not simply the rate that guarantees 100% occupancy.
A useful room rate should reflect several things at the same time:
- Your hotel’s costs
- The hotel’s market position
- The value offered to guests
- Competitor pricing
- Current demand
- Remaining room inventory
- Guest expectations
- Seasonality
- Day of week
- Local events
- Booking window
- Distribution costs
The important distinction is between price and value.
A guest does not evaluate a room only by the number displayed on the booking page. They are also considering location, room size, cleanliness, reviews, amenities, parking, breakfast, service, convenience and the overall experience.
A $90 room may represent good value to one guest while a $70 room may seem expensive to another.
That is why copying another hotel’s rate rarely produces a complete answer.
Start With Your Hotel’s Costs
Before deciding what the market might allow you to charge, understand what it costs to operate your rooms.
Your cost structure can include:
- Housekeeping
- Laundry
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