Prices
Rates or prices?
In the hotel industry is more common to speak of rates than prices. Especially in comparing what customers are going to pay we speak of rates: in our situation we will call your decisions on rates 'prices', still.
A lot of aggregators are comparing hotel prices are based on finding the Best Available Rate: abbreviated BAR. Among them, Expedia and Trivago are the most well-known. Aggregators often also give suppliers insights into rate and in benchmarks.
On the page Year 1-2-3-4 decisions you can find the actual sales price the hotel published, just as you take over. From year 1 on, you can choose these prices yourselves.
Sales prices for the hotel rooms
Let's have a closer look at the sales prices for staying in the hotel.
Looking at the sales prices of your hotel the management should decide on last-minute and a rack rate price for the two options weekdays and weekend days.
The idea behind the two prices is that it enables you as a manager to think in a price-“range” for your hotel instead of one single figure. So, reasoning from your strategy, you might think of a price range that fits in best with your strategy. From this min/max range, an average price is calculated that is being used in the calculations.
Keep in mind that your revenues, of course, consists of the (average) price times the number of sales. On the other hand, you have your net result (revenues - minus all costs) which also depends on your costs. On the page operating review there is a basic explanation of the structure of the costs and the way you can, or cannot influence them.
Cost price
The hotel has fixed costs and variable costs which revenues have to cover, apart from the planned profit. On the page Cost price you'll find an indication of the average cost price of any room: on taking over this is € 83.13 per occupied room. You will make additional costs (your decisions 6-10) and so this will go up, easily to € 105.10 per occupied room.
Of course, you have your strategy, variety in prices, psychological prices, your occupancy rate e.g. that influences your price decisions. The cost prices, though, is always an important point-of-reference.
ADR
To have some kind of benchmarks outside of the Emerald Forest, the average daily rate might come in handy. The average daily rate (ADR) is a performance indicator used in the hospitality sector to measure the strength of revenues generated. It is measured as the total revenues generated by all the occupied rooms in a hotel or lodge divided by the total number of occupied rooms over a given time period. It is a simple average that shows the revenues generated per occupied room (source. The tool Statista gives and indication (US) on average prices and developments within.
Price types
As you take over there is a history. The weekdays have been booked mainly by business people who, generally, have been paying a higher price than the leisure market who have been booking weekends. As this is in most countries the case, it will be very hard (nearly impossible) to change this 'logic'. To keep things simple, the hotel just works with four basic prices (see the page decisions):
- rack rate, the highest price and last-minute prices: the lowest
- the weekends and weekdays prices.
Other price varieties should be linked to marketing decisions.
Other price types
The CEO of Emerald Forest doesn't want to change the prices too much: you should stick to the concept of last-minute (low) and rack rates. No separate prices for shoulder season, low or high season, group rates etc. Promotional prices, so during a certain time period or as a campaign, are no problem. The same goes for renovated and non-renovated rooms: the doesn't want to link prices to the type of rooms, as renovations are ongoing on and it heavily limits the flexibility of the hotel in assigning rooms to people. So far, this didn't cause major problems with the customers.
What you can do, is be creative yourself and make additional calculation and explain (in the row additional information for your coach) what your ideal price system would be. If this is calculated well, your coach might reward you with a bonus.
Prices banqueting
There are much more possibilities in changing this quickly: most of the time these are individual groups, each having its own requests and demands.
Prices Food and beverages and facilities
You can not influence these prices, nor can you influence how they are used. These revenue groups just follow the occupancy rate of your hotel.
Inventory
What the hotel can sell, as a room, or in the restaurant, depends on the inventory. More info on the rooms in the page Rooms.
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