How do YOU set room rates?

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IronGate's picture
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Estimate expenses and calculate rates to cover them
0% (0 votes)
Set rates (by whatever method), and budget expenses to not exceed the revenue
6% (1 vote)
Other (discuss, please)
94% (15 votes)
Total votes: 16

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After a winter of steep decline due to prices that finally became too high after successive increases over the years, we have decided to stop fixed prices and go for flexible ones.

A few month in advance, I set the prices based on turnover & occupancy rate of previous seasons. The aim is to have directly the correct price (price which may allow improvement on previous years).

We have 3 room and we price each differently for a couple although they are similar in offer. We have 3 seasons and extra costs on week-end (different extra according to season, again).

Every 2 weeks, I review how the next months are filling up and adjust when necessary. If a slow start, I may decide to reduce prices. Every few days, I also look how the following 2 weeks have been filled up and reduce costs progressively to lowest.

When guest want to know the price, I need access to my computer as I never know them anymore. Guests can also check them / book direct on our website.

This gives me the feeling of driving looking through the windscreen and not through the rear view mirror (much better when curves arrive, such as when locals hotels reduces their prices).

I am much more expensive than comparable inns in summer & week-ends, but quite close to them or lower in winter. I smile when, on busy summer nights, I get call from people desperate for rooms when all inns are full (at low prices) and I am the only option left and still sure to fill up.

I feel that I am very close to the max that can be obtained.

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OnTheShore's picture
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Other. We inherited a set of rates. We've tweaked things a little bit since then, but we're basically the same -- it's what the market will bear. It has to do with location (location, location...), as well as amenities and features.

We have some brochures from the 50's and 60's (and the 80's and 90's) in our archives. Calculating those old prices in current dollars (based on the rate of inflation, etc., -- there are calculators on the web that will do this for you), we're pretty much right on target.  So we are more or less still charging what we were charging 50 years ago (adjusted for inflation).

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Arks's picture
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Harborfields wrote:

So we are more or less still charging what we were charging 50 years ago (adjusted for inflation).

It must be frustrating because I know you must have looked for ways to increase value so you can move into a higher rate class. But if there aren't people available to pay for the additional perks, there's no point in doing it.

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seashanty's picture
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  we had to cover expenses of course.  then add a profit margin.

  right away, i checked the area places to see where we fit in with comparable amenities.   our closest competitor (distance) didn't offer much in the way of amenities but was a lower price and was mostly always full.  so i couldn't be much higher than them or we'd have rooms standing empty ...

Generic's picture
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02/24/2011

Rates are based on so many factors including how well the season is going, yield and of course what my competitors are charging. But I have to take in consideration that I serve a full breakfast and many places don't. In fact, I'm well known for my breakfasts and because of the variety I sometimes win longer stays than other places do.

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Iris's picture
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We charge what Motels would charge per night in this area but then we look at their amenities, location, the services we quietly provide (services that others most definitely do not provide) compare them to ours and come up with the price.  

 

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Breakfast Diva's picture
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"Estimate expenses and calculate rates to cover them

Set rates (by whatever method), and budget expenses to not exceed the revenues"

Looking at these two choices, it gives me the impression that you have a lot of expenses and don't have much room to create the room rate above your expenses. If that's how you are trying to calculate your room rates, you don't have much wiggle room.

Unless you are offering something way different than the properties around you, the best thing to do is to make your prices according to what else is out there in the market. Hopefully that covers all your expenses and leaves some profit for you.

I've tried to make our room rates higher than other b&bs in our area because we offer more amenities. It's nowhere near as low as what our actual expenses are, so that doesn't even become important in my calculations. It's what the market will bear. Sometimes it's a matter of just $10 that can make or break whether someone will book or not. Right now, we're at the top of what we can charge for our location, demographics, etc. 

Madeleine's picture
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Breakfast Diva wrote:

 Right now, we're at the top of what we can charge for our location, demographics, etc. 

I am at that spot, too. Actually, I am probably over at this point. Will either back off for next year or not raise rates. Definitely won't raise, just not sure if they'll stay high as they are.

My basis for that is what the highest priced places charge and to have rooms $30 less than they are because we don't offer the amenities they do and we don't have really large rooms. And I'm finding people will pay way more for the amenities. So the amenity-rich places are doing a lot better than we are. Something for the next owner to undertake.

After that it comes down to time. I don't have the time to keep up with the amenities! Restocking rooms, extra laundry, lots of extras at breakfast.

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You can only charge what people will pay.

So the rates have to be in-line with the amenities, location and other comparable inns.

  • There are a few inns on this forum that I feel the rates are too high for what they offer, I know the inns, the locations and the amenities.
  • There are also a few inns on this forum that I feel are undercharging for what they offer, and their location.  

Having said that, when we looked at purchasing a turn-key B&B in the White Mountains of NH (as another inn-mate here will attest) the rates were so low because there were so many inns and they were all in competition! I was flabbergasted!  AND...the occupancy was so high there in season, that many of the inns illegally rented out owner's quarters/basement/attic rooms etc.

So for our B&B, we charge what we can charge, and no more. We offer an online discount, and diff specials and packages throughout the year. We are NOT a destination/location. We have to work hard to get reservations. Like many of you do.

  1. We have to sell and bring them in...price point makes a big difference.
  2. Now are we at the right price point? I don't know.
  3. If we charged less would we have more rooms, but work harder not smarter? Perhaps.
  4. It seems that the price point we are at right now brings in quality guests who truly enjoy their stay, and feel it is good value for their money.  
  5. Do we make a truckload of money as innkeepers? NO.

We didn't get into this to make a truckload of money, we got into it with rose-colored glasses for the lifestyle and the investment. cool

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Madeleine's picture
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Totally agree with the NH inns. Living in the basement to rent out your own bedroom is beyond the pale. And most of those inns (and you probably looked at a few of the same ones we did) had ZERO innkeeper space. You were confined to your room! And if you rented it, you were confined to the basement!

Sorry, that's a bit of a side track! But, it has to do with pricing. $98 for a room in peak season, whether that was winter or summer. You can't begin to pay for heat at $98/night. And I don't see where rates have gone up in 10 years.

As far as pricing, I just wondered about that because our least expensive room with the fewest amenities is blowing the doors off the rest of the rooms in occupancy. So, certain guests (mostly young ones) are willing to overlook some inconvenience for price.

Push back on price hasn't been really prevalent this year. If a guest pushes back, it's a $100 push back so that's not my customer.

Joey Camb's picture
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what has helped us the most is our national health service has paid for the accommodation for medical conferences up to this year - they are broke so now the doctors and nurses have to pay for themselves which means they are shopping around a lot more (though booking later and later which is a pain) where as before they booked themselves into the most expensive place they could get away with - now its us that are more attractive!

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Joey Camb's picture
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Combination method

(1) expenses

(2) demand at that date ie more demand higher rate

(3) we have 50 very similar properties where we are some slightly higher in standard some lower so its fitting in where you are in the pecking order.

(4) regulars get special rates

(5) Local Businesses get a (local corporate rate) so they know if they book with us what they will get all year round.

(6) longer stays get a better rate ie we have a new festival coming from 2nd August 2014 and many stay 3 weeks for it - they will get a much better rate - average stay for this event is 6 days so have done a 6 day package etc

(7) People coming for more events get a better deal ie have one company comes with 2 rooms for 4 nights 3 times a year they get a better deal on their july stay because of the 2 other stays.

(Cool slight discount for people who book directly as I don't have to pay commission and as I pay VAT tax as 10% of turnover it reduces my turnover as well ie save 15% commission plus 10% of the stay as tax is also cheaper.

 

gillumhouse's picture
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05/22/2008

When I opened I called the B & B in the neighboring city and asked what the rates were. I then set my rates $5 less because she had private baths and I had a shared. I upped the rates by 2.50 to $5 every couple years. Then when I installed the private bathroom I upped the rate in that room by $20 over the 2 rooms that shared a bath. Then when I put a queen in one of the shared rooms I upped the rate in that room and upped the rate in the private bath a bit more and left the room with the full bed the same as our budget room. I am probably at the max I will be able to charge for where I am. (And it is more than I ever thought I would be able to charge!)

Arks's picture
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05/22/2010

I set the rates at about what seemed right for my place, and my area, then lowered them a bit since I've just opened and don't have much business. At some point in the future I'll get around to calculating just how much the place costs a day, counting utilities, expendable supplies, etc. and will have a better idea of where rates should be. But if you find you need to charge $175/night, and you can't GET $175/night, well, there's a problem!

I've resisted all temptation to lower rates too much, just to fill beds, because so far the prices seem to be attracting a good sort of people and I don't want to change that. Granted, people with more money can be just as thoughtless with my property as anybody else, but on average maybe they're a little better than the motel crowd traveling with all the kids.

Just had a 3-night guest leave and she's the first I've had who moved furniture to suite her needs, and I think every single table top item in the room (magazines, welcome book, brochures, even the clock radio) was moved to a different place from where I keep them. Used every pouch of bath salts and oils, used robe and slippers, used about every amenity in the place, and I'm happy about that. As long as they don't damage things, I want people to enjoy the place and use the stuff and make themselves at home...within reason!

Kay Nein's picture
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We took over an existing Inn.  Their rate was grossly low.  We upped it by $20 immediately.  Then 6 months later we upped it another $30 and quickly saw a decrease in reservations.  We dropped it back $10 and have been there ever since.  We also called the local chain hotel and found that our price was almost identical whereas we offered more.  We're comparable to other B&Bs in price although we all offer completely different experiences (one is a mountain cabin, the other a working farm with one 1-room cottage).  

So - we compared ourselves to other lodging providers and adjusted according to that max that the tourists would accept.  We are at $130-190 now.

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05/22/2008

We looked at what others were charging. Weighed what we had vs them and just set a rate. Worked for me.

Proud Texan's picture
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EmptyNest wrote:

We looked at what others were charging. Weighed what we had vs them and just set a rate. Worked for me.

Ditto.  However, we are analyzing our costs to project when a rate increase might be in order due to inflation.  It's a complicated process because no two reservations are the same.

Breakfast Diva's picture
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Other!

IronGate's picture
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As with JB, discuss please. I'm curious.

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Other

IronGate's picture
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I've added that choice. Discuss, please.  Smiling

IronGate's picture
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I'm not wondering about the mechanics of the process. I'm just curious which direction most folks come at this.

Madeleine's picture
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How we came at this...we used the prices already in place as we had an idea what that would bring in revenue and we had an idea what the expenses would be. We were way off in both cases and in both cases way off in the wrong direction.

Honestly? The answer is 'I don't know' and that's a terrible thing to say. 'What the market will bear' is about the best I can do.

 

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