Setting Room Rates

As far as rates go, I do notice an interesting trend here among my three in-town competitors.  All are larger than I am, and have a wider range of rooms & rates, starting at around $100.00 on the low end (or less) and going up to $240.00 on the high end.

At any given time in the past, the largest and most luxurious rooms went first every weekend.  For the last few months, those highest priced rooms (stuffed with romantic amenities) are always the last to go, and just sit there empty right up to the weekend, even this holiday weekend. 

Plus I find if you are too cheap then people think there is something wrong with you. For example I had done this chap a good deal as he was booking 7 rooms for 2 nights. He rang this week to say he needed another 2 rooms so I said I would fix him up with my neighbour. I rang to check her avaliability and she said I normally do my double rooms for X which was $25 cheaper than I had done him as a good deal. I said don't do it cheaper as he will think there is something wrong with yours as he already thinks he is getting a good deal with me! plus it is a busy weekend she is doing herself out of money. There is a balance to be struck in everything to cheap is a problem as much as too expensive!

the impression I get from my trade association and speaking with hotel people as well is people are mostly willing to pay the same but they are looking for added value (which I think B&B's do very well anyway as we are small and nimble businesses) for example where as before with a hotel bill they wouldn't really check it they would just pay now they are looking at all the items on it and checking. They are looking for optional extras which they may or may not use ie a pool or flat screen TV's. It is all about getting your money's worth which is not a bad thing.

 Fear essentially sparks entrepreneurship? huh? That is strange.  Are you saying Benjamin Franklin did what he did out of fear? I feel that fear is an opposing force to entrepreneurship. 

Boomer wrote "Fear creates ingenuity, which in turn sparks entrepreneurship"

and "Sorry to say, but as a business person, if you are not in fear of the economy, then your totally out of touch with reality - I do not know of any business big or small that has not felt the effects of the economy"

Again I will disagree with you, I am not in fear of the economy and I am not totally out of touch with reality, but thanks for saying I am.  Of course it is effecting everyone...You must watch...oh never mind I might get political and talk about the current fear mongering.

You're absolutely right Boomer.........I am currently service industry.........intending to jump ship to another service business......call it hosipitality......

OK....hunkering down was taken out of context.........perhaps another phrase would have been better.

Point was..........in a down economy there is trepidation to move forward......for me moving forward is increasing revenue........this to often relates to stagnant pricing..........if anyone can hold prices for good and service for several years, contintue to walk away with profit.........Great!!........I'd be the first to ask how that was accomplished.

Truthfully.............no...................no, I don't fear the economy. I don't fear recessions or near depressions...........been through to many.........I embrace the challenge.........figure out ways to repackage services to spark interest....find new revenue streams with added services. And yes, shop insurance, suppliers. Find inefficencies...what ever possible to reduce overhead and operating costs.....all the while producing a product that meets or exceeds expectations..........will raise pricing where and when necessary............the business is the beast that has to be fed.........only way to feed the beast is cash flow and profit.

I've gotten to wraped up in this thread for being an aspiring................Sorry Swirt......

My apologies to all

Sorry to come in late - daughter, then grandson here.

When I opened, I called the B & B in the next town who had all PB and made my rates $5 less because I was 3 w/shared. Over the years I edged up by 2.50 to $5 per room. Then I raised the room with queen bed by $10 and left the 2 w/full-size the same for a year. In 2006 we created an ensuite PB for the queen room. That room is now $129 and the 2/full & share are $95, In January, everything is going up by $10. I held the line for 2 years - 2011 gets the rate hike.

I will not lower my rates! Took too long to get there. What I DO do is offer things like the Egg-Special (2 weekday night and choose your discount - could be from 10 to 50%) and military/cop/fireman discounts. I am going to look for some flat screen TVs for the rooms. Daughter talked me out of the king bed (it would take up the room) but agrees that Rosi's can take the queen. We also found the Harris is as it will be - not able to be arranged differently and the queen would swallow the room.

This is gotten off track I think, no one here is in fear of the economy and hunckering down, we all just try to make wise choices for our businesses. Each inn is different, where some inns have had a huge slump they simply cannot raise rates or add costly amenities.

People won't complain, One Day, they simply won't book a room, this is bread and butter for most innkeepers. Raising rates has a few criteria, including occupancy. As mentioned most innkeepers had extreme cost hikes and to cover that instead of raising rates by very much they are trying to cut costs where they can, which is never a bad thing.

If we factor in labor and hours/time we are making 50 cents an hour.  I think your reasoning is good, but running an inn is not a hugely profiteering business. The bennies are in the tax write offs since we live in our businesses. The bennies are in running our own business how we choose and not working for the man.  Being home, renovating an historic home, etc etc.

Sure boomer.......

Current economy has everyone a bit edgy and finding anyway possible to economise expenses......I don't know of any business...around me, here and myself included that isn't cutting expenses in an effort to maintain current pricing.....Myself I did however find services that we do, where I did edge up pricing to maintain profit.........our profits margins have declined, with tweaking here and there the decline has not been to steep.

All.......please understand........my touting raising rates to keep some what of a pace with increasing expenses, does not in anyway mean that all or any need to go out now and raise rates..........

We all need to be profitable.........we all need that cushion of funds for the unexpected.

I don't know........but I doubt a $5 increase on a room rate will put off alot of people.......Perhaps not all rooms across the board.....can start with just 1 or 2 rooms.....test the waters.........

Maybe......an actual reduction in a room rate can translate into higher occupancy.....again.....I wouldn't think across the board all rooms for a rate reduction.

As perhaps some may think gimmics being a bit unsavory.........I like them........example........some offer a discount for doing the online booking, $10 a room........well..........Raise your room rates $5......and all you've lost is $5.........and the reason for offering the online booking discount is to free one from the phone......if a guest refuses to book online.....that $5 increase makes the phone in reservation more palitable.

Another thing I want to get across..........don't feer this economy.......it is a challenge.......challenges is what makes business ownership interesting and to some, fun...........challenges also gets you out of the box.....out of the routine..........it's routine that often wears down business owners. It does me.

The cupcake and box can be a great idea to fill rooms.......plan ahead.....I was thinking.........for a future weeks or perhaps a month promote a gift give away for bookings.......a homemade baked good, our gift to you for staying with us any 2 night stay or longer November 1 to November 20.....as an example........or......for Birthday or Anniversary stays during the month of October a free 6 inch cake for 2 night stays or longer................if you have a gift shop.........50% or what ever off all gift shop items the month of February.......can also try doing this with interbusiness promoting...with local restaurants, shops, live or movie theaters.......these businesses are experiencing the same economy...........what ever it is one wants to try........PROMOTE it..............don't do it as a surprise to make a guest happy.........thinking perhaps they will tell family and friends.......we have no control at all whether guests will spread the word of our goodwill

Raising rates during this economic disaster would be truly detrimental. We keep fixing our bottom line by cutting back on unnecessary items. The first thing we changed was cutting nearly 50% of our costs by changing our suppliers – we had a linen company that kept adding surcharges for gas, surcharges for just about everything, while maintaining his base price – he was a small regional linen company – we finally gave in to something we swore we would not do and went to a national linen company. We literally saved over 50% - now many local B&B’s have done the same thing – Linen is just a sample of our changes, too many to list here.

You mention revenue increasing solutions, all of which are great, and we do them, but since we have cut back on salaries, we now do most of the housekeeping ourselves – since this cuts into our mid-day time, we now charge $25 for early check-in requests(1 pm) and $45 for late check-out requests(2pm). We are surprised by how many opt-in for this feature – and wish we had implemented this sooner –sort of a pseudo rate increase, but one the guest voluntarily agrees too

You mentioned that guests know that prices have gone up on just about everything, of course they do, but they have also changed the buying habits in order to offset they expenses. We are what I term a “left over business” whatever is left over after everything is paid – this does not mean we are any less of an important part of their life, we are, they all need time away – but if we keep raising our prices, they will do as many are doing now, buying store brands Vs. quality brands

My favorite quote -

Business Acumen: “linking an insightful assessment of the external business landscape with the keen awareness of how money can be made — and then executing the strategy to deliver the desired results” – a quote from one of my old business professors.

some thing else to think about.......

neighboring business often times wait for someone else to flinch........it may just be others are waiting to see if and when someone makes the decision to adjust rates.........so they can to.

right......same on my end......though when gas went above $3 a gallon we raised rates..........when it went above $4.......we added a surcharge

At that same time........all our operating expenses increased....considerably.........we in turn increased rates the new season

As I have said.........can absorb increases to overhead and operating for so long..........at some point that can no longer be done.

Since that one big increase we did for the start of 2008.......we had made no adjustments since, other than to other aspects of services.....................I know, I know.........this is a different industry...............business is business and it's all the same..............in lodging.........either increase rates or find avenues for additional income......whether that will be box lunches, gift shop, cheese and cracker platters, etc.......

At some point......rates will go up, they have to.......

As discussed....this can be done on increased value.......as in a patio hot tub..........remodeling a bathroom to include jacuzzi tub.........but your spending $ to increase the value..........some times you just can't

Sure.........one can operate to the point of no longer earning profit............why?

All I'm getting at is.........................numbers don't lie..........they tell the story

When all the costs skyrocketed two years ago I believe most every forum member did NOT raise rates, we ate the cost to keep guests coming in.  Basic items went up astronomically, and we had to bide our time on it and not raise our rates. We also re-evaulated how we did things and what items could we cut back on. ie driving to the grocery store less, less spoilage on fruits and veg. 

yeah KnK......best arguements have been with myself......it's a real bummer when I lose......

I don't want to leave out that increasing occupancy % will increase revenue.......not always easy to do.......even if room rates haven't changed in a while.......or they are reduced to bring about that higher occupancy.

Your right........"value" is the key to any pricing of goods and services

Can one max out the value?..........I think so.

With a long standing of percieved high value.....you'd have to go back to the operating expense numbers.........cost of doing business increases.......so must the cost of service..........as I've said. How long anyone can absorb increases is up to them..........some can longer than others.........there will have to come a time when rates will have to increase.......even though the value has not.

Use this for example........linnens......200 thread count..........500 thread count will cost twice as much.........is providing 500 thread count to provide the percieved value to increase rates, due to overhead and operating expense increases?

I know many small businesses operate and do well operating on a feel for the business.........and as long as it is providing some profit......or that at the end of the month, year......if there is money left over, that's a good thing.

I'm concerned with, when overhead and expenses not being met along the way........the way to know this is to know the #'s........run a comparison from the previous year, 2 or 3 years

I am in agreement with you.........less occupancy, increased rates would be what I would hope for.

I am currently in the green industry.........aspiring to make a career change.....I know my profit margins are much greater than others that do more work than I do.

 KnK welcome back! We have missed you. 

Aloha everyone

I thought this was a great question and great answers because it gets to the core of HOW a B&B is different.

We have stopped using occupancy as an indicator of our success. We look at revenue.

For us, we watch our metrics and if we hear or see or value under fire, we start looking at the most cost effective way of adding value until we feel we have pulled our value up to our price.

Once that is saturated, we start talking about raising our rates and what values might come along with that. 

Thanks Breakfast Diva.  I'm working on it.

Done by numbers......

Knowing your numbers.......your overhead, operating expenses.........you know what that is for a year......for a month........for a week........for a day.

When factoring expenses..........factor in your time.....if you operate alone or a couple doesn't matter........factor in the labor hours......morning breakfast.........to clean or change out a room.......clean the common areas......factor in the once or twice a year break down cleaning..........per hour..........per day..........per week..........per month...........per year

And yes ofcourse the supplies.....food, linnens, cleaning, etc.......

Figure an occupancy %.........that would be a minimum for all rooms to cover expenses..........then add in profit.

Now you will have all rooms priced the same...........if all rooms are identical......well then your done.............if rooms are different........you can break down them down to square feet.......establish the number to the total square feet of the rooms........lets say for example.....it comes to $1 a sqft.........you can begin pricing rooms according to the sqft.......

You can assess $ amounts to specific ammenities.......queen bed vs king bed........2 person whirlpool tub vs shower.........tv vs no tv and so on.

Each ammenity that is added to a room has a $ value.....you want to recoup that over time and will that ammenity is still viable take profit..........if the ammenity is for the entire property......as in wifi.....pool........hot tub, etc..........assess that to all rooms

Obviously you will need to know what your regional competitors are pricing their rooms at to get an average for $ per room.......you won't know their occupancy %.....no matter.

Now..........if you've done this right.....you will gain a profit.........factors depending whether you reach profit sooner or later....and how much.......a couple of those factors......occupancy and how much mortgage is....as will utilities.....as well as fluctuating costs of supplies.

As expenses go up.......so does pricing.......sure.....one can absorb increased expenses...but how much and for how long........you don't ever want to be in the position of catching up

Make changes to rooms or common areas.....update, redecorate, etc......has value......reflect that in prices........just painting walls is maintenance

That's one way.......there are other ways

Just keep in mind.......add ammenities such as flat screen tv's.......or increasing size of tv's.....stuff like that increases value..........and what does increased value mean?...................increased $..................one thing to consider..........pricing ones self out of the market................take making the property wifi access all over.........maybe you can't increase room rates at that momment..........within the year you should

On the other hand.........improvements and added stuff........can also reflect in higher occupancy rates........increased occupancy is more desired to increasing profit........rather than just increasing room rates

This is how I see it..........translating from my industry to the B&B industry........try doing it by the numbers........see what you come up with.........if you're selling.........buyer needs to know the numbers.

I have just raised my Loft Suite rate to make it $25 more then the cottage rooms.  The Loft Suite books first hands down.  Lots of Anniversaries and Honeymooners, or just a couple get away.  The cottage rooms just aren't being booked.  Want to share your ideals on this?  All have private baths.  Would love to hear what you think!

Both of my private bath rooms are the same rate...shared bath room is $25.00 less.

I wonder if we had two innmates show up on our door step, keeping in line with our rooms rates (ie not changing the range itself) would they find rooms have a different appeal and should be priced higher?  

ie this room has a fireplace but it is 100 degrees outside, so I am not willing to pay more for that until winter.  ?  ie you have a higher rate on a claw foot tub when in reality guests prefer the non claw foot, so you could charge more for those rooms instead?

Our first 4 years open the higher priced rooms sold first.  Now it is the mid priced rooms, as if they will feel guilty going for the gusto?

Yes, how you price them within your inn is another story altogether.  Room size, bed size, views and amenities play a big part into that, and yet there are some we know here who give a way the moon for just a wee bit more in a much more upgraded room.  The guests don't really get it until they are in the room.

Lemmee ask this question - Do y'all try to keep your room rates comparable, say, to each other, within the same inn? ie $5 or $20 difference at the most?  or does that not matter, like Mortie said, $95 to $450 range and there are only 4 rooms.

Over the years we have tried just about every price combination - and have finally settled on 3 different prices - based on room size and amenities and views - here is my unscientific results - given the choice a large % of guests picked the higher end room pricing. For the most part, we ignore the competition (we still are aware) but we offer many things they just can't.