Setting Room Rates

[MTLLodge]

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!

 

[One Day]

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.

 

[Breakfast Diva]

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!.

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!

I just took a look at your site and am confused...the hook and line room are in the cottage but I don't see a picture of the cottage and I have no idea how these rooms are situated. Are they 2 bedrooms that share a common area? What's in the cottage?
I would speculate that these two rooms are not renting as much because it's not clear what the cottage is all about.

 

[Morticia]

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?.

If you have what you think is an amenity...like the clawfoot tub...then you convince the guests that it is worth more. Think Bull Durham.
NO, I will not pay more for a fireplace room in the summer, no matter how pretty it looks. The PO's charged more for the rooms with the fireplaces even in the summer and I never understood why. The guests can't use them, they can only look at them. MOST guest pile them up with their stuff.

 

[One Day]

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?.

If you have what you think is an amenity...like the clawfoot tub...then you convince the guests that it is worth more. Think Bull Durham.
NO, I will not pay more for a fireplace room in the summer, no matter how pretty it looks. The PO's charged more for the rooms with the fireplaces even in the summer and I never understood why. The guests can't use them, they can only look at them. MOST guest pile them up with their stuff.
.

If you have what you think is an amenity...like the clawfoot tub...then you convince the guests that it is worth more. Think Bull Durham.
NO, I will not pay more for a fireplace room in the summer, no matter how pretty it looks. The PO's charged more for the rooms with the fireplaces even in the summer and I never understood why. The guests can't use them, they can only look at them. MOST guest pile them up with their stuff.

Are they actualy charging more in the winter for the fireplace?

 

[Morticia]

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?.

If you have what you think is an amenity...like the clawfoot tub...then you convince the guests that it is worth more. Think Bull Durham.
NO, I will not pay more for a fireplace room in the summer, no matter how pretty it looks. The PO's charged more for the rooms with the fireplaces even in the summer and I never understood why. The guests can't use them, they can only look at them. MOST guest pile them up with their stuff.
.

If you have what you think is an amenity...like the clawfoot tub...then you convince the guests that it is worth more. Think Bull Durham.
NO, I will not pay more for a fireplace room in the summer, no matter how pretty it looks. The PO's charged more for the rooms with the fireplaces even in the summer and I never understood why. The guests can't use them, they can only look at them. MOST guest pile them up with their stuff.

Are they actualy charging more in the winter for the fireplace?
.

If you have what you think is an amenity...like the clawfoot tub...then you convince the guests that it is worth more. Think Bull Durham.
NO, I will not pay more for a fireplace room in the summer, no matter how pretty it looks. The PO's charged more for the rooms with the fireplaces even in the summer and I never understood why. The guests can't use them, they can only look at them. MOST guest pile them up with their stuff.

Are they actualy charging more in the winter for the fireplace?

Yes, more in the winter when they are usable, but they also charged more in the summer because they said it was 'ambience' to be able to look at the fireplace. I just made all the same style rooms the same price and eliminated having to explain how having an non-working fireplace was worth more money.

 

[MTLLodge]

Thanks Breakfast Diva. I'm working on it.

 

[happykeeper]

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.

 

[JBloggs]

KnK welcome back! We have missed you.

 

[One Day]

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..

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.

Raising rates doesn't necessarily mean there is added value..........some times rates increased due to overhead and expenses.....
Insurance goes up 10%......Property tax goes up 5%.....associations dues goes up 10%........utilities goes up 8%........etc..........
Your rates goes up 5% per room to accomodate increased cost of doing business......................is there added value to the increased rates?

 

[happykeeper]

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..

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.

Raising rates doesn't necessarily mean there is added value..........some times rates increased due to overhead and expenses.....
Insurance goes up 10%......Property tax goes up 5%.....associations dues goes up 10%........utilities goes up 8%........etc..........
Your rates goes up 5% per room to accomodate increased cost of doing business......................is there added value to the increased rates?
.

Aloha One Day,
I'm not sure if you were questioning the premise or asking a question. I'm a little rusty.
Are you suggesting you would just raise your prices because the cost of doing business has gone up?

 

[happykeeper]

KnK welcome back! We have missed you..

It's been a busy year!

 

[Morticia]

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..

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.

Raising rates doesn't necessarily mean there is added value..........some times rates increased due to overhead and expenses.....
Insurance goes up 10%......Property tax goes up 5%.....associations dues goes up 10%........utilities goes up 8%........etc..........
Your rates goes up 5% per room to accomodate increased cost of doing business......................is there added value to the increased rates?
.

Aloha One Day,
I'm not sure if you were questioning the premise or asking a question. I'm a little rusty.
Are you suggesting you would just raise your prices because the cost of doing business has gone up?
.

Aloha One Day,
I'm not sure if you were questioning the premise or asking a question. I'm a little rusty.
Are you suggesting you would just raise your prices because the cost of doing business has gone up?

Oddly, we have had to keep prices lower when everything else goes up. The winter we were hit with fuel oil prices at $4.50/gallon was the year everyone wanted lower rates. It seems that when everything is chugging along guests are more laid back about the pricing. When everything is sky high, the guests think they are the only ones paying those prices, that as biz owners we must be getting some sort of deal.
When guests asked us how much we were paying for fuel, we told them. They were stunned. And the next question invariably was, 'How can you stay in business?' Exactly!
Even tho our prices probably 'scared off' 75% of the callers and walk-ins this summer, we still had a great season.

 

[One Day]

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..

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.

Raising rates doesn't necessarily mean there is added value..........some times rates increased due to overhead and expenses.....
Insurance goes up 10%......Property tax goes up 5%.....associations dues goes up 10%........utilities goes up 8%........etc..........
Your rates goes up 5% per room to accomodate increased cost of doing business......................is there added value to the increased rates?
.

Aloha One Day,
I'm not sure if you were questioning the premise or asking a question. I'm a little rusty.
Are you suggesting you would just raise your prices because the cost of doing business has gone up?
.

Aloha One Day,
I'm not sure if you were questioning the premise or asking a question. I'm a little rusty.
Are you suggesting you would just raise your prices because the cost of doing business has gone up?

Absolutely .........
Can absorb increased cost of doing business for so long.......ignore it and going out of business is what comes next......
for example..........a room rate of $100 per night.......keep that rate for 2 years...........during those 2 years.........heating oil had gone up 40%......electricity had increased 7%.......cost of say linnens went up 20% since the last major purchase......OJ, eggs.....you get the idea.
All did not increase at one time..........lets take it in one large #..........if your total overhead and operating expenses increased 9% .....then your $100 a night room rate is no longer $100..............it's now $91
Alot of cost of doing business increases can easily be overlooked.......A dozen eggs can increase $.05 or $.10 or so during that time..........not a big deal.......I get that............it's the accumulated increased costs that matters.
Guests know costs go up........they pay them to.......for their own homes and daily living.
So......if one has made no improvements to an establishment, as in added ammenities. Which is where many seem to place a $ value to as a means to increase rates...........or worthy of increasing rates..........
On the other hand........increase occupancy, that increases revenue and will offset the increased cost of doing business........this to is at what expense?.........increased labor....supplies........and sometimes in a service business quality of the work......in this case the quality of the product you produce for the guests.........and ones self.

 

[happykeeper]

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..

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.

Raising rates doesn't necessarily mean there is added value..........some times rates increased due to overhead and expenses.....
Insurance goes up 10%......Property tax goes up 5%.....associations dues goes up 10%........utilities goes up 8%........etc..........
Your rates goes up 5% per room to accomodate increased cost of doing business......................is there added value to the increased rates?
.

Aloha One Day,
I'm not sure if you were questioning the premise or asking a question. I'm a little rusty.
Are you suggesting you would just raise your prices because the cost of doing business has gone up?
.

Aloha One Day,
I'm not sure if you were questioning the premise or asking a question. I'm a little rusty.
Are you suggesting you would just raise your prices because the cost of doing business has gone up?

Absolutely .........
Can absorb increased cost of doing business for so long.......ignore it and going out of business is what comes next......
for example..........a room rate of $100 per night.......keep that rate for 2 years...........during those 2 years.........heating oil had gone up 40%......electricity had increased 7%.......cost of say linnens went up 20% since the last major purchase......OJ, eggs.....you get the idea.
All did not increase at one time..........lets take it in one large #..........if your total overhead and operating expenses increased 9% .....then your $100 a night room rate is no longer $100..............it's now $91
Alot of cost of doing business increases can easily be overlooked.......A dozen eggs can increase $.05 or $.10 or so during that time..........not a big deal.......I get that............it's the accumulated increased costs that matters.
Guests know costs go up........they pay them to.......for their own homes and daily living.
So......if one has made no improvements to an establishment, as in added ammenities. Which is where many seem to place a $ value to as a means to increase rates...........or worthy of increasing rates..........
On the other hand........increase occupancy, that increases revenue and will offset the increased cost of doing business........this to is at what expense?.........increased labor....supplies........and sometimes in a service business quality of the work......in this case the quality of the product you produce for the guests.........and ones self.
.

Forgive me One Day.. but your last lines would suggest you are arguing with yourself.
You started out saying that you absolutely would raise rates just because the costs go up and end up saying some things that make it more ambiguitous. It's like you agree that occupancy is not the right metric for a B&B and that raising rates is the right thing. So if that is what you think- we agree!
What I was trying to get at was that the idea that you can just raise your rates because your costs have gone up is not, IMHO, true. Adding value, OTOH, can increase your revenue, add to your profit margin, and increase guests value perception. If done properly, it allows you to push past your increased cost of doing business and extend your profits. If your revenue goes up and your occupancy goes down, several very good things happen. If you go back to the formula I mentioned previously, raising your rates can be done successfully once you have saturated the value of your current price point.
Just more wild and crazy thoughts from the "Build it and they will come" guy

 

[One Day]

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.

 

[One Day]

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

 

[One Day]

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.

 

[Boomer]

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.

 

[JBloggs]

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.