As hotel demand in some ways returns to pre-pandemic patterns and guest behaviors evolve, hoteliers are working out how to best price different room types.
Different booking patterns, changing guest preferences and new technology all come together as hotel revenue managers figure out rates for rooms as well as room upgrades.
In the robust hotel market prior to the pandemic, hotels were pushing premium pricing on just about everything, said Wendy Stevens, chief operating officer at Maverick Hotels & Restaurants. During the pandemic, her company’s hotels were pricing upgrades and room types lower to entice guests to book and to generate incremental revenue.
“Thank goodness we have rebounded and we’re not using those practices as much,” she said. “It feels good that we’re able to charge the premiums for the better rooms or be able to upgrade the best guests.”
Similar to before the pandemic, guests during the week typically don’t want rooms with queen beds unless they’re at a lower price, said Nancy Obstler, vice president of sales, marketing and revenue management at Raines. Sometimes corporate travelers want the double queens so they can sleep on one bed and keep their belongings on the other bed.
The queen rooms are more popular on the weekends, and the hotels will push the rates on those as demand increases, she said.
As more corporate travel returns, some hotels will require minimum stays of three nights to reduce the burden of turning around rooms amid shortages in housekeeping staff, Obstler said. It’s a challenge if corporate travelers are staying for one night, requiring daily cleaning for the next guest who will stay only one night.
These hotels will sell out on Tuesdays and Wednesdays now, but this strategy helps with the Mondays and Thursdays as well, she said.
“We’re tending to want that longer length of stay to be able to get a better [revenue per available room] and help the operations of the hotel,” she said.
Demand for upgraded room types has always been strong at Marcus Hotels & Resorts’ leisure-driven hotels, said Linda Gulrajani, vice president of revenue strategy and distribution. That was more pronounced during the pandemic when almost every traveler was a leisure traveler. Guests then weren’t particularly price-sensitive, so they were willing to pay for upgraded room types, even at the traditional urban hotels.
Revenue-management systems have helped hoteliers understand guests’ propensity to pay for upgraded rooms, she said. In the past, hotels would price a room with a view at $40 more than a standard room, a basic junior suite at $80 more and a big suite at $200 more.
“But we didn’t really understand if that’s what the guests wanted to pay, and we weren’t dynamic in changing those premiums during high demand, low demand, weekdays, weekends,” she said. “Technology has helped us become more dynamic and more robust in how we’re pricing those upgraded room types.”
When higher-tier rooms are available, such as suites, front-desk associates are incentivized to sell those at check-in, Stevens said.
“When you’re checking in and they say, ‘We’ve got an upgrade: a beautiful corner room for $25.’ Are you going to take it? Probably,” she said.
If there’s a room available, the top-tier loyalty program member is going to get the upgrade, she said.
“It is to our benefit to sell those rooms pre-arrival,” she said. “We want to take care of those guests. We want to take care of the top guests, that’s what our business thrives on, those regular guests coming to our hotel. Again, we have to think about the health and revenue growth of the hotel as well.”
At check-in, the goal will always be to make money for any room upgrade, Gulrajani said. The front-desk process isn’t as dynamic as the normal sales process, she said. The associates have parameters and guidelines to follow, but Marcus Hotels executives are happy associates are trying to get extra revenue rather than just giving away free upgrades.
Marcus Hotels strongly encourages its hotels to give upsell incentives to front-desk associates, she said. That could be extra pay, free lunches, gifts or other rewards if they reach a certain amount per period.
Along with upgraded room types, the company sees revenue opportunities through renovations, she said. Its Grand Geneva Resort & Spa in Lake Geneva, Wisconsin, has been undergoing renovations, including its guestrooms. The hotel has sent out targeted email blasts to loyal guests promoting newly renovated guestrooms offered at a premium rate.
“We’re only sending those to people who have stayed with us a number of times,” she said. “We want them to be the first to experience the rooms.”
Marcus Hotels is thinking about the concept of free upgrades more than it used to, Gulrajani said. Upgraded room types cost more to clean because they’re bigger, and the pandemic and labor shortage have the company thinking about expenses and operations in different ways now.
“Before COVID, we would have never thought about the cost of cleaning a suite if we upgraded somebody, like it just wouldn’t for most hotels have played into the conversation,” she said. Where today, it does. It doesn’t mean we never will, but we sure think about it more.”
For brand loyalty members entitled to an upgrade, front-desk associates aren’t going to try to charge them for moving up a room type, Gulrajani said. If the guest wants to move from a standard room to something higher up, such as the presidential suite, that’s an upsell opportunity.
“Typically, the dollar value isn’t the same as what it would have been if they booked full price for the suite,” she said. “A lot of times we’ll negotiate and take $100 instead of $200 just because any revenue at that point is good revenue, especially if we’re full and we’re going to have to upgrade people for free.”
There are still revenue opportunities even after giving a loyalty member a free upgrade, Obstler said. If there are a few standard rooms left, that will push up rates. If a loyalty member receives a free upgrade, that frees up a standard room that another potential guest is more likely to book, even if the rate is increased, compared to a upgraded room type.
“So, we’re really not losing out that much in the end by upgrading them,” she said.
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