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HoReCa KB

Rate Strategy: Rate Types and Package Offers

Series: Hotels — Revenue & Demand Management Level: Practical Audience: Hotel GMs, revenue managers, property owners

Why One Rate Is a Revenue Problem

Section titled “Why One Rate Is a Revenue Problem”

A single price for every guest is operationally simple and financially costly. Different guest segments have different willingness to pay and different needs. A well-structured rate architecture lets you monetize each segment appropriately — without leaving money on the table or driving anyone away.

A solid rate strategy isn’t just “high season rate vs. low season rate.” It’s a system where every rate serves a specific purpose.

The Rate Hierarchy: From Maximum to Minimum

Section titled “The Rate Hierarchy: From Maximum to Minimum”

1. Rack Rate

Section titled “1. Rack Rate”

The officially published maximum rate — the “sticker price” before any discounts apply. Historically, this was literally printed on a card behind the reception desk. Guests rarely pay rack rate today, but it serves a strategic function:

  • Psychological anchor: “30% off rack rate” sounds compelling
  • Negotiation ceiling: The starting point for corporate and group rate discussions
  • Benchmark: All other rates are positioned as a percentage below it

Budget properties typically set rack rates between $80–$120/night; luxury properties range from $400–$800+.

2. BAR — Best Available Rate

Section titled “2. BAR — Best Available Rate”

The primary working rate in revenue management. BAR is the actual public rate on any given date — visible across all channels. This is the rate that moves with demand, market conditions, and competitive positioning.

Key properties of BAR:

  • Public (everyone sees it)
  • Dynamic (it changes)
  • The baseline for all derived rates (corporate = BAR − 15%)

Rate parity: Traditionally, hotels were required to maintain the same BAR on their own website as on OTAs. As of 2024, EU/EEA hotels can legally offer lower direct rates following the Digital Markets Act.

3. Advance Purchase Rate

Section titled “3. Advance Purchase Rate”

A discount for booking early — typically 60–90 days out, usually non-refundable. Goal: lock in revenue early and reduce the risk of unsold inventory in soft periods.

Typical discount: 10–20% off BAR.

4. Non-Refundable Rate

Section titled “4. Non-Refundable Rate”

A lower rate in exchange for no cancellation or modification rights. Directly reduces the cancellation risk — critical when OTA cancellation rates approach 37%.

5. Corporate Rate (CNR — Corporate Negotiated Rate)

Section titled “5. Corporate Rate (CNR — Corporate Negotiated Rate)”

A fixed rate agreed with a specific company for their travelers. Can be static (fixed for a contract year) or dynamic (a set percentage off BAR).

Dynamic corporate rate is generally better for the hotel: the company always gets a discount, but the hotel protects margin during high-demand periods.

Corporate guests are valuable because they travel year-round — including the low season.

6. Group Rate

Section titled “6. Group Rate”

A volume discount for 10+ rooms. Group blocks let you plan occupancy months in advance. The trade-off: lower ADR in exchange for predictable demand.

7. Package Rate

Section titled “7. Package Rate”

Room + additional services bundled into one price. Psychologically, packages obscure the bare room rate and create a perception of value.

Common package inclusions:

  • Breakfast (most universal)
  • Dinner, half-board
  • Airport transfer
  • Spa treatment
  • Local attraction tickets
  • Early check-in / late checkout

8. Last-Minute Rate

Section titled “8. Last-Minute Rate”

A discount for bookings 24–72 hours out. Used to fill rooms in the short window. Use with caution: it trains guests to wait for cheap rates rather than booking ahead.

Static vs. Dynamic Rates

Section titled “Static vs. Dynamic Rates”
TypeDefinitionExampleWhen to Use
StaticFixed price, doesn’t changeRack rate, corporate CNRNegotiations, guaranteed pricing
DynamicAdjusts by algorithm or manual decisionBAR, last-minuteManaging occupancy and demand

A well-run hotel uses both: static rates for segments that need price predictability (corporates, tour operators, groups), and dynamic rates for the public-facing channel.

Consortia Rates and GDS

Section titled “Consortia Rates and GDS”

For corporate travel, there’s an additional layer — rates negotiated through Travel Management Companies (TMCs) and travel consortia (AMEX GBT, CWT, BCD Travel, FCM). These are distributed via the Global Distribution System (GDS: Amadeus, Sabre, Galileo) and are visible only to affiliated travel agents and corporate bookers. Worth pursuing when corporate demand is a meaningful share of your mix.

Building a Rate Architecture from Scratch

Section titled “Building a Rate Architecture from Scratch”
  1. Set your Rack Rate — the price you’d ideally charge in perfect conditions
  2. Define BAR for peak, shoulder, and off-peak — typically three distinct levels
  3. Calculate corporate rate — BAR minus 10–20%
  4. Build 2–3 packages for core segments (couples, families, business)
  5. Assign conditions to each rate: refund policy, minimum stay, channel availability

The cardinal rule: Every rate should serve a specific purpose. Don’t create rates for the sake of complexity — it confuses staff and guests alike.

Competitive Set Monitoring Without Software

Section titled “Competitive Set Monitoring Without Software”

Once a week, check rates for 3–5 competitors in your comp set on:

  • Booking.com / Expedia (public BAR)
  • Their direct websites

Simple monitoring table:

PropertyToday+7 Days+30 DaysTrend
Competitor A$120$140$110↑
Your property$115$135$105↑

If competitors are raising rates for an upcoming period — move with them or ahead of them. If they’re discounting — analyze before following.

Sources

Section titled “Sources”