A great deal of terminology is used in the hotel business. It’s not always easy to understand and you might need a helping hand to get you through all the various expressions. An example is all the rate types with different kinds of names. To help you, we’ve listed the most common rate types for you with a short explanation. So, at the end of this article, you’ll know if there are any other rate types you can use for your hotel.
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Standard rate (RACK)
The standard rate is also called a RACK rate. This is the price per room without discounts or extras. It’s also the price shown on the website and the published price list for the hotel. Think of creating at least two different kinds of RACK rates: including and excluding breakfast.
Also interesting: 5 successful pricing strategies for a higher revenue
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Best available rate (BAR)
The best available rate, or BAR, is the most affordable rate that can be offered to the guest. There are two types of BAR rates, a dynamic rate, or a daily rate.
A dynamic rate is typically a standard rate based on the number of rooms available. For example, BAR rate 1 is used with a room occupancy of 0 – 20 percent, BAR rate 2 with a room occupancy of 20 – 40 percent, BAR rate 3 with 40 – 60 percent and so on. The prices increase as occupancy increases.
The daily rate has a fixed price based on the day of the week. For example, from Sunday to Tuesday you pay 100 euros for a standard room, on Wednesday and Thursday it’s 120 euros and Friday and Saturday it’s 150 euros. The prices are always adjusted proportionally based on forecasts made by the revenue manager.
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Non-refundable rate
A non-refundable rate means that the guest cannot cancel the booking free of charge. Not every booker is interested in this rate, because there is an element of risk should they need to cancel the booking. Nevertheless, a non-refundable rate is attractive, the price is lower than the standard rate and, as a hotelier, it is guaranteed revenue. Many hotels choose to offer a 5 - 10 percent off or 5 to 20 euro discount on the standard rate.
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Last-minute rate / Walk-in rate
The description says it all, this rate is for guests who book a room at the last minute or at reception for that night. The rate is often lower than the standard rate to stimulate last minute room sales. How much lower this rate is, is up to the hotelier to determine.
You might also like: 4 performance indicators (metrics) for a more profitable hotel
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Length of stay (LOS) rate
You can use this rate type when you want to encourage extended stays. The longer the guest stays, the more discount they will receive. It’s an interesting rate type because, as the guest is staying longer, the overall cost of maintaining the room is lower. The guest is also more likely to spend extra at the hotel and the longer stay inspires a positive review because of familiarity.
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Family rate
A family rate is a price reserved for parents and children. The price of extra beds is usually included. Also, there are often some add-ons included, such as fun children activities. If your accommodation is a place where many families stay, this can be an attractive rate to offer.
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Package deal
The best available rate (BAR) in combination with an activity or dinner is called a package deal. There can be many different kinds of package deals so get creative and offer different choices. Think of a package deal including bike rental, or a 2-night stay including dinner on one night.
Learn more: Hotel packages: why are they (especially now) important for your revenue?
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Corporate rate
Is your hotel popular for business travellers? If so, you can consider a special rate for this target group. The corporate rates are for business guests who return regularly or add significant value to the hotel. Look at businesses that drive volume to your property and offer them a competitive price, exclusively for them.
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Group rate
When large groups stay at your hotel, for meetings or conferences, there’s a good chance that they’ll receive a group discount. Group travellers for leisure can also receive a similar discount, for example, tour groups or weddings. These agreements are not made directly with the guests, but with the travel agencies, companies, or organisers.
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Complementary rate
This rate is not seen anywhere online but only in the property management system. The rate is set at 0 euros and can be used when you are offering someone a free stay.
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Promotional rate
If you want to increase room sales during the low season, promotional rates are excellent to use. Think of offers like “3 nights for the price of 2” or a free breakfast.
Tips from the expert: How to create the most profitable hotel packages
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Half-day rate
The half-day rate is popular with airport hotels or hotels that are attractive to business guests. It’s likely that the booker only wants to stay half a day at the hotel, whether as a layover until their next flight or to have a quiet place to work. The advantage to the hotelier is that the hotel room can be rented twice in one day: during the morning and then for an overnight stay. However, for housekeeping, logistical challenges can arise so keep this in mind.
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Early booking rate
Early bird rates encourage early bookings. This is usually a rate that offers a discount if you book well in advance (30 days up to 6 months). For the hotelier, it guarantees advance room occupancy, and for the booker, it’s nice to be rewarded for their loyalty.
Of course, there are many other rate types you can use but this is an excellent foundation to start with. Our advice is to offer, at least, the standard rate, a non-refundable and a package deal. This way, you have a good variety of prices available and it allows the bookers to compare and choose the most suitable option for them.
Tip: Print this infographic and keep it on your desk as a cheat sheet!
About SmartHOTEL
For more than 16 years, SmartHOTEL has been helping hoteliers navigate the exciting world of online distribution. From our office based in the Netherlands and the United Kingdom, our team serves independent hotels, hostels and chains worldwide by providing channel management and tailored online distribution solutions. A lot has changed over the last years, but our goal remains the same: simply connect hotels to the world. For any questions regarding our services, please contact us at sales@smarthotel.nl or call +31 (0)182 75 11 18.