Let’s Put Some Sense in Room Rates

By. Kirby Payne 08th Mar 2010

There always seems to be some confusion about all the different rates offered at a hotel. Recently I distributed a memo to some of our limited service economy lodging properties trying to help the front office staff understand our company’s philosophy on rates. I’ll share it with you this month.

Note-The Club program referred to has to do with the frequent guest program we use in many of our hotels. One hotel might call it the Coach Club while at the next it is the Econo Club.

Rack Rate

That phrase is for internal use only and should not be used with the public. By definition it is the hotel’s published rates excluding any promotional discount programs.

Published Rate

The rates published in travel directories of various general types. This is the base rate for a room that would be quoted to a guest for an average or typical night. Usually there is a range of published rates representing different types of rooms for single or double occupancy. During peak demand periods it is acceptable to quote the high end of the published rates for rooms that are sold at a lower rate. During peak periods it is also acceptable, even desirable, to not quote single occupancy rates.

Extra Person Rate

This is the additional charge for additional adults in the room above double occupancy to create triple or quadruple occupancy. The extra person rate is usually the difference between the single and double occupancy rates.

Group Rate

Not necessarily a discounted rate! It is a rate appropriate to the group, the nights of the week, length of stay and the time of year. Group rates must be approved by the Corporate Director of Sales and Marketing and the General Manager. Group rates may be higher than published rates.

When taking reservations or quoting rates, it is always advisable to ask if the person is with a group if a group is booked for the dates the person is inquiring about. If their response is, “Yes, what groups do you have?” or something equally transparent, do not volunteer what groups are in house. They should know their group. Knowing about group affiliations before quoting the rate will eliminate the underselling a group rate which might be higher because of various factors.

Club Rate

These are rates which are established for each hotel’s program. Part of marketing the program is telling the participants that “active participants” will be guaranteed this rate for a period of time. Ideally, we start the rate in the slow season and attract business and then leave it in for the high season as a reward to the active members. We do not want to implement it during the high season so people can use it once or twice and then not use our hotel during the slow period.

I want to emphasize that the various hotels’ Club programs are frequent guest programs for legitimate frequent guests. These guests will almost always, without exception, be commercial guests. This rate may or may not be the same thing as a commercial rate. Club rates include additional special amenities that are not included with the commercial rate regardless of which one is higher.

Commercial Rate

Commercial rates are typically established when rates are submitted to the franchiser once or twice a year. In that case they may be discounted from rates published in various general directories. Note that the word “rack” was not used. Commercial rates used directly by the hotel may be changed from time to time in consultation with the director of sales and marketing.

There may be different commercial rates in effect at the same time. For instance, several high volume corporate accounts may have one, while walk-ins have another (if any at all) and the franchisor may have others for their special programs. Ideally most, if not all, commercial rates start in the same place once or twice a year, get eroded away for larger accounts or particularly slow times, and then get corrected again when directories are published.

It isn’t automatic that every Tom, Dick and Mary who has a business card gets a commercial rate. Most of the time companies should have an agreed upon rate for their visitors or the guest should be a club member. Individuals should be offered whatever rate necessary for that particular day. The statement, “We have no commercial room rates available tonight,” is not a four letter word. On the other hand, offering a commercial rate is a perfectly legitimate way to discount off published rates.

Remember most of our hotels are economy lodging facilities so the published room rates are already “economy rates”. We don’t need to discount when we don’t need to discount!

Negotiated rates

Any rate negotiated for special situations. These might include hospital visitors to patients, National Guard, etc. These rates are only available to qualified guests. They are not to be offered when they are not requested, the person’s eligibility must be verified in some manner and the rates are not available during peak periods unless a special exception has been made in advance and approved by the Director of Sales & Marketing.

Distressed Rates

These are rates which the hotel’s General Manager has authorized during distressed occupancy periods. Typically a GSA (Guest Service Agent/Desk Clerk) would offer published rates first and if this were declined, begging to search for bonafide discounts the guests might be eligible for. If the guest isn’t legitimately eligible for any, the GSA might ask if they are regular visitors to the area and offer a “discount bonus” for signing up to the Club program if the guest appears to be legitimately eligible. The GSA might offer a discount for some other purpose such as helping the GSA rent the most rooms that week or to try a room the plumbing was just repaired in, but has not yet been inspected.

The point of all of this is not to erode the hotel’s published rate credibility.

About Kirby Payne

Kirby D. Payne, CHA, is president of Tiverton, RI-based HVS/American Hospitality Management Company, a full-service hotel-management company with offices in South Florida and Dallas. The company has operated hotels throughout the United States and served a multiplicity of clients, including lenders, airport authorities, law firms and individual investors. Payne, a 50-plus-year hotel-industry veteran, served as the 2002

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