Why your hotel should start using derived rates

Welcome Anywhere Property Managment System > Blog > Hotel revenue management > Why your hotel should start using derived rates

Derived rates are powerful tools that independent hotels can use to compete with the big chains.

As well as saving busy general managers a lot of hassle, being able to dynamically adjust rates across a batch of rooms in one fell swoop can boost revenues.

As derived rates are becoming more common, let’s dive into what makes them tick and why they’re worth leveraging at your independent hotel…

The basics

Derived rates are typically offered as a tool within a PMS (property management system) and are linked to the hotel’s online booking service and channel manager.

Historically, and without any form of derived rates tool, hoteliers have had no choice but to adjust room rates individually whenever it was within their interests to make wholesale changes.

This manual approach is time-consuming and not exactly ideal, which is why the automated features offered by derived rates are a big selling point for those who adopt them.

The idea is to set a base rate, then use that rate as the foundation on which all other rates are automatically calculated. For instance, your room-only rate could be a good starting point; the lynchpin which defines how other rates are worked out, if you will.

When you run a discount offer, for example, this price will be derived from your base rate, with a percentage of the total subtracted to match the desired promotional discount.

The same applies for room rates which include extra services, such as breakfast, an evening meal or even a spa treatment package.

Once everything is set up according to your liking, you can simply let the derived rates tool do all the hard work, so you can focus on delivering a great guest experience elsewhere.

The benefits

Aside from the obvious advantages that derived rates offer in terms of efficiency and fewer pricing errors, they bring other perks to the table for independent hotels.

For instance, you might want to adjust your rates to reflect seasonal changes, or to complete more effectively with your local rivals. There may also be times when you need to lower prices to stimulate sales when you see a quiet patch on the horizon.

Whatever clever tactics or new strategies you want to try out, derived rates will give you the ability to do so without forcing you to jump through hoops in your PMS and channel manager.

Mistakes happen, and derived rates go a long way to avoiding common errors made by hotel staff. For example, if you lower your base rate, but forget to change your discounted rate, this can create confusion among potential bookers. With derived rates active, you’ll never need to worry about such a slip-up taking place.

Derived rates also make channel management far more effective, by enabling you to make wholesale changes to rates across a range of OTAs in seconds. In a competitive marketplace, this can give you the edge, or at least enable you to respond quickly to whatever new curveball your closest rivals have thrown your way.

Wrapping up

There may be a bit of work involved in perfecting your derived rates setup, but once the cogs are whirring you’ll be glad that you put in the effort with this fantastic form of rate management.

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