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Setting room type upcharges infographicThe first hotel that I ever worked at was a relatively small 70 room property with 4 floors. Almost everything about the hotel was quite standard: a 2.5 Star property about 3 miles from a major NFL stadium and just a few miles from a major Amusement Park. We were busy in the summer; our weekends almost always fared better than our weekdays, and we struggled for corporate business on weekdays much like many other hotels in the area.

The one thing that did stand out about that hotel was the number of room types we had, despite our relatively small footprint.  My jaw still drops when I think of how many we had in that hotel: fourteen. That’s right- fourteen room types for just seventy rooms.

Junior suites, Junior Vaulted Ceiling Suites, Accessible Kings, Accessible Double Queen Suites, Vaulted Ceiling Jacuzzi with Extra floor space which we called the Governors’ Suite, Regular King, Double Queen, and the list goes on. All of this was after some pruning too; we very nearly included the two sets of connecting suites which would have added a King Connecting and Two Queen Connecting suite room type into the mix for a total of 16 room types, which would’ve rivaled H.H. Holmes’ number of room types in his thrill-kill-mansion.

The only real benefit to the assortment of room types was that it gave us a huge amount of creativity with which to experiment with various room type upcharges based on whimsical criteria. We actually did charge a bit more for the vaulted ceilings, the Jacuzzi’s, the floor space, and every other combination you could think of. It was quite a bit of fun in hindsight, although rate changes were absolutely tedious at times.

However, most hotels that I now interact with on a daily basis usually have 2-5 room types which is totally routine in the select-service world. Typically, my hotels have a King room, Two Queen bedroom, and some upgraded iteration of each of those (King Suite with or without a Sofa, and Two Queen Suite with extra floor space or a sofa thrown in for good measure). Most hotels as a knee-jerk reaction price their 2 queen suites a little bit higher, and that usually a smart move, but I still see a hesitancy to really try and upcharge the two bedrooms on the high compression leisure weekends, which I think is a big opportunity to drive ADR at many properties who are still using the old traditional $5 and $10 upcharges on their premium room types (many times just because that upcharge has always been in place). It’s time to take our stodgy old room type charges off the mantle, dust them off and give them an update. By following the tips below you will be able to immediately make an impact at your property as long as you offer at least a 1 and two-bedroom type.

Tip 1:

Come up with a logical day of week upcharge strategy. Typically, corporate travelers stay Sunday-Thursday and prefer a king room type. Leisure travelers travel on the weekend and prefer 2 beds. As a general rule of thumb (obviously considering the room type mix in the property), consider increasing the upcharge for kings during the week for the less price-sensitive corporate traveler, and increasing the upcharge on the 2 bedroom types over the weekends.

Tip 2:

Identify your hotel’s seasonality trends; which seasons and months can you comfortably experiment with boosting your room type upcharges? For many of us, that time of year is the summer, where leisure travelers expect to pay a premium simply for the additional bed. Although we may have developed a habit of charging only an additional $10 upcharge on rooms with 2 beds, in reality, we can most very easily increase that to a $15 or even $20 upcharge, especially on high demand summer weekends and event dates year-round.

Seasonality Grid

Tip 3:

Shop your competitive set’s room type upcharges. Are similar hotels pushing their premium and two-bedroom types higher than your premium and two-bed offerings? If so, that is often enough justification alone to give a higher upcharge a try. Shop your nearest 4-5 competitors over a mixture of weekends/weekdays/events for a more complete view.

Here’s an Example of room type charges in the market of the previous hotel we just used as an example:

OTA Insights Rate Shop

Tip 4:

As an added defense mechanism, your hotel should be utilizing an upcharge-by-number-of-guests function in your PMS or CRS. Make sure that if someone were to shop your property online and specify that there were 4 adults in the room, your rate will reflect the accurate price including all extra-person-charges. Not all prospective guests will be so courteous to let you know how many guests there will be in the room upon booking, but for those that will, don’t turn away free room revenue!

Below is an example of a property that charges $10 + for every adult after 2 adults.

Property Management System upchargesTip 5:

Analyze room-type occupancy and ADR premiums. From your PMS/CRS/RMS, export a report that illustrates performance (ADR, Occupancy, etc) by room type. For example, the property below can likely squeeze a few extra dollars from their ONBR (one bedroom) suite, as the current ADR premium exceeds what their upcharge is on all seven days of the week!

Revenue Performance by Room Type gridTip 6:

In the negotiation process with RFP’s and local negotiated accounts, ensure that sales are upselling your premium room-types and not lumping them in with the lowest room type. All too often in the haste to negotiate new business there is no consideration given to room type upcharges when bidding for prospective corporate clients, and sales will often give the whole hotel away at a flat rate. This becomes problematic when corporate guests begin to expect premium room types at no additional charge.

Try to negotiate accounts with certain rate expectations regarding premium room types, such as the example below:

Sample LNR Rate strategy

Be sure to check out our previous blogs on advance purchase discounts, overbooking policies, and revenue hurdle points!