What is rate mixing?
Rate mixing is a practice many hotels use to offer different rates for a singular booking or package. This way, the guests get the most out of the booking by mixing different daily rates. You essentially allow guests to choose rates depending on their needs and mix them together. Guests are attracted by the best price available, and hotels are able to attract guests at different rates, optimizing profitability.
How does rate mixing work in hotels?
Rate mixing in hotels gives hoteliers the chance to create strategic offers and get the most out of each booking. At the same time, it ensures that guests get the best rate for each individual night’s stay. It also ensures higher occupancy rates and better revenue per room because at any given time there can be multiple rates at play, and hoteliers are able to maximize the daily revenue per room.
Hotels work with a variety of different rates – seasonal and weekend rates, advanced payment discounts, rates based on length of stay, advanced bookings, and many other types. The idea is that by mixing, you can take advantage of all these types. Even on the same day, guests could be paying a different rate for the same room depending on a variety of factors.
Rate mixing example
You may have a discounted rate if someone books two nights during the weekday. Let's say it's €120 per night instead of €150. The same guest might book two weekday nights (Wednesday and Thursday) and two nights during the weekend, which cost €200 per night. With a more competitive rate, the guest can pay the discounted rate of €240 for the two weekdays and €400 for the weekend.
So, instead of paying the highest rate of €800 for four nights, the mixed rate brings the bill to €640. For hotels, this means selling at the highest rate when demand is high (during the weekend) and offering a more competitive rate when demand is lower (during the week). It's an effective strategy for maximizing revenue during off-peak periods.
Best practices when implementing a hotel rate mixing strategy
Now that you have a better idea of how rate mixing works, let’s look at some of the best practices.
Establish a transparent pricing model
When implementing this pricing strategy, make sure it aligns with your hotel’s revenue goals, target market and brand positioning. You also want to consider fluctuations in demand, seasonality and competitor pricing in your comp set and be transparent about which rate your guests are booking.
Keep in mind cancellation policies
Different rates may also have different cancellation policies. Keep these in mind when working with mixed rates. If you're mixing a non-refundable rate with a refundable weekend rate, make it clear that only part of the reservation is refundable. Otherwise, it leaves room for confusion and can lead to frustrated guests.
Balance supply and demand
Try to balance supply and demand by adjusting room rates based on actual demand. If you see that, during the same period, the ocean view properties are not being booked, but the garden view with a terrace room is very popular, adjust prices. Offer the ocean view at a lower rate during the week, then raise it during the weekend. Guests will benefit from a lower rate for part of their stay, making them feel like they got a good deal.
You can charge higher rates when demand is high and offer less popular rooms at a lower rate. This process enhances guest satisfaction because they can select a room type that matches both their preferences and budget.
Always put guest satisfaction at the forefront
Yes, the goal of your property is to be profitable. But if you don’t prioritize guest satisfaction in pricing decisions, you won’t have any guests. When determining the appropriate rate mix, cater to price-conscious guests and those looking for the best room for each occasion. By fully understanding what your guests are looking for, you can adjust prices to meet their needs.
Learn more about hotel rate types and how to maximize your property’s revenue.
Identify areas for improvement
Any revenue management strategy requires you to analyze how well it’s working and adjust your process accordingly. You can evaluate historical data, conduct customer surveys, gather guest feedback, and monitor and adapt your pricing strategies accordingly. You can also experiment with rates at any given time and analyze your revenue. Don’t forget to leverage your analytical tools to see how well your hotel is performing year-over-year.
Leave some leeway for price adjustment
As with all pricing strategies, give some leeway for price adjustment. Perhaps you have a regular guest used to paying a specific rate instead of the mixed rate. In that case, your front desk staff should be flexible enough to honor these exceptions. It's best to find a way to accommodate the needs of your regulars, as investing in new guests is much more expensive.
Conclusion
We’ve looked at rate mixing in hotels to maximize revenue. We’ve seen some of the best practices and got an idea of what it is and how it works. While rate mixing can help you optimize revenue and attract guests, this pricing strategy should be carefully managed to ensure both parties benefit. When done right, hotels can be more profitable while keeping guests happy.
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