More than 90% of hotel and brand revenue management professionals will tell you they follow a flexible BAR model for their pricing strategy.
Dig a little deeper though and you often find that in fact they do have a BAR Rate and sure enough it does move up and down based on perceived demand; what’s this there are other rates in market that are much lower than BAR and are being promoted on an ongoing basis. in this case is BAR really BAR.
First off what is BAR;
Best Available Rate (BAR) is defined as the lowest available unqualified rate, representing the fair market value for the hotel for each day.
I am a big proponent of a true flexible BAR pricing model; one where BAR is priced based on the hotel and market demand and does in fact provide the lowest unqualified rate the consumer every day. Following this model provides a baseline for all other pricing along a touch point to continuously measure to test out demand.
Don’t get me wrong I support and work with clients aggressively to take advantage of all segments of business in the price triangle including premium and discount along with retail. It is when discounts are offered on an ongoing basis without restrictions or fences under the cloak of marketing that I shake m head. Here’s why:
- Any discount offered without restriction is your new BAR rate; so despite a BAR Rate Code set at $225 the Saver Rate set at 25% off or $169 is now your Best Available Rate.
- Any discounted rate offered on an regular basis begins to train the consumer to wait and not book retail; think about it if you were a regular traveler and you signed up for a hotels Email Offers that come out every week or two offering reduced price with no restrictions would you not wait.
- The discount offers are often called marketing promotions which of course get marketing dollars put against them to promote a lower rate; naturally the promotion sell with great volume and everyone celebrates despite a lower rate being sold.
OK I think you get the point; anyone can discount a rate call it a promotion, market it and generate volume;. In order to generate maximize RevPAR and maintain a true BAR model here are a few keystones to always refer back to:
- Set BAR based on a minimum of these three items: Market Demand. Property value compared to your competitive set & Internal Demand
- BAR is always the lowest unqualified rate sold in market; NO EXCEPTIONS
- Discounts, promotions, special offers always have a fence to force a qualification, examples include; Limited Time Offer, Fully Prepaid/Non Refundable, Membership, etc
When you set BAR in this way the future becomes more clear; you can deliver on the old Revenue Management mantra of Right Rate/Right Date.
It only works though if the property team is honest about the right price for the hotel in the market; many want to be a $300 a night hotel very few actually are. If price is set right then more retail business will be sold, RevPAR will increase and everyone is happy.
Last note; when it comes to marketing definitely include a price point as a call to action. The price point should be what is referred to as the Lead Rate or lowest BAR Rate for the period advertised and managed based on demand generated.