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Here at Duetto, we advocate an Open Pricing methodology to rate optimization. But what if you want to run a Best Available Rate by Length of Stay (BAR by LOS) strategy?
Open Pricing and BAR by LOS - could they ever be friends? Yes, thanks to the flexibility of the Duetto system.
What is Open Pricing?
Open Pricing is the ability to price all room types, channels, and dates independently of each other to maximize revenue without having to close any off.
What is BAR by LOS?
Best Available Rate (BAR) is a commonly used base rate upon which all other priced segments are based. It is also the common rate used for comparison between hotels. BAR by Length of stay (LOS) is a BAR rate that is dynamically priced based on the number of nights a guest has booked at the hotel. For example, the BAR rate for a seven-night booking will often be lower than the BAR rate for a single night.
So how can these two different pricing practices work together?
What a BAR by LOS strategy does is it allows hotel revenue managers to flex their prices according to various lengths of stay. It sounds simple but feeding this into your distribution channels can be complicated.
Within Duetto, users can simply set their discounts by LOS. For example, a two-night stay receives a discount of between 5% and 7%, 3-7 nights gets a discount of between 7% and 10%, etc. The discount is applied to the optimized rates produced by our pricing application, GameChanger.
The biggest benefits of operating a BAR by LOS strategy in tandem with Open Pricing come with properties that commonly accept long-stay guests; resorts that typically have an average length of stay of 7-14 nights, or aparthotels that may have guests staying with them for anything from one to 365 days.
Operating both systems in tandem can enable properties to maximize inventory. These benefits come from a shift in lead time and length of stay patterns, resulting in ADR and RevPAR growth. Longer stay patterns tend to have a longer lead time and therefore often book outside the “pricing adjustment” window, thus resulting in a higher ADR. This enables hotels to build out stronger base business.
“Having worked in the aparthotel sector for a long time, and managed longer lengths of stay, the advantage is that you can control your length of stay. You know for how long your customers are going to stay, and as such, you can maximize on rates for your shoulder nights because they are staying for longer,” explained Melody Grelat, Senior Customer Success Manager, EMEA, Duetto.
“You have much more control over the discount because it is coming off an optimized Open Priced rate,” she added.
Playing Inventory Tetris
Joyce Galvao, Director of Customer Success, Duetto, explains it as a computer game: “Imagine you are playing Tetris with these stay blocks. You have people all staying for different lengths, so you can slot them into the system to your advantage. It does allow for better inventory management.”
BAR by LOS enables certain property types to build a solid base business, but the big gains can come by optimizing the single nights or short-stay inventory that remains. Selling these on a fully optimized Open Pricing rate can boost the bottom line, as our client Florian Kuch, Revenue Manager at THE FLAG, explained in this blog: Exceeding Expectations On A Tuesday.
“We have 75% long stay as a base and the rest is more transient. With 75% of the inventory already sold that gives me much more confidence to play with rates and be more aggressive,” Kuch told us.
THE FLAG operates AutoPilot on all transient business, and in 2019 this tactic enabled Kuch to increase ADR by 5%.
“Because we are incredibly flexible our customers don't need to be tied to just one thing. Here is Open Pricing supporting BAR by LOS. This is what we can do with the flexibility of our system,” Galvao said. “If you're trying to maximize what you can do with your inventory, then that becomes a possibility.”
More Control On Discounts
Operating an Open Pricing strategy in tandem with BAR by LOS can help certain properties to gain more control of their discounts.
Here’s how. Often, a BAR by LOS system will take the highest BAR rate for the period in question. If you are pricing on a seven-night stay, which would include a peak weekend period, the total rate will be dictated by those peak rates. This might not be the most competitive package to go to market with.
Bringing Open Pricing into the equation means that every night of that seven-night stay has its own rate, discounted to account for the longer length of stay. For example, this might mean that Friday and Saturday are at $150, while Sunday is $125, and the rest of the nights are $135, but every single one of these rates is then discounted by 10% to account for the longer stay, and the total seven-night package is presented to the consumer.
In periods of low demand, being extra competitive on rates can be the difference between securing the booking or not. It can also help you sell those low-demand Sunday nights that might not always shift.
Pia Leonard, Director Strategy and Business Development, Victor’s Residenz-Hotels, explained this in more detail: “Length of stay pricing is the logical evolution of open demand-based pricing. Every day of the week and length of stay combination has a certain demand and desirability and should therefore have a dynamic and individual price. This allows the hotels to be more competitive in the market not just through dynamic Open Pricing, but taking into consideration the arrival and stay patterns, driving more business into shoulder dates with preferable lengths of stay.
“Some peak days may see a small decline in daily ADR, but the overall RevPAR result will be higher, due to the gain in occupancy at good ADR on the shoulder or less desirable days. In particular during slower times, like off-season, during a pandemic or post-pandemic, this does provide a noticeable advantage.”
Setting Rate Boundaries
Open Pricing can enable properties to get even more granular with their pricing strategy through BAR by LOS. By setting floor and ceiling (min/max) rates and pushing an automated Open Pricing strategy that is defined by season, by day of the week, by day before arrival, or any other applicable restriction, hotels can deliver dynamic pricing and not just a fixed percentage of discounts.
Running an automated Open Pricing strategy means that, as you get closer to stay date (for example seven days out), you can override all BAR by LOS rates and just offer your optimized one-night rate, regardless of the length of stay, to boost that final revenue capture.
Can Open Pricing and BAR by LOS be friends? Absolutely! The flexibility of the Duetto platform means that each can have its place in the revenue strategy of certain property types. And when used together this can help hotels, resorts, and aparthotels to increase RevPAR, shift shoulder dates and optimize on those last-minute transient bookings, which are becoming more popular with the consumer right now as they navigate travel uncertainties.
Want to know more about how Open Pricing can support your BAR by LOS strategy? Duetto customers can contact their Customer Success Manager. Non-Duetto customers can contact us here: https://www.duettocloud.com/contact
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