Should Hoteliers Start Increasing Room Rates Again?

Two years into the pandemic and the hospitality industry has yet to recoup its losses since 2019. With more travel restrictions being lifted every day, is it time to increase hotel room prices back to pre-pandemic levels? 

The short answer is yes. But how fast and by how much you implement your hotel price increase will depend on your initial pandemic response.

Price hikes will be difficult for those who offered huge discounts

Dan Skodol, hotel revenue management expert at Cendyn told Skift “Studies have shown that hotels that are the fastest to drop their rates and who drop their rates the deepest can be the last ones to recover when demand comes back.”

So if you were one of the hoteliers who were aggressively offering huge discounts to increase occupancy rates, you might have a more challenging time bringing up your average daily rates as guests might have gotten used to your reduced pricing. It will be difficult to justify a price increase with the on-going pandemic. 

What you CAN do is to slowly introduce more perks with incremental increases in room rates. You can add free cancellations, flexible rebooking options, or late check-out as you increase hotel room prices again. 

Note that you might see a drop in occupancy rates as you start implementing this strategy but rest assured that you’re better off starting price increases now than incurring more losses in the future. 

For those who didn’t rely on discounts, be cautious in charging more too fast, too soon

While increasing room rates might be difficult for discount-heavy hotels, those that chose a different route should pace their price hikes cautiously. Guests will be more open to your increases as the holidays roll in and with travel bans being lifted BUT they will still be on the hunt for the best deals around. reports that since the beginning of 2020, “Consumers have, in kind, been more than happy to embrace these new freedoms and demand for hotel rooms across some of the most popular holiday destinations is now 184% higher than it was a year ago.”

Hotels in the Asia-Pacific region have increased room rates by 1%-12% to accommodate the growing demand and cover losses. However, each price increase is subject to factors like changing travel policies, economic power of target markets, and a possible new COVID-19 variant. 

Experts advise hoteliers to still maintain market price competitiveness in their revenue management approach and capitalize on the holiday booking surge at a conservative rate. 

Long-term advice? Always maintain pricing power

Duetto revenue management expert Nevin Reed comments “The hotels who took the most desperate measures with their revenue management strategy in the short run [will have] the toughest time recovering in the long-run.”

Always consult with hotel revenue management experts and refer to the most recent data when creating both short-term and long-term strategies, especially in the face of drawn-out crises. It’s better to offer more value and cost-effective perks than to immediately slash prices. 

At the end of the day, your guests will book with you if they see value in your hotel and attractive, timely prices. Just remember to always think long-term and think of the big picture. 

Need help in improving your average daily rates and maximizing revenue? Check out ZEN Hospitality Solutions’ Revenue Management Software (ZEN RMS) and find out how you can start recovering pandemic losses. 

Book your FREE consultation today. 

Article by Ayna Gonzales