By Charles Tan
In today’s highly competitive hospitality market, particularly in Thailand, hotels that rely on fixed room rates throughout the year are increasingly vulnerable. Demand fluctuates sharply by season, weekday patterns, events, and traveller behaviour. As a result, pricing can no longer be static — it must be strategic, flexible, and data-driven.
For hotels already in operation, room rate management is not merely a sales function. It is a core profit driver that directly impacts Revenue, GOP margins, brand perception, and investor confidence.
Flexible Pricing: Selling at the Right Price, at the Right Time
Flexible Pricing refers to a structured approach that allows room rates to adjust according to market conditions, while maintaining rate discipline and brand integrity. In practice, this approach is built around three key pricing methods, each serving a distinct commercial purpose.
- Dynamic Pricing – Aligning Rates with Real Market Demand
Dynamic Pricing is the foundation of modern revenue management. It involves adjusting room rates based on live market indicators, including:
- Demand and supply dynamics
- Seasonality (high, shoulder, and low seasons)
- Day-of-week patterns
- Booking pace and lead time
- Competitive set (Comp Set) positioning
Practical Application
- During high-demand periods, rates are increased to maximise ADR and overall yield.
- During low-demand periods, rates are adjusted to stimulate occupancy without unnecessary discounting.
When executed correctly, Dynamic Pricing enables hotels to optimise both occupancy and ADR, rather than sacrificing one for the other.
Dynamic Pricing is not about frequent price changes — it is about justified, disciplined pricing decisions.
- Promotion Rates – Stimulating Demand Without Diluting the Brand
Promotion Rates are tactical tools designed to influence booking decisions during specific periods, such as low season or slow booking windows. The objective is not simply to sell rooms, but to create urgency and perceived value.
Effective Promotion Structures
- Advance Purchase / Early Bird offers
- Length-of-stay incentives (Stay Longer, Pay Less)
- Value-added packages including F&B, spa, or resort credits
The most successful promotions reduce price erosion while increasing perceived value. Rather than cutting rates aggressively, hotels add meaningful benefits that protect ADR and brand positioning.
Poorly designed promotions, however, risk training guests to wait for discounts — a pattern that erodes long-term profitability.
- Under Cut Rates – A Tactical Tool, Not a Strategy
Under Cut Rates involve intentionally pricing below the competitive set. While this approach can be effective in limited scenarios, it must be used with caution.
Appropriate Use Cases
- Newly opened hotels building initial market presence
- Secondary locations competing with prime areas
- Short-term occupancy recovery to support cash flow
Critical Controls
- Apply only to selected room types
- Restrict to specific channels
- Define a clear exit strategy
When overused, undercutting leads to price wars, ADR erosion, and long-term brand damage. For investors, persistent undercutting is often a warning sign of weak positioning rather than strong competitiveness.
Beyond Pricing: Key Rate Management Principles Investors Should Watch
Rate Structure
Clear rate architecture is essential. Hotels should maintain well-defined categories such as:
- Best Available Rate (BAR)
- Seasonal Rates
- Contracted and Corporate Rates
- Package Rates
A disciplined rate structure allows for better forecasting, control, and transparency.
Rate Integrity
Rate parity and consistency across channels are fundamental to brand credibility. When OTA rates undercut direct channels, guest trust erodes and distribution costs increase.
Strong Rate Integrity supports:
- Higher direct booking contribution
- Lower commission dependency
- Stronger brand perception
Channel Strategy
While rates should remain consistent, value propositions should differ by channel.
- Direct bookings should offer exclusive benefits
- OTAs should be used strategically for visibility and volume
This balance protects margins while maintaining market reach.
Comp Set Selection
Pricing decisions are only as good as the competitive set they are benchmarked against. Hotels must compare themselves with properties that share:
- Similar positioning
- Comparable location
- Equivalent target markets
An incorrect Comp Set leads to incorrect pricing decisions — and distorted performance metrics.
Common Pricing Mistakes in Operating Hotels
- Using discounts to compensate for service or product weaknesses
- Over-reliance on promotions
- Ignoring booking pace and forward-looking data
- Allowing OTAs to dictate pricing behaviour
These issues often manifest in declining ADR, volatile occupancy, and inconsistent GOP performance.
Executive Conclusion
Strong hotel performance is not achieved by being the cheapest option in the market. It is achieved by pricing intelligently, consistently, and strategically.
Hotels that succeed over the long term:
- Use Dynamic Pricing as the core framework
- Deploy Promotion Rates selectively and purposefully
- Apply Under Cut Rates sparingly and tactically
The most profitable hotels are not those with the lowest rates,
but those with the strongest control over their pricing strategy.
At Vigor Hotel Solutions, we believe that pricing is not a reaction to the market —
it is a leadership decision that defines profitability, resilience, and long-term asset value.
