Cracking the Code: Deciphering motel nightly rates for success
For someone new to the accommodation sector, stepping into the ownership of a motel unveils many challenges. One those challenges is understanding the intricacies of nightly rates. So, how do you know what to charge and are the current rates competitive? Cracking the code to decipher motel nightly rates will break down the details and what to consider in the process.
For new property owners, breaking down the costs of selling a room from the expenses can be an eye-opening exercise. This should be one of the first steps in truly knowing how much to charge. The essential cost analysis encompasses items such as linen, staffing, cleaning supplies, utilities, and amenities. Factoring in commission costs, council rates, insurance, and wear and tear provides a more comprehensive view of the overall expenses. Once the ongoing costs are established and the guest avatar is understood, the owners will have a better picture of the potential profit and revenue growth of the property while considering any improvements or operational changes they wish to make.
When reviewing the nightly rates and deciding how much to charge, there is one important aspect to consider. Is the advertised rate of the room in line with the product? Being competitive in pricing in the market is a wonderful thing to be, however is the product competitive? There is no point in having a high-priced room if the quality is sub-standard and social media and online reviews can be absolutely brutal to any business. Charging the same as a competitor when the property is not at the same standard can have a negative flow on effect to forward occupancy and revenue. If the property needs a little love, be honest and consider setting the rates slightly lower than competitors, while still operating at a profit. This will enable improvements to take place and the property to rebuild its position within the market. On the other side of the coin, does the motel offer more than the competitors and can the current rates be increased?
Understanding the property’s clientele, point of difference and market will also have substantial influence on knowing how much to charge. However, all of these considerations may change seasonally and over a short period of time so being flexible with rates and knowing the property intimately can significantly benefit the bottom line. For example, as an accommodation operator in a high tourist area, Lunar New Year celebrations brings a large number of one-night stays as guests visit as many areas as possible in a short space of time. This is a complete flip from a few weeks prior during the summer school holidays when guests stayed for multiple nights or weeks.
Whether opting for standard rates or dynamic pricing, considering length-of-stay discounts or embracing set-and-forget rates, all of these decisions play vital roles when crafting a rate structure tailored to the unique needs of the property. To make the hard decisions there are tools and businesses available to help motels analyse their data and set a plan. Many property management systems also have a built-in yield management tool that will assist in understanding how much to charge and when according to the market and demand.
Consider revisiting the nightly rates in relation to costs on an annual basis. Once finalised, and if not automated, uploading rates and availability to the motel’s website and OTA’s need to be completed at least every 6 months. These tasks are easily incorporated in the Monthly Tasks Calendar to help remove any overwhelm and stress associated with running a motel.
Knowing how much to charge is about understanding the property as much as it is understanding the market. Finding the right tool for the individual motel from the wealth of systems and businesses can remove the overwhelm and keep it simple. Enabling moteliers to enjoy the lifestyle and freedom of a successful accommodation business.
