Using revenue management and financial tools to optimize rates and minimum nights

Guesty’s revenue management and financial tools help you maximize income, increase occupancy, and make your listing stand out in the booking channel platform. In this article, we explore the various tools you can use to adjust your pricing, length of stay prerequisites, and availability settings. Also, we describe how the different tools can be used in conjunction.

Guesty’s accommodation fare is the basic component of a reservation’s total payout. 

Other costs can be added and calculated based on the accommodation fare, including basic fees, additional fees, and taxes. Also, coupons and promotions can be applied to the accommodation fare.

All the non-accommodation fare components will be shown separately in the guest’s invoice (folio).

Note:

The accommodation fare is based on the listing’s default base price. When the price is adjusted by revenue management or financial tools, it becomes a “nightly rate.” 

Adjustments cannot result in a price per night of less than 10 dollars or the equivalent value in other currencies. For example, a discount won’t be applied, if it lowers the price per night below 10 dollars.

The accommodation fare is the sum of the price per night for the dates of the reservation. Each night’s price is calculated independently, and different nights can have different rates. Adjustment tools affect the cost of each night individually, except for length of stay discounts, which apply to the price of all nights together. 

Tools in the same layer may override one another, while higher-level tools are applied in addition to (“on top of”) lower-level tools.

The calculation layers

Let’s explore how revenue management and financial tools affect the calculation of the accommodation fare and the minimum number of nights per stay.

1st layer
2nd layer
3rd layer
4th layer
5th layer

 

First layer: Base price and minimum nights

Base price

A listing’s base price will be the price per night for a listing, if no other tools are used to adjust it. You can set a weekday base price and a separate base price for weekends. 

The base price is reflected in the calendar (if it isn’t adjusted by a higher-level tool).

Minimum and maximum nights

Based on the same logic of the base price, the default minimum and maximum nights per stay will be the listing’s minimum/maximum nights unless adjusted by higher-level tools. 

The minimum number of nights is reflected in the calendar  (if it isn’t adjusted by a higher-level tool).

Note:

Owner stays and manual reservations can be made for a date range outside the minimum/maximum nights range.

Second layer: Nightly availability restrictions & rates

Manual adjustments

You can use the calendar to manually adjust the price per night for specific dates without having to change the default base price. Similarly, you can use the calendar to adjust the minimum nights per stay for specific dates. The adjusted price or minimum nights will instantly be reflected in the calendar.

Manual adjustments can override or be overridden by third-party pricing tools. Also, when assigning a new listing to a rate strategy, you can override manual adjustments to the price per night or minimum nights. Manual adjustments to the minimum nights will be overridden by Guesty PriceOptimizer (GPO) every 24 hours. However, manual adjustments to the price per night will sync with GPO and won't be overridden by it.

When making a manual adjustment to the price per night or minimum nights, you can decide whether to override an existing rate strategy rule (if applied). As long as the "Override rate strategy" checkbox is ticked, rate strategy rules won't alter the price or minimum nights for the selected dates. To deactivate the override, You can uncheck the checkbox, or use an override of the manual adjustments by a rate strategy, discussed in the rate strategy rules section below.

For example: The base price is $60. The price per night for 23 May 2024 was adjusted by a rate strategy to $66. Later, the price was manually adjusted via the calendar to $68. The manual adjustment overrides the rate strategy adjustment, and the nightly rate is now $68.

Rate plans, markups, markdowns, and discounts can all work with manual adjustments. These higher-level tools will apply “on top” of the second-layer tools. 

For example: A rate plan adjustment of +5% will apply to the manually adjusted price for 23 May 2024 (68$), changing it to $71.40.

Guesty PriceOptimizer 

Guesty PriceOptimizer (GPO) is a data-driven, machine-learning tool that gives you recommendations for your listings' nightly rates based on different time period intervals. Our interactive software takes several details into account based on market trends to offer the best-suggested prices.

GPO will override any previous rate strategy adjustments or 3rd party pricing rules when the data is updated every 24 hours. If using these tools, ensure you make any adjustments to the price per night or the minimum nights directly via the GPO settings.  Also, manual adjustments to the minimum nights will be overridden by GPO within 24 hours. However, manual adjustments to the price per night will sync with GPO and won't be overridden by it.

Higher-level tools can be combined with GPO.

Rate strategy rules

Rate strategy rules can adjust the price per night, the minimum number of nights per stay, or the availability restrictions. You can set a one-time or recurring rules, and apply them to defined periods or for a specific conditions, such as when there is upcoming availability, or for short stays. You can also set a minimum and maximum limit to avoid a rate strategy rule to alter the price per night below or above a specified limit. 

After a rule is activated, the adjusted base price or minimum nights will be reflected in the calendar.  Access the “Pricing” tab in the relevant property page to check which rate strategy is assigned to the listing.

A listing can be assigned to one rate strategy at a time. To switch a listing’s rate strategy, unassign the listing from the former plan before assigning it to a new plan. However, multiple rules can be used for the same rate strategy. Learn below how they’ll behave in the case of overlap.

Overlapping rate strategy rules

Multiple rate strategy rules are set to adjust the minimum nights

A rate strategy can have multiple rules for the minimum number of nights, that may apply to the same listing and in the same date range. In case of a conflict, the following logic applies:

  • If an optimizing occupancy rule has been activated, it will apply above any other minimum night rules that are set for the same date. Where there are gaps in the calendar, the optimizing occupancy setting automatically adjusts the minimum nights to allow for shorter reservations. 
  • If the Optimizing Occupancy rule is not activated, but there is an upcoming availability rule, the rule will override any other minimum night rules that are set for the same date.
  • If neither of the above rules has been set up but you have created other rules, Guesty will apply the longest number of minimum nights that have been set for the same dates. For example, if both three-night and two-night minimums have been set for the same date, three nights would be applied. 

Multiple rate strategy rules are set to adjust a nightly rate

  • If the overlapping discounts are all the same type - percentage or fixed-price - they will be aggregated. For example, if an "increase by 15%" rule and a "decrease by 5%" rule apply on the same date, the price will increase by 10% (15% - 5%).
  • If the overlapping discounts are not of the same type, the percentage discount will be applied first and then the fixed-price discount will be added or subtracted from that amount.

Overriding previous adjustments by a rate strategy

When assigning a rate strategy to a listing, the rate strategy will by default apply only to dates on which the price or minimum nights were not adjusted before. However, you can choose to override any adjustments made to the base price, minimum nights, or both, when assigning a new listing to the rate strategy.

This includes adjustments made by the following tools: 

  • Manual adjustment of the price per night 
  • Manual adjustment of the minimum nights per stay
  • Guesty PriceOptimizer 
  • Another rate strategy that was replaced by the current rate strategy
  • Third-party tools 

For an existing listing under a rate strategy, you can unassign and reassign the listing to the rate strategy. The override screen will then reappear.

Avoid combining rate strategy rules with third-party tools as they can override the rate strategy if they are applied after it. Also, be aware that GPO will override any rate strategy adjustments to a listing every 24 hours.

Higher-level tools can be combined with rate strategy rules.

For example: A listing’s base price is $60. The following rate strategy rule is applied: Between May 21, 2024 - May 25, 2024, increase the base price by 10%. If you choose to override previous manual adjustments made to the base price, the updated nightly rate for these dates will be adjusted to $66. Otherwise, the nightly rate will remain $60.

Third-party pricing tools

You can use third-party tools to adjust the pricing, minimum nights, and availability settings of a listing, and their adjustments will be reflected in the calendar’s nightly rate or minimum nights, accordingly.

Avoid using 3rd party pricing tools alongside rate strategy rules, and manual adjustments, as they can override one another. GPO will override the action of 3rd party tools when the data is refreshed every 24 hours.

Third layer: Rate plans

A rate plan is a combination of a listing’s cancellation policy with other optional components, including meal plans, pricing rules, minimum or maximum night rules, and availability restrictions. Cancellation policies can be set as part of a rate plan, or be used as standalone.

A cancellation policy is required for making any listing bookable/sellable in a booking channel. If some dates don’t fall under a cancellation policy, the listing won’t be bookable on those dates.

You can use multiple rate plans for the same listing, creating different booking options for the guest to choose from. For example, the guest can select between a flexible cancellation policy with breakfast included, or a strict cancellation policy without meals. 

If only one rate plan is assigned to a listing, it will be applied by default when a reservation is made (created manually or via a channel). If more than one rate plan is applied for the same listing, you can select the desired rate plan when creating a manual reservation or when sending a quote.

Rate plans can be used with any other tools. If the price per night or minimum nights has been adjusted by a second-layer tool, it will serve as the basis for the rate plan’s “on top” calculation.

Any adjustments made by a rate plan (or any other higher-level tools), aren’t reflected in the calendar and will be integrated into the reservation’s accommodation fare. Higher-level tools can be used with a rate plan, as well.

For example: A listing’s base price is $60. A rate strategy rule is applied for certain dates, increasing the price per night by +10%. Additionally, we set a rate plan of a +$20 increase with no date range limitation. The rate strategy will be calculated first, and then the rate plan will be applied. The price per night will be $86.

= $60 + 10% + $20

Fourth layer: Markups and markdowns

You can use markups and markdowns to compensate for a booking channel commission fee.

Guesty automatically rounds up the price following a markup/markdown adjustment. For example, if the calculated accommodation fare is $79.20 after a markup is applied, it will be rounded to $80. 

Note:

Length of stay discounts are calculated based on the rounded price.

Fifth layer: Length of stay discounts

Length of stay discounts are set per listing and are synced with some booking channels. The discount is the last adjustment layer of the accommodation fare. The accommodation fare won’t be rounded following a discount.

Discounts are embedded in the accommodation fare. In contrast, coupons and promotions will apply to the accommodation fare, and when creating a manual reservation, you can decide not to apply them. An applied promotion or coupon will be displayed on a separate line item in the guest folio (invoice).

For example: We created a manual reservation, with a coupon and a promotion included.  We applied a promotion named “Long booking” offering a 10% discount, and also a coupon named “Fredtest 12 months”, offering a 12% discount. Both have been added on separate lines in the reservation creation widget. Once you create the reservation, the promotion and coupon will appear in separate lines in the guest invoice. 

Example: How multiple tools work in conjunction

Use the following example to check the hierarchy between different revenue management tools when they are used in conjunction.

A listing’s base price is $100.A rate strategy adjusts the base price by -$5 for the following dates: 26-31 MAY 2024. A rate plan is set to decrease the nightly rate by -$17 (no date limit). Also, a markup of 5% is set. Lastly, a weekly length of stay discount is applied, giving a 9% discount per stay

The accommodation fare for different dates will be calculated as mentioned. 

01/06-08/06 

Accommodation fare calculation:

(100-17)*1.05=87.15 >> 88 (rounded)

88*7=616

616*0.91=560.56

 

27/05-01/06

Accommodation fare calculation:

(95-17)*1.05*5=409.5 >> 410 (rounded)

 

26/05-02/06

Accommodation fare calculation:

(95-17)*1.05*6=491.4 >> 492 (rounded)  

(100-17)*1.05*1=87.15 >> 88 (rounded)

492+88=580

580*0.91=527.8

 

04/06-08/06

Accommodation fare calculation:

(100-17)*1.05=87.15 >> 88 (rounded)

88*4=352

 

27/5-29/5

Accommodation fare calculation:

(95-17)*1.05*2=163.8 >> 164

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