How to price hotel rooms: a UK guide for small hotels

To price hotel rooms well, set one public price for each night, your best available rate, and move it up or down as demand for that night changes. Start from what the night is worth on the calendar, adjust for events, how far ahead you are and what nearby hotels are charging, and protect your busiest nights with stay rules. Never cut your rate just to be the cheapest in town; for a small hotel it is an expensive habit.

The rest of this guide shows how, with the numbers from a hotel you could run: 24 rooms on the Welsh coast, around £110 a night midweek in autumn, £165 on a summer Saturday, 68% occupancy across the year, and about 40% of bookings coming through online travel agents. The hotel and its numbers are illustrative; the decisions are the ones we make at our hotels.

What is a best available rate?

Your best available rate, or BAR, is the price anyone can book for a given night: your standard room, standard terms, no special conditions. Every other price you sell hangs off it. A non-refundable rate might be 10% below BAR, a dinner-bed-and-breakfast package £60 above it for two, a superior sea-view room £30 above it.

The important idea is that BAR belongs to a night, not to a season. Many small hotels still run a price list: £110 in low season, £130 in shoulder, £165 in high season. It is simple, and it leaves money on the table, because two nights in the same “season” can be completely different. A Saturday in late October that falls in half term is not the same night as the Tuesday after it, even though your price list says they are.

So think of 365 separate prices: a sensible starting point for each type of night, then move the ones that need moving.

A quick test: a night that sells out weeks ahead was too cheap. A night still mostly empty a few days out while nearby hotels fill may be too dear, or you may have a visibility problem rather than a price problem.

How does the UK calendar shape your prices?

Before you look at a single competitor, the calendar tells you most of what you need. For a UK leisure hotel, demand is driven by when people are free to travel.

Seasons

For a coastal hotel in Wales, the shape of the year looks roughly like this:

• Peak: from the last week of July to the end of August, when the English and Welsh school holidays overlap. Saturdays sell out first, then Fridays, then midweek.
• Shoulder: May, June and September. Weekends are strong, midweek is soft except for older couples and walkers, who love these months.
• Low: November to mid-March, apart from Christmas, New Year, Valentine’s weekend and the February half term.

A city-centre hotel with business trade may be busiest midweek in spring and autumn and quietest in August. Know your own shape from your own history.

Bank holidays

In England and Wales there are eight bank holidays: New Year’s Day, Good Friday, Easter Monday, the early May bank holiday, the spring bank holiday at the end of May, the summer bank holiday at the end of August, Christmas Day and Boxing Day. Scotland and Northern Ireland have their own lists, and Ireland is different again, so if you are near a border, or you draw guests from across one, check both.

A bank holiday weekend turns the Sunday into a Saturday. On a normal weekend your Sunday night is one of your weakest of the week; on a bank holiday weekend it can be as strong as the Saturday. Price the Sunday of a bank holiday weekend at least like a Friday, and like a Saturday if it is filling, and expect the Saturday to sell out earliest. Easter moves every year, so check where it falls before you load next year’s rates.

Half terms and school holidays

Families book around school holidays, and half terms matter more than many hoteliers allow for: a week in mid-February, a week at the end of May (usually around the spring bank holiday), and a week at the end of October. Scottish and Irish holidays fall on different dates, which can help a hotel that draws guests from both.

Half-term midweek nights behave like summer midweek. Price a February half-term Tuesday like any other February Tuesday and you will sell out cheaply to families who would happily have paid £20 more.

Christmas and New Year

Christmas is its own market, often sold as three-night packages with dinners, and New Year’s Eve as a two-night minimum. Decide it early: Christmas guests book in the summer and early autumn, and if your rates are not loaded by September you have already lost some of them.

How far does an event reach?

An event is any reason a lot of people want to be near you on the same night: a concert, a rugby international, a festival, a big wedding, a graduation, a marathon, an agricultural show. Events are where small hotels most often underprice, because the hotelier hears about them late or does not realise how far the demand spreads.

How far an event reaches depends on its size and on how many rooms there are near it:

• A stadium concert or a rugby international in Cardiff can fill rooms 30 to 45 minutes’ drive away, because the city itself sells out and people spread outwards. If you are within that radius, the night is worth far more than its weekday suggests.
• A large festival or county show fills its own town and the next one along, perhaps 15 to 20 minutes away.
• A local event, a food festival or a regatta, mostly reaches the hotels in the same town. It still matters to you if you are one of them.

Keep a list of events for the next twelve months and add to it whenever you hear of one; the earlier you know, the earlier you can price. Before deciding, check the night: if nearby hotels have sold out or raised their rates, the event is real. And the nights either side often carry some of its demand.

Do not overreach. An event night is not automatically worth double. Raise it in steps and raise again if the bookings keep coming; going down after guests have booked at a higher price is awkward.

Weekends and midweek

For most UK leisure hotels Saturday is the strongest night, then Friday, and Sunday the weakest; hotels with business guests may be busier midweek. Set a weekly shape and keep it consistent. For our 24-room hotel in autumn that might be:

• Sunday to Thursday: £110
• Friday: £135
• Saturday: £150

Then let the calendar and events move each night away from it. A Thursday before a bank holiday Friday is really a Friday. A Sunday of a bank holiday weekend should be priced at least like a Friday, and like a Saturday if it is filling.

Watch your occupancy and average daily rate by day of the week over a few months. If Saturdays are always full and Thursdays always half empty, the gap between them should probably be wider than it is.

How does lead time change your prices?

Lead time is how far ahead of the night a booking is made. It is one of the most useful things you can know about your own hotel, because different nights fill at different speeds.

At our hotels, summer Saturdays are often booked five weeks or more ahead. November Tuesdays are mostly booked inside the last ten days. Your numbers will be different, but the pattern is common: the nights with the most demand fill earliest.

That gives you two rules.

Raise busy nights early. If a night is filling faster than the same night last year, or faster than similar nights, raise it while there are still plenty of rooms to sell. If you wait until you have three rooms left, you have sold twenty-one rooms at the old price. The way to see this is pace: how many rooms you have on the books for a night compared with the same point last year. A summer Saturday that is 15 rooms sold six weeks out, against 10 rooms at the same point last year, is telling you to go up.

Decide quiet nights late, but not too late. Low-demand nights are mostly decided in the last week or two. Dropping a November Tuesday three months out does little, because those guests have not started looking. Look at them again ten to fourteen days out, when you can see your pickup, the bookings that arrived in the last few days, and judge whether a change would help.

Last-minute pricing

Should you drop the price in the last few days to fill empty rooms, or hold it because a guest booking on the day was coming anyway? At our hotels we do a little of both. On a quiet night with nothing happening locally, a modest drop a few days out can pick up a couple of bookings. On a night that is filling, the last rooms are worth more, not less, so we hold or raise. What we avoid is training guests to wait: if your price always falls on the day, the guests who notice will stop booking ahead.

What are length-of-stay rules for?

Length-of-stay rules control which bookings you accept, not just at what price. The common ones are:

• Minimum stay: guests arriving on, or staying through, a given night must book at least two (or three) nights.
• Closed to arrival: nobody can check in on that night, though guests already staying can stay through it.
• Maximum stay: rarely useful for small hotels.

The reason to use them is simple. On a busy summer weekend, a guest who books Saturday night alone can block a room that another guest would have booked for Friday and Saturday. If Saturday sells out anyway, you have lost a Friday night’s revenue.

A two-night minimum on the busiest Saturdays, bank holiday weekends and big event nights is reasonable for most coastal and countryside hotels. The danger is leaving it on too long. If a Saturday still has three rooms a week out, the guests who wanted two nights have booked elsewhere, and your rule is now turning away the one-night guests who are left. Lift it, or move it to a minimum of two nights for arrivals on Friday only, and let the last rooms go.

Watch for orphan nights too: a single empty night between two bookings in the same room. A one-night guest is the only way to fill it, so make sure your rules allow one.

What is a compression night?

A compression night is a night when demand in your area is greater than the number of rooms available, so most hotels nearby are full or nearly full. A big event usually causes it; so do bank holiday Saturdays in peak season.

On a compression night the guests who are still looking have very few choices left. That changes everything about how you price:

• You should be among the dearer hotels in your area, not the cheaper ones. The cheap rooms went first.
• The usual comparison with nearby hotels matters less, because many of them are sold out and showing no price at all.
• Stay rules are worth using, because there is enough demand to fill the whole stay.

The usual mistake is to keep the normal price, sell out weeks early, while the one hotel with rooms left charges £60 more. If you see nearby hotels selling out, your own night filling fast, and an event within reach, treat the night as a compression night and price it like one.

What does being the cheapest really cost?

Every small hotel feels the pull to be a little cheaper than the hotel down the road. It feels safe. It is usually a mistake, and the numbers show why.

Take our 24-room hotel on a midweek night at £110. Say each occupied room costs about £22 in cleaning, laundry, breakfast and amenities, and you sell 12 rooms. You keep £88 a room, or £1,056 on the night.

Now cut the price to £100. You keep £78 a room. To earn the same £1,056 you need 13.5 rooms, so 14 rooms: two more bookings, every night, just to stand still. On a quiet November midweek, where guests are not price shopping between you and your neighbour so much as deciding whether to travel at all, those two extra bookings often do not come.

Across a year the same habit adds up. At 68% occupancy our hotel sells about 16 rooms a night. A £5 discount across every night of the year is about £30,000 of revenue, and none of it is saved in costs.

There is also commission to think about. Online travel agents charge commission of often 12–25%, most independents around 15–18%; check your contract. If 40% of your bookings come through them, a £110 OTA booking at 15% leaves you £93.50 before your own costs. Cutting the rate to win OTA bookings means you are paying the agent a share of a smaller number. The OTA commission calculator shows what a year of this costs your own hotel.

Being cheapest also starts a race nobody wins. If the hotel down the road matches your cut, you are both £10 worse off with the same share of guests.

None of this means never lowering a price. It means lowering it for a reason you can name, on a night that needs it, by an amount you have worked out, and putting it back up when the reason goes.

Should you match competitors?

You should know what they are charging; you should not copy them. Your competitors are the hotels a guest would seriously consider instead of you, usually four to eight properties of a similar standard within a short drive. Not every hotel in town is one of them.

Competitor prices tell you how the market reads a night. If they have all raised their Saturday by £30 and two have sold out, something is happening. If one hotel has dropped its November midweek rate, that tells you little about yours.

A rate shopper collects competitor prices for you, so you are not opening ten browser tabs every Monday. If you are weighing one up, our comparison of rate shopping tools for small UK hotels sets out who each one suits. Larger groups use a revenue management system that also recommends prices. Either way, the decision stays yours: you know your rooms, your guests and your reviews, and good reviews are worth money too.

How do you keep prices consistent across channels?

Rate parity means showing the same price for the same room and terms on every channel: your own website, Booking.com, Expedia and anyone else you sell through. It matters for two reasons.

First, guests compare. If your website is dearer than an OTA, you pay commission on a booking you could have had directly. If an OTA shows a lower price through a member discount or a forgotten promotion, you are undercutting yourself.

Second, contracts. Many OTA contracts in the UK ask that your own public website is not cheaper than the price you give them. Read your own contract; the details vary. In practice that leaves you free to reward people who book direct in other ways: breakfast included, a late checkout, a better room when one is free, or a lower price offered privately to past guests by email or on the phone.

A channel manager sends one price to every channel at once, which removes most accidental differences. It does not catch everything. Promotions, mobile-only discounts and loyalty prices are switched on inside each OTA’s own extranet and are easy to forget. Check what a guest actually sees, for a few nights, every week.

A weekly 15-minute routine

Pricing needs a routine you will keep, not a revenue manager. This is ours, once a week when the house is quiet.

1. Look at the next 14 nights (3 minutes). For each, compare rooms on the books with the same point last year. Note anything well ahead or well behind.
2. Look at the next 90 days for anything new (3 minutes). New events, a bank holiday you had not priced, a wedding that has booked a block. Mark the nights that need a decision.
3. Check your competitors on the nights that matter (4 minutes). The next four Saturdays, any event nights, and the quiet nights you are thinking of moving. Are they rising, falling or sold out?
4. Make your changes (3 minutes). Raise the nights that are pacing ahead. Lift stay rules that are now blocking bookings. Lower a quiet night only if you can name the reason.
5. Check parity and write it down (2 minutes). Pick three nights and compare your website with your main OTA. Then write one line about each change you made and why. In a month that log will teach you more than any report.

Once a month, look at the month just gone: occupancy, average rate and RevPAR against last year. The RevPAR calculator will work it out if you do not already track it. Ask what you would have priced differently, and adjust next year’s starting shape.

If you would rather have the competitor checks and the event list in one place and spend those fifteen minutes on decisions, you can try RatePulse free for 14 days, with nothing to install.

A worked example: two nights at a 24-room coastal hotel

Here is how the same hotel prices two very different nights. The hotel and its numbers are illustrative; the decisions are the ones we make.

A Tuesday in November

It is ten days out. The hotel has 6 rooms booked for the night, against 7 at the same point last year. Nothing is happening locally. Two of the four nearest competitors have rates between £95 and £105; one has dropped to £89; one is at £115. The hotel’s BAR is £110.

The temptation is to drop to £89 and match the cheapest. The numbers say no. Last year’s November Tuesdays finished at about 11 rooms, most of them picked up in the final week. At £110 that is £1,210 of room revenue and a RevPAR of about £50. With £22 of costs per room, at £89 the hotel would need 15 rooms to keep the same after costs: four more than history suggests, from guests who are mostly deciding whether to travel at all.

So we hold £110 on the public rate and do two smaller things. We make sure a non-refundable rate 10% below BAR is open, for guests who want to save and can commit. And we send a midweek offer by email to past guests: dinner, bed and breakfast for two at a price that only works because the dining room needs covers on a Tuesday. We look again five days out. If pickup has stalled and competitors have all moved lower, a £10 drop then is a decision with a reason.

A Saturday in August

It is five weeks out. The hotel has 19 rooms booked, against 14 at the same point last year. It is the Saturday before the summer bank holiday, the town’s food festival is on, and three of the four nearest competitors are sold out on the major booking sites. The hotel’s BAR is £165 with a two-night minimum.

This is a compression night, and it was priced too low. At this pace the hotel would sell out within the week at £165, to guests who would have paid more. So we raise to £185 now. If three of the last five go at £185 within a fortnight, the final two go up to £210.

Selling all 24 rooms at £165 brings in £3,960. Selling the last five at £185 and £210 adds £150 on a single night, and more if we had moved when the pace first showed. Across the Saturdays of peak season and the bank holidays, decisions like this are worth thousands, with no extra guests and no extra cost.

We keep the two-night minimum while there are five rooms left. If three are still empty a week out, we lift it for Saturday arrivals so the last rooms go to whoever is still looking.

Related reading

• RevPAR, ADR and occupancy: the three numbers to judge your pricing by
• Pickup and pace: how to tell whether a night is filling faster or slower than it should
• OTA commission calculator and RevPAR calculator
• The best rate shopping tools for small UK hotels