Restrictions in Hotel Revenue Management
What are restrictions and how does restriction management work in hotels
The Covid-19 pandemic has provided a valuable lesson, particularly for those in the hospitality industry: hoteliers and hotel managers need to possess the flexibility to promptly adjust not just to evolving trends, but also to governmental and industry guidelines.
In the present era, where travelers are in search of short vacations, business trips, and longer stays, implementing limitations on the length of stay can serve as an effective pricing strategy to incentivize guests to book a room at a consistent price for each night of their intended stay.
By managing restrictions, one has the ability to set controls over which bookings are accepted on specific dates or rate types.
For example, certain rates may only be made available during select bank holidays or the fall off-season. Restrictions can also affect the length of stay guests are allowed to book for during periods of high or low demand. By combining these approaches for different price types and demand phases, an optimal result can be achieved.
Depending on the technical equipment, these controls can be managed in the Revenue Management System (RMS), for example with RateBoard, the Property Management System (PMS) or both. However, to stay on top of things, it is advisable to choose one system for this task and stick with it.
The Importance of Length of Stay
The duration of a guest's stay plays a significant role in determining the labor costs for your hotel. Consider this scenario: If a couple reserves a room in your establishment for seven nights, assuming it's your only booking, your staff only needs to manage one room in terms of cleaning, room service, and other tasks.
However, if you receive seven separate bookings from different guests, each for a one-night stay, your staff will have to attend to the needs of seven different rooms. This not only increases the overall workload but also leads to higher associated labor costs.
Implementing a pricing strategy based on the length of stay allows for flexibility by considering the guest's arrival date and the number of nights they intend to stay. Under this approach, guests are charged a fixed package price per night for the entire duration of their stay. This strategy aims to maximize revenue and encourage guests to extend their stay.
Let's say Thursday experiences low demand. To entice longer stays, it is crucial to offer attractive pricing for the preceding days, particularly on Wednesday. This encourages guests to consider staying for two nights starting from Wednesday rather than just one.
Furthermore, promoting longer stays proves more advantageous when your hotel is exceptionally busy or during special events. For instance, if you have limited availability, it is preferable to accept bookings with a willingness to stay for four nights. This approach facilitates managing the period following the event when demand tends to be lower. Through length-of-stay pricing, you can finely adjust demand during peak times.
Types of restrictions
CTA - Closed to Arrival
Closed to Arrival means that the customer cannot arrive on a specific date, regardless of the planned length of stay. Hotels usually apply the entry restrictions when they do not have staff available for check-in, such as no reception team on Sundays.
CTD - Close to Departure
Close to Departure is a restriction applied to an Rate Plan that restricts booking departure on that date. For events like Christmas, this feature helps avoid bookings with check-outs on specific dates.
MinLos - Minimum Length of Stay
With a minimum length of stay, guests are given a minimum number of nights that they must book if they want to arrive on a specific day. This restriction makes sense above all in periods of high demand in order to avoid too many shorter stays, which may also mean that the rooms are vacant. An example of this in the holiday hotel industry is a minimum stay of two nights on weekends or up to seven nights over the Christmas holidays, especially in hotels in ski resorts.
MaxLos - Maximum Length of Stay
Maximum length of stay is a constraint policy that limits room availability by specifying a maximum number of nights a guest can book for stays. The MaxLos is also used in times of high demand and especially when guests are offered discounts.
Use restrictions correctly
In order to get the most out of restrictions, the following tips should be observed during implementation:
1. Situation Analysis - Understand your market and its demand
Demand patterns and thus peak times can be recognized on the basis of historical data and forecast demand data. It is now important to consider which restrictions can support maximizing utilization.
2. Identify shoulder data
Around high season times, there is often the opportunity to get even more bookings for dates shortly before the start or at the end.
3. Test and analyze
After the desired restrictions have been set, it is important to check whether they are running correctly and whether potential errors can prevent loss of revenue. This can easily be checked with test bookings. In addition, the performance should be checked at regular intervals in order to find areas in which one can improve. This will help you find the optimal restrictions for your hotel and maximize your results.
Set restrictions in RateBoard
With RateBoard's software it is possible to set and manage all the restrictions mentioned and send them to your own PMS and channel manager. It should be noted that not every system can receive this data, if it is, the option to set restrictions will not appear in the app. Instructions on how to set restrictions in the app can be found here.
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