How to Raise Your Prices and Rates Without Losing Guests





The King of Wall Street, Warren Buffett once said, “The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you’ve got a terrible business.”

Increasing bedroom rates is of course one of the chief ways hotel owners and managers boost income and profit. However due to the fear of losing guests and market share many hoteliers are weary of increasing their prices. This was especially so during the Great Recession.

Many hotels got stuck in the trap of constantly dropping their prices in a bid to attract guests away from competitor hotels and protect their market share. As a result hotel bedroom rates have plummeted and hotels have found it a challenge to turn over a profit.

Thankfully as the economy has started to recover and to grow again, hotel bedroom rates have also started to creep up. No business and no industry can grow or expand if prices are continually falling or stagnating. Rising prices mean hotels can grow and expand again.

My ambition for this blog is to give you some helpful tips and practical advice on how to raise your hotel’s prices without losing guests.

Value and Pricing

The value of a product or service is the worth customers places on a product or service. The higher the value the higher the price you can charge. The vast majority of successful businesses are successful because they get the match between price and value right.

When the time comes to raise your prices you should also raise the value you offer your guests.  Remember that a higher price implies greater quality. It is critical you get the match between price and value right. Failure to get the match between price and value correct could lead to customer resistance and a decline in the number of guests visiting your hotel. Always remember that price is what your guests pay and value is what they get.

Pricing Strategy

When setting the price for a product or service there are three primary methods to choose from. The three approaches to pick from are cost-based pricing, completion-based pricing, and customer value-based pricing.

All three mechanisms have their advantages and disadvantages, but the consensus amongst business experts and those working on the frontline is that the customer value-based pricing method is the best pricing strategy over all.

Andress Hinterhuber in his article (Sited above), writes, “The increasing endorsement of the customer value-based strategies among academics and practitioners alike is based on a general recognition that the keys to sustained profitability lies in the essential features of customer value-based pricing.

These include understanding the sources of value for customers; designing products, services, and solutions that meet customers’ needs; setting prices as a function of value; and implementing consistent pricing policies.”

Choosing the Right Time

Choosing the right time to raise your prices is crucial. If you get the timing wrong your risks losing guests to your rival hotels.

It is generally accepted that the best time to raise prices and bedroom rates is just before a busy period. If you want raise your bedroom rate for the busy summer season, then start making perceptions for the price increase in early spring and then raise your prices in April just before the start of holiday season.

 The Freedium Model

Judith Aquino in his blog, recommends employing the freemium model of pricing. The freemium model works by offering a basic product or service free of charges while charging a premium rate for advanced services.

There is a growing trend in the hospitality industry of using the freemium model in relation to internet and WI-FI services. A hotel could for example give its guest’s free basic WI-FI but then charge a premium rate for an upgraded service that offers faster download speeds and better accessibility.

There is considerable scope to expand the freemium model to other aspects of your hotel business. For instance you could offer your guests a cheap bottle of wine for free with their dinner and then charge a premium rate for a higher quality bottle of wine.


This blog has been about how to raise your prices while avoiding guest’s resistances. After reading this blog I want you to walk away with the confidence and self-belief to raise your prices and not fear losing guests and market share. Rising prices are a sign of a hotel’s health and vitality.