Flexible pricing, flat rate, dynamic pricing ,and floating rates, all Revenue Management (RM) must begin with a scientific approach to developing a pricing strategy or all yielding will be done to inferior rates and less than optimum RM will be the result. But before we go any further, let’s clarify the difference between a rate strategy and rates. A rate strategy is how a property positions its rates verses its competition and is most often expressed as a range of rates. Rates are within the rate strategy and are manipulated on a short term basis as demand dictates. Let's examine what drives a hotel’s room rate strategies today. If we ask hoteliers, “How did you arrive at your current rate strategy?” we receive the following or similar answers: “Our competition increased or decreased their rate by 5% so we did also.” So it is based on Competitive Pricing to raise the market share. “Our costs increased by 5 % which might be renovation cost so we needed to increase our rates.”

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