A look into how hotel prices work

Why do hotel prices differ during certain times of the year? And how do hotels determine how much to charge for their rooms? These are the burning questions facing curious travellers.

For starters, there is no such thing as a universal fixed hotel rate. Prices in every corner of the globe are constantly changing depending on seasonality and popularity. But what else goes into pricing? We take a look at the nitty-gritty details of how hotel pricing works to shed (hopefully) some light on fluctuating rates and pricing in general.

The different factors involved

There is no one set factor for determining how much a hotel room will cost. Rather, hotel pricing is determined by any combination of the following factors: location, seasonality, demand, star rating, amenities, value of services and other hotel competition. Even things like increases in flight searches to a particular destination or good and bad weather can have an impact on hotel prices. Taking all these different things into consideration, hotels are able to determine their rates.

Rarely do hotels make any profit if they have the same rates for every room, every day. In order to cover operational costs (and to make a profit), hotels determine a range of rates for their hotel rooms. As occupancy and demand increases and supply (room availability) decreases, lower hotel rates are closed and only higher rates are available. It’s the classic supply and demand.

Forecasting prices

Previous hotel price trends play a big role in determining a hotel's current rates

Previous hotel price trends play a big role in determining a hotel’s current rates

Often, many hotel managers rely on analysing hotel data to make educated guesses on how a much hotel room should be sold at. They can forecast prices by analysing any previous price trends at their hotel (comparing high-season rates to low-season rates for example) to see if there is potential for a similar price pattern to occur in the following year. They also compare their prices with other hotels to get a sense of what types of hotel rooms are selling at which rates.

It all comes down to one person

Even with today’s technology and fancy reservation systems, prices come down to one person, usually the hotel manager, who is the one deciding and inputting the rates to their hotel reservation system. Many hotels nowadays even have full-time revenue managers whose job it is to use different types of software to help develop rate strategies.

How do online travel agencies factor in to everything?

Booking your hotel online? You're probably familiar with online travel agencies then

Booking your hotel online? You’re probably familiar with online travel agencies then

If you’re booking a hotel online, more than likely you are booking through an Online Travel Agency (OTA) which is the actual website selling you the hotel room (not a hotel’s own website). OTAs have teams of people whose job it is to negotiate with hotels directly to get good prices for hotels to list on their website.

What does the OTA get out of it you might ask? Let’s break it down. If an OTA negotiates successfully and gets a hotel room at a discounted price, for example, the OTA can then sell that room directly on their own website. Alternatively, the OTA can reserve the room at a specific rate, which can be a little riskier if it’s not sold but allows for the most leeway in the price

How hotel prices work on momondo

momondo (not an OTA by the way) doesn’t sell any hotel rooms directly, rather we gather all the possible hotels and different rates that are being offered by our trusted OTAs and we list everything in one easy convenient place. Have a look around our hotel page and you’ll see just how easy we make it!

Explore hotels around the world

For more information about how momondo works with prices, please feel free to visit our help page, which can be found at https://www.momondo.com/about/help

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