In today's competitive lodging industry, it is common to hear the phrase "push the rates" as a way to maximize revenue. Driven by rising operating costs, this strategy often means simply increasing room rates in hopes of generating more profit. While this may seem logical, it frequently overlooks one of the most fundamental principles of economics: supply and demand.
When rates are increased without understanding market demand or price sensitivity, the result can be the opposite of what was intended. Hotels that consistently raise rates without careful analysis often experience declines in Average Daily Rate (ADR), Occupancy (OCC), and Revenue per Available Room (RevPAR).
One of the biggest misconceptions in revenue management is the belief that increasing room rates automatically increases ADR. In reality, raising rates beyond what the market is willing to pay can reduce occupancy so significantly that overall revenue—and even ADR—declines.
"Pushing the rate" generally refers to increasing room prices above what the market will reasonably support, often without analytical justification or a clear understanding of price elasticity across the hotel's customer segments. While the goal is to increase revenue, ignoring demand and guest price sensitivity can ultimately reduce both occupancy and profitability.
Hotel rooms are highly perishable products. Once a night passes, an unsold room can never be sold again. Because of this, pricing decisions must always consider the basic economic relationship between supply and demand. Raising rates without regard to market demand can significantly reduce bookings.
Every hotel has a pricing threshold—a maximum rate at which it can increase prices before occupancy begins to decline. Beyond that point, each additional rate increase generates diminishing returns because fewer guests are willing to book.
Likewise, every hotel also has a minimum pricing threshold, below which rates are unnecessarily discounted and revenue is left on the table.
One of the most important responsibilities of a revenue manager is identifying these upper and lower pricing boundaries.
Consider a simple example.
Imagine a 200-room hotel with:
Increasing the average rate by $5 may increase total room revenue by approximately $165. However, as rates continue to rise, revenue gains begin to shrink. Eventually, occupancy declines enough that overall revenue starts to decrease. By the time rates increase by $20 or $30, the hotel may actually earn less total revenue than before the increase.
This illustrates the perishable nature of hotel inventory. When rates are pushed too high, unsold rooms often end up being discounted through coupons, flash sales, opaque channels, or last-minute promotions. Although a small number of rooms may sell at the higher rate, too many others are eventually sold at significantly lower rates—or remain empty altogether—reducing both ADR and RevPAR.
One of the biggest weaknesses of the "push the rates" philosophy is the lack of analytical support behind many pricing decisions.
Revenue management should never rely solely on intuition, habit, or outdated practices. Instead, pricing decisions should be supported by multiple sources of analytical data that provide a complete picture of market behavior.
The STAR Report is an excellent benchmarking tool, but by itself it does not fully explain demand patterns, price elasticity, or guest purchasing behavior.
To make better pricing decisions, revenue managers should supplement STAR data with additional reports, including:
These reports provide valuable insight into guest price sensitivity, booking behavior, and changing market demand.
One of the most valuable analytical tools is the Rate Distribution Report, which measures the relationship between room rates and occupancy.
Even if your franchise already provides this report, creating your own customized version often allows for deeper analysis.
A well-designed report should compare room rates with occupancy across several normal business weeks—avoiding holidays, major events, or unusual market disruptions—to establish a reliable pricing baseline.
This allows revenue managers to visualize where occupancy begins to decline as rates increase and where additional discounts no longer produce meaningful occupancy gains.
Several reports should be analyzed together rather than independently.
Whether franchise-provided or internally developed, this report should compare room rates with occupancy over several representative weeks to establish the hotel's normal pricing behavior.
Always review the appropriate STAR Report. The most useful comparison is one that positions your hotel near the middle of the competitive set, helping identify meaningful market trends rather than focusing on statistical outliers.
Reports from online travel agencies and metasearch platforms provide additional insight into consumer demand, competitor pricing, and booking behavior across multiple distribution channels.
These reports identify why guests chose not to book your hotel, including price objections or availability issues. Comparing this information with rate changes helps determine whether pricing decisions are driving customers away.
No single report tells the complete story.
Revenue managers should integrate multiple data sources to understand how pricing decisions affect occupancy, ADR, and total revenue.
For example, compare your internal Rate Distribution Report with STAR performance for the same period. This provides valuable context and helps determine whether pricing changes are aligned with market conditions or are simply moving the hotel away from demand.
When several reports point toward the same conclusion, pricing decisions become significantly more reliable.
The "push the rates" strategy is not a universal solution for increasing hotel revenue.
Without understanding market demand, price elasticity, competitive positioning, and occupancy behavior, higher rates can easily reduce bookings and lower total revenue.
Successful revenue management requires balancing room rates with market demand through careful analysis of multiple data sources, including Rate Distribution Reports, STAR Reports, OTA data, booking pace, and denial/regret reports.
Rather than simply pushing rates, revenue managers should focus on finding the optimal rate—the price that maximizes total revenue while maintaining healthy occupancy and ADR.
Ultimately, the goal is not to achieve the highest possible room rate. The goal is to achieve the highest possible total revenue.
Nicholas Vasseghy
Daryon Hotels International
July 15, 2012
Daryon Hotels International has earned a reputation as an innovator in hotel revenue management, developing practical strategies and forward-thinking methodologies that help hotels maximize revenue and outperform their competition. For additional information, contact win@daryon.com