Achieving Higher ADR with Per Person Pricing in Corporate Business Hotels

One of my clients, a manager of a small property with 43 rooms and a decent MICE and SMERF business, was constantly seeking innovative strategies to maximize revenue. One promising approach to boost your Average Daily Rate (ADR) is implementing per-person pricing. This article explores how this pricing model can elevate your property’s profitability and simplify the proposal process for your clients.

Introduction to Per Person Pricing

Per-person pricing is a strategic approach where hotel rates are determined based on the number of guests occupying a room, rather than a fixed rate per room. This method aligns pricing more closely with the resources consumed by each guest, such as meals, amenities, and housekeeping services. By adopting per-person pricing, you can more accurately reflect the true cost of accommodating additional guests, leading to more efficient resource allocation and potentially higher ADR.

Benefits for Hotels and Organizers

For hotels, calculating the Daily Delegate Rate (DDR) becomes more straightforward. The DDR, which encompasses the cost per delegate for conference facilities, meals, and other services, can be easily adjusted based on the per-person pricing model. This ensures that you can cover the variable costs associated with each additional guest more precisely, enhancing revenue management.

From the organizer’s perspective, per-person pricing simplifies budget planning. Organizers receive a clear, per-person cost, making it easier to forecast expenses for corporate events, training sessions, or group bookings. This transparency can enhance decision-making and improve client satisfaction by providing a more detailed and accurate breakdown of costs.

Achieving a Higher ADR

Implementing per-person pricing can directly contribute to a higher ADR for your property. Here’s how:

2. Accurate Cost Allocation: By charging per person, you ensure that the rates reflect the actual usage of hotel resources. This precision helps in justifying higher prices, as clients understand they are paying for what they use.
4. Optimized Revenue Management: Per person pricing allows for more dynamic pricing strategies. You can adjust rates based on occupancy levels and demand, ensuring maximum revenue during peak times.
6. Enhanced Service Value: Clients perceive greater value when they see a clear breakdown of costs. This transparency can justify higher rates as clients recognize the comprehensive services provided.
8. Attracting Diverse Clientele: Per person pricing can appeal to a broader range of guests, from solo travelers to large groups. This flexibility can increase occupancy rates, thereby driving up ADR.
10. Improved Upselling Opportunities: With per person pricing, you can more effectively upsell additional services and amenities, as the pricing model is clear and straightforward. Clients are more likely to add services when they understand the incremental cost per person.

Popular Applications

Per person pricing is particularly popular in resorts, family-friendly hotels, and properties that offer all-inclusive packages. However, its application is also growing in corporate business hotels. This model offers greater flexibility and can attract a diverse clientele, from solo business travelers to large corporate groups. It enables you to cater to varying guest needs more effectively and to tailor your services to different segments.

Advantages and Challenges

While per-person pricing offers several advantages, such as improved cost alignment and enhanced flexibility, it also presents certain challenges. You must manage the logistics of accurately tracking guest numbers and ensuring that all associated costs are covered. Additionally, communicating the pricing structure to potential guests and organizers can require careful explanation to avoid confusion.

In conclusion, by implementing per-person pricing, you can significantly enhance your property’s ADR. This strategy aligns pricing with resource usage, optimizes revenue management, and provides transparent value to clients. Early outcomes indicate that there are no significant issues with this transition, suggesting a smooth implementation process. Embrace per-person pricing to elevate your hotel’s profitability and client satisfaction.

Update: 19.6.2024 – After implementing this MICE / SMERF rate strategy, the hotel has no seen any rejection from their business partners that they would rather see charging per room, not per-person. The 2024 YTD ADR increased by 13,75% in those two segments.