Hotel Revenue Glossary · Demand

Demand Curve

A graphical representation of the relationship between room price and the quantity of rooms demanded at each price point. The demand curve slopes downward — as price increases, fewer rooms are demanded, and as price decreases, demand rises.

Why it matters: Understanding your demand curve for each date helps determine the optimal price point that maximizes total revenue. Pricing too high leaves rooms empty; pricing too low fills rooms but sacrifices rate. The demand curve identifies the sweet spot.

Worked example: Test one Wednesday across four weeks on a 130-room house. At A$259 you sell 71 rooms, or A$18,389. At A$229, 88 rooms and A$20,152. At A$199, 104 rooms and A$20,696. At A$179, 118 rooms and A$21,122. Revenue is still climbing at A$179, but only by A$426 for fourteen extra rooms to clean, about A$30 each, which is where your own servicing cost decides whether to keep going.

Common mistake: Reading a curve off four different Wednesdays and calling it elasticity. Those weeks also differed in competitor pricing, weather, school terms and what was on at the convention centre. Unless you can hold those roughly constant, you have measured demand, not the response of demand to your price.

All glossary terms Price Sensitivity Demand Elasticity Dynamic Pricing