Hotel Revenue Glossary · Pricing

Premium Pricing

A strategy of pricing rooms above the competitive set average to position the property as the quality leader in the market. Premium pricing requires that the product, service, and brand consistently justify the rate premium to guests.

Why it matters: Premium pricing delivers higher ADR and RevPAR when executed well, but it demands that every guest touchpoint reinforces the premium perception. A poorly maintained property cannot sustain premium rates — the product must justify the price.

Worked example: You hold A$289 while the four-hotel set averages A$241, a rate index of 120. Occupancy runs 71% against their 79%, an occupancy index of 90. Your RevPAR is 71% of A$289 = A$205; theirs is 79% of A$241 = A$190, an index of 108. Lose four more points of occupancy, down to 67%, and RevPAR falls to A$194 and the premium has bought you almost nothing.

Common mistake: Holding the premium after the product stopped supporting it. A tired corridor carpet and a fifteen-year-old bathroom never appear in your rate report, but they appear in review scores and then in occupancy. Premium pricing is a claim the guest tests every night, so audit the product on the same cycle you audit the rate.

All glossary terms ARI (Average Rate Index) Value-Based Pricing Rack Rate