Hotel Revenue Glossary · Pricing

Value-Based Pricing

A pricing approach that sets rates based on the perceived value to the guest rather than on cost-plus or competitor-matching formulas. Value-based pricing considers the unique attributes of the property, room type, view, floor level, and experience.

Why it matters: Value-based pricing captures willingness to pay that cost-plus pricing misses. A corner suite with a harbor view may cost the same to maintain as an interior room, but guests willingly pay a significant premium. Pricing to value rather than cost unlocks hidden revenue.

Worked example: Two rooms, identical footprint, identical to service. One faces the car park, one faces the water. Cost-plus prices both at A$189. Sell the water view at A$239 and, across 26 such rooms running at 70%, the A$50 differential adds 26 x 70% x A$50 = A$910 a night, roughly A$332,000 over a year, with no extra cost incurred and no extra room built.

Common mistake: Setting the premium once and leaving it. Willingness to pay for a view or a high floor moves with season and segment. A A$50 water-view premium a leisure guest pays gladly in January may be refused by a Tuesday corporate traveller who will not be in the room during daylight. Differentials need the same review cycle as base rate.

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