What Is a Rate Plan? Hotel Rate Structures Explained

The same room, the same night, three different prices: what looks arbitrary at first glance follows a logic. Behind every price is a rate plan with its own conditions.

What a rate plan is

A rate plan defines at what price and on what terms a room type is sold. This includes cancellation deadlines, when payment is due, inclusions such as breakfast and rules such as a minimum stay. Room types and rate plans together form a hotel’s rate structure. It is set up in the PMS and distributed to all channels via the channel manager.

Typical types of rate

Flexible rate: free cancellation up to a deadline, usually the highest price.

Non-refundable rate: cheaper, but paid at booking and with no refund.

Package rate: room with extras such as half board, spa entry or a hiking map.

Long-stay rate: a discount from a set number of nights.

Corporate and group rates: agreed prices for particular customers.

Why conditions matter more than discounts

In revenue management, these conditions are called rate fences. Chris Anderson and Sheryl Kimes of Cornell University describe them as a tool for selling some rooms at a discount while selling the rest at higher prices. The fences are meant to stop guests who would pay the higher price from taking the cheaper rate. They are never watertight. Without an effective way of separating guest groups, the authors even advise against charging different prices.¹

In practice, this means guests who want to stay flexible pay more, while those who book early and commit get a better price. A plain discount without conditions simply means that every guest pays the lower price.

How many rates make sense

Every rate has to be maintained in the PMS, channel manager and booking engine. For small properties, a flexible rate, a non-refundable rate and one or two packages are often enough. What matters is that guests understand the difference at a glance. Ten rates with barely distinguishable conditions confuse guests and staff alike.

What hoteliers should look for

More in the magazine

How closely rates and cancellation terms are linked is shown by the ANDERS Hotel Walsrode in our article "Last-minute bookings make staff planning hard for ANDERS Hotel Walsrode". How hotels steer rates according to demand is explained in the glossary entry on revenue management, and how rates reach booking platforms in the entry on the channel manager.