Do you want to know the mathematical formula of optimum pricing of a room in Serviced apartment, and make good money without losing business due to over pricing, or lose money due to under-pricing?

My Pain:

How to decide on rates for the complete serviced apartment or a Room- Single/Double occupancy, discounted rates for corporate, discounts to agents & special rates for long stay.

My experience:

The first step in the process is to determine the breakeven cost. In other words, find out the minimum monthly expense (Like you will need to give your monthly rent, staff salary, electricity etc.) when there is no guest/revenue. Refer How to calculate break even point for service apartment business.

Breakeven cost/room/day (BE) = Minimum monthly cost / no of rooms/30 (Ex: a typical value is  Rs 1200/room/day). This is the key to your pricing and in my 10 years of experience I find many serviced apartment owners/managers have vague idea about their operations break-even cost.

Here is the magic formula.

Base Rate:  BE/ 0.75 cost per room/day, ). If our break-even cost is 1200 then Base rate = 1200/0.75 = Rs 1600. This is the minimum price and you should try not to go below. This is the price you can offer to your freelance marketing person.

Monthly Rate:   BE/ 0.65 cost per room/day, If our break-even cost is 1200 then Monthly rate = 1200/0.65 = Rs 1850.This the price that you could offer to guest who stays minimum for a month or above.

Corporate Rate: BE/ 0.55 cost per room/day, If our break-even cost is 1200 then Corporate rate = 1200/0.55 = Rs 2200. This is the price that you could offer to your corporate clients who offer you a committed business of at least 100 room nights a year.

Web Rate or the display price on the website:  BE/ 0.5 cost per room/day, If our break even cost is 1200 then Web rate = 1200/.50 = Rs 2400. This is the price that you would offer to a one-time customer.

Please note the calculation above is for a room. GST is extra

Here is what you can further add to improve your profitability.

Every second person Add 300/500 on the web rates, 200/300 on corporate rates & 100/150 on the Monthly rate. So web rate for single occupancy is Rs 2400+GST then double occupancy web rate could be Rs 2700+GST

If you have a large inventory of rooms say 10 rooms and if 5 rooms are slightly large room . Add value like maybe a coffee table with 2 chairs and sell as Deluxe rooms with say extra cost of say 350. So the Deluxe room pricing could be Rs 2750+GST for Single occupancy & Rs 3050+GST for double occupancy.

For a Travel agents give a standard 15% margin on the web rate.

The Pricing

Room Web Rates: Rs 2400/300+GST

Room Corporate Rates: Rs 2200/200+GST

Room Monthly Rates : Rs 1850/150+GST

Room Base Rates: Rs 1600/100+GST

Please note the above is a typical pricing derived from the formula and are your guidelines. The final Rates will be fixed based on the competition you have nearby and also the demand supply in that area.

My Conclusion:

Bottom line do not be very stingy or rigid on the pricing as long as you know your base price. A few hundred rupees here and there will not matter. Focus on not losing the business or your client. There could be times when a corporate requests you that the officer does not have the said limit. Don’t think twice,  just honor it. Remember you have won him  for life.

Also Check out:

• How to start Service Apartment
• How to set up Service Apartment