Pricing an Empty Christmas

The situation

Two enquiries landed in the same week at a 47-bedroom independent hotel in Edinburgh.

The first was a corporate account wanting two nights a week, every week, from the end of September through to the following June. The second was a European tour operator wanting 24 rooms — 42 guests — across Christmas, and again across Hogmanay. That operator had already been quoted for the previous year and walked away, saying the rates were too high.

Both enquiries were about to be answered the way most independent hotels answer them: off the rack rate, adjusted by feel. Nobody had looked at what the hotel actually earned on those particular dates.

So we went to the booking data. Two full years exported from the property management system — 13,310 bookings — with every stay broken out into its individual nights, so the question could be asked properly. Not what is our average rate, but what did this type of room, on this night of the week, in this month, actually put in the bank after commission?

What the festive fortnight actually looks like

The operator wanted a single rate across both packages. One chart makes that impossible to agree to.

Christmas Eve ran at 32%. Thirty-two rooms sat empty on the night we were quoting a premium rate.

The finding nobody was looking for

The Christmas half of that was the answer to the question asked. The Hogmanay half was worth more.

The hotel sold 43 of 47 rooms on New Year’s Eve at an achieved rate of £91. That is thirteen pounds above an ordinary Monday in December. Selling out on the biggest night of the Edinburgh calendar is not evidence that £91 is the market — it is evidence of a rate that was set once and never revisited.

Every £10 added to that night is £430, on a night that sells out regardless. Nothing on any report the hotel ran would have flagged it, because 91% occupancy reads as a good result everywhere it appears.

What went out

The festive quote was built night by night rather than as a flat package price, so the Christmas Day premium was visible and defensible instead of buried in an average. Meals were quoted as a standard dinner, bed and breakfast supplement, with a premium on Christmas Day itself.

Of that total, £5,460 is food and beverage — 46% of the deal. A group that looks marginal on room rate alone stops looking marginal the moment the restaurant is counted, and that is the argument for taking festive group business at all.

The corporate account, and the mistake in the data

The other enquiry — two nights a week for nine months — ran on the same method and produced a sharper lesson about the numbers themselves.

The first pass compared the corporate offer against gross achieved rates and landed on £62 to £78 depending on season. Then the hotel mentioned something in passing that changed the arithmetic: one of the two major agencies deducts its commission at source. Its figure in the system was already net. The other agency’s was gross, with commission invoiced monthly.

Comparing one channel’s net against another’s gross had invented a £22-a-night gap between them that did not exist — the real difference was around £10 — and had understated what the hotel genuinely banked. Corrected, the recommendation moved up by £6 to £8 a night across the board.

Two seasonal tiers rather than one flat rate, because midweek occupancy runs at 92–97% from April to June. A single low rate across nine months would have given away the months the hotel could least afford to discount. The softest night of the week turned out to be Sunday at 55% — so the account was steered towards Sunday and Monday arrivals, where there was room to be generous.

Two things in the export that would have produced a confident, wrong answer

Fourteen per cent of bookings carried a zero value. Not errors — tour blocks and owner bookings invoiced outside the system. Left in, they drag average rate down by roughly a fifth and make every period look weaker than it traded. Stripped out without asking, you lose the occupancy they represent. They have to come out of the rate calculation and stay in the occupancy one.

Commission is deducted in two different places depending on the channel, and the system stores both the same way. Nothing in the export flags which is which. That distinction isn’t discoverable from the data — it came from a remark in conversation, and it moved the final recommendation by about 12%.

This is the part most rate reviews get wrong. The report runs, the numbers look plausible, and the decision is made on an average that has quietly been built out of two incompatible things.

What it comes down to

1. Price the night, not the season. “Christmas” was two opposite trading conditions eight days apart. Any rate quoted across both was wrong for one of them.

2. Selling out is a pricing failure, not a success. 91% occupancy on New Year’s Eve at an ordinary Monday rate was the clearest signal in two years of data, and it looked like good news on every report the hotel ran.

3. The comparison is net, not gross. A direct booking pays no commission, so a discounted direct rate can beat a higher agency rate. Get the commission mechanics wrong and the whole negotiation is anchored to a number that doesn’t exist.

4. Count the food. Nearly half the value of the festive block sat in the restaurant. Group business judged on room rate alone gets turned away for the wrong reasons.

5. Ask what the zeros are. The most dangerous rows in any booking export are the ones that look like missing data and are actually a different business model.

How long this took

The analysis itself — two years of bookings, expanded to per-night detail, segmented by night of week, month, room type and channel, with the commission mechanics corrected — was a single afternoon. Ten years ago it would have been a week of someone’s time and probably wouldn’t have been done at all, which is why most independent hotels are still pricing group enquiries off the rack rate and a feeling.

The judgement calls — pricing Christmas keenly, holding Hogmanay, deciding which figure to show the operator and which to keep back — are not technical. They come from having sat on the other side of that enquiry. But the analysis that made them possible is now cheap enough that there’s no good reason to skip it.