Minimum Price Differentials

Minimum Price Differential is an optional setup that enforces a minimum price difference between Room Classes. The recommended default values are zero to ensure the system can optimize the price difference between Room Classes based on their remaining demand. See Room Class Pricing for details.

Adding Minimum Price Differentials might lead to suboptimal results, see this scenario. You might need to set up Minimum Price Differentials due to your property's business practices. For example, if your Deluxe Room Class always needs to achieve $20 more in room revenue than Standard, set up a Minimum Price Differential of $20 between them.

Setup Steps

Setting Up for All Days and Seasons

1. Click Next after you complete Price Ranking and Upgrade Path setup. The Minimum Price Differential step displays. G3 RMS displays Room Classes as you ordered them in Price Ranking and Upgrade Path.
2. Enter a default value in the Minimum Price Differential field. This value can be a positive integer or zero.
3. Click Apply. The value becomes the default difference between all Room Classes with a ranking relationship.
4. Change the value between Room Classes, as needed.
5. If you need to control the Minimum Price Differential at the day of week or seasonal level, click the Advanced Settings link. See Minimum Price Differential by Day of Week and Season below.
6. Click Next. Continue to complete all the steps in Rooms Setup.

Setting Up by Day of Week and Season

If needed, you can vary the differentials by day of week and season.

1. Click , then Inventory, and then Rooms Configuration.
2. Click Next after you complete Price Ranking and Upgrade Path setup. The Minimum Price Differential step displays. G3 RMS displays Room Classes as you ordered them in Price Ranking and Upgrade Path.
3. Enter a default value in the Minimum Price Differential field. This value can be zero or a positive integer.
4. Click Apply. The value becomes the default difference between all connected Room Classes.
5. Change the default value between Room Classes, as needed.
6. Click the Advanced Settings link if you need to set up price differentials by day of week and season.
7. For the necessary Room Class pairs and days of week, change the minimum price difference that must be in place between the two Room Classes. Each row displays connected Room Classes: the From Room Class column represents the lower ordered Room Class, and the To Room Class column represents the higher ordered Room Class.
8. Click Add following a room type if you need to add a season. The Add Season window opens.
9. Click the Start Date or End Date calendars to add the seasonal date range. The date range must be in the future.
10. Enter the Minimum Price Differential for each day of week in the season.
11. Click Apply.
12. Continue to add seasons following the steps above to set up all required seasons.
13. To make changes, click Edit . To delete a season, click Delete .
14. Click Next. Continue to complete all the steps in Rooms Setup.

Best Practices

Align Minimum Price Differentials with Your Past Pricing

For example, if you priced Deluxe 10 above Standard in the past, don't use a Minimum Price Differential of 30. Otherwise, price ranking forces G3 RMS to push up the prices of higher ranked Room Classes as well. That might lead to uncompetitive pricing for those higher ranked Room Classes.

Align Minimum Price Differentials with Pricing Setup

Set a Minimum Price Differential that is smaller than the difference between the Floors (and Ceilings) of two Room Classes. For example, for Standard Room Class the Floor and Ceiling are 100 and 150, for Deluxe 140 and 190. The system wants to select the lowest price for Standard and Deluxe. But if you set a Minimum Price Differential of 50, then the system can't select the Floor values (100 for Standard, 140 for Deluxe), because they are only 40 apart.

Understand How G3 RMS Applies Minimum Price Differentials

As part of Price Ranking, G3 RMS applies the Minimum Price Differentials to the Optimal Price decision, before applying Rounding Rules and Supplements. See How G3 RMS Determines Pricing.

Notes: 

• Other setup, for example, setting appropriate Ceiling and Floor values for each Room Class, Price Ranking, and Rounding Rules might already ensure differentials.

• G3 RMS doesn't apply the differentials to Room Class Group Evaluations.

Use Minimum Price Differential if Past Pricing Isn't Representative

Use a Minimum Price Differential if the historical ADR difference between two Room Classes is no longer representative. For example, in the past the ADR difference between your Standard and Deluxe Room Classes was very small. That's because they were very similar or because the Front Desk regularly upgraded guests for free. Now you expect a higher ADR difference because of a renovation or because of a change in the upgrade policy. In that case, you might need to set a temporary Minimum Price Differential. Once G3 RMS learns the new differential from the historical data, you can remove it.

Include Tax

If you are in a country with Tax-Inclusive Pricing Tax-inclusive pricing applies in countries where quoted and booked prices have to include taxes like a Value-Added Tax (VAT) or Goods and Services Tax (GST). If you are not in a country with tax-inclusive pricing, taxes are added to pricing only at the point of payment. In G3 RMS, tax-inclusive pricing is enabled and configured in Property Specific Configuration., enter Minimum Price Differentials inclusive of tax. For example, if you require a minimum price difference of 10 between the Standard and the Deluxe Room Class, enter 10. If your tax is 20%, the Minimum Price Differential of 10 includes a tax of 2. View Entering and Display of Taxes in G3 RMS for more information.

Exclude Supplements

If your property set up non-room Supplements, the differential values should not include the cost of non-room supplements. For example, you require a minimum difference of 30 between the Standard and the next higher Deluxe Room Class. But out of the difference of 30, 20 is breakfast and set up as a supplement. In that case, enter 10 as your Minimum Price Differential. G3 RMS adds 20 when it calculates the Final Price decisions.

Monitor Your Overrides

If you enter a Specific pricing override, your override does not adjust to fit your Minimum Price Differential rules. See Best Practices for Overriding Pricing for more information.

Scenarios

Minimum Price Differentials Might Restrict Optimal Pricing

Before you set up any differential, remember that G3 RMS also considers your Pricing Setup and Price Ranking when it prices Room Classes. Adding a Minimum Price Differential might restrict the system's ability to find the optimal pricing decision. Here is a simplified example:

The Standard Room Class is ranked lowest as number 1, and its pricing decision is $199. For the Deluxe Room Class, the next higher ranked one, you set up pricing from a Floor of $150 to a Ceiling of $250. You also require rounding to rates ending in $9 for both prices. Based on very low Deluxe demand and the observed price sensitivity, G3 RMS calculates optimal results if Deluxe is priced only slightly above Standard. With a $0 minimum differential, G3 RMS can price at $209 and maximize revenue.

However, if you set a $30 minimum differential between Standard and Deluxe, the lowest possible pricing decision that G3 RMS can select is $229. In this scenario, though, there might be no demand for Deluxe at $229. Therefore, if you enable upgrades between Standard and Deluxe, G3 RMS might forecast to overbook Standard up to the amount of the unused Deluxe capacity. You will sell only rooms at $199 and upgrade many to Deluxe, instead of selling at least some Deluxe at $209.

G3 RMS Can Ignore Minimum Price Differentials due to Minimum Change Values

See this scenario in Minimum Change Value.