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.

Minimum Price Differentials do not apply if your designated reservation system (usually your PMS or CRS) does not support different BAR decisions by Room Class. In this case, the Master Class determines the BAR decisions of all Room Classes, and this setup step is unavailable. G3 RMS doesn't apply the differentials to Room Class Group Evaluations.

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. The value must be greater than 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.

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.

Scenarios

Minimum Price Differentials Might Restrict Optimal Pricing

Before you set up any differential, remember that G3 RMS also considers your Rate Plan 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 BAR1 at $199. For the Deluxe Room Class, the next higher ranked one, you set up BAR2 at $209 and BAR3 at $229. 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 BAR2 ($209) and maximize revenue.

However, if you set a $20 minimum differential between Standard and Deluxe, the lowest possible pricing decision that G3 RMS can select is BAR3 ($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.