Why the Obvious Rate Move is Often the Expensive One

Some judgement calls look wrong right up until the booking behavior proves them right.

Holding rate can look reckless when the hotel is behind pace. Starting with a low, occupancy-first, pricing strategy can look careless when competitors are protecting rate. Questioning a major-event premium can look overly cautious when early signals point to compression.

That is the uncomfortable part of revenue management: the most visible signal is not always the most useful one.

A pace report, a rate shop or an event calendar can point the team toward an obvious move, while the wider demand picture points somewhere else.

Mallory Wall and John Stanfield see that tension across Lighthouse’s Commercial Strategy Services portfolio, where they oversee revenue strategy across dozens of branded properties in Texas, the Midwest and the Southeast – convention-led hotels, upscale boutiques, limited-service chains and everything in between.

Their markets vary, but the pattern is familiar: hotels often make confident assumptions about demand before the booking behavior has fully proved them right.

Key takeaways

• Being behind pace doesn’t always mean demand is weak. Sometimes guests are just booking later than they used to.

• Dropping rate to fill rooms can backfire. The cheap bookings you take now can crowd out better-paying ones that would have come later.

• A lower rate isn’t always a discount. Used deliberately, it can win you the nights around a big event, not just the peak one.

• Know your market before you trust the numbers. A rate that looks wrong on paper often makes sense once you know where your hotel really sits.

The premium was right. The restrictions weren’t.

Major events tend to create confidence early.

Hotels often open inventory with higher rates and tighter restrictions because the opportunity looks clear from a distance. Historical comparisons, demand signals and competitor pricing can all point in the same direction, especially when a similar event has driven strong performance before.

Mallory saw that play out around a major sports event in one of her markets. The expectation was for a much stronger spike, and the initial case was reasonable: comparable events had driven demand before, and the early signals suggested strong compression again.

Closer to arrival, the picture became more uneven. Demand was still there, but it was concentrated around certain dates, locations and stay patterns. Supply was heavier than expected, alternative accommodation played a bigger role, and properties with better access to transport and event activity benefited more than others.

Rate was only part of the problem.

“We were too aggressive in the beginning,” she says. “We required a full, non-refundable deposit, and I think that kept a lot of people away.”

The rates were not wildly out of step with the market. The bigger question was whether the total strategy matched how guests were actually booking.

High rates can work when demand is deep and committed. They become harder to sustain alongside tight restrictions if guests are still comparing options, booking later, or unsure how much flexibility they need.

The danger of blinking too early

That same tension played out differently around a recurring event the hotel knew well.

Historically, the strategy was to open with length-of-stay restrictions, push rate and wait for the business to build.

This time, the hotel was behind pace.

The team held for a while, but the occupancy gap was visible. The event was getting closer. Pressure built.

Eventually, they dropped the rate. Then they dropped it again.

The demand eventually materialized, but much later than expected.

“We should not have dropped rate,” Mallory says. “We should have held. We should have trusted that this was going to materialize like it did. The booking pattern and the booking window was just so much shorter.”

It is the classic revenue manager’s dilemma. When the hotel is staring at empty rooms in a forecast meeting, holding rate can feel reckless, even when it is the right move. That’s when the panic sets in.

“I think the lesson is to trust the demand that’s there, even if you’re behind pace,” Mallory says.

The better response, she says, would not necessarily have been to ignore the pace issue. It would have been to manage the response more carefully. 

If the hotel needed some base, it could have allowed a limited amount of lower-rated business, then capped it, yielded it and protected higher-rated demand as the booking window developed.

“Once you get to a certain price point, you can pretty easily fill a hotel,” she adds. “But that’s not necessarily the business you want.”

Dropping rate can close an occupancy gap in the short term. The risk is that the hotel fills with lower-rated bookings that end up displacing higher-value demand that would have arrived later.

“Once you get to a certain price point, you can pretty easily fill a hotel. But that’s not necessarily the business you want.”Mallory WallWhen a lower rate is the more strategic move

A late-season game in one of John’s markets created a different kind of decision.

The usual playbook around major home games was to price strongly, manage length of stay and adjust based on the day and time of the game.

Kickoff time alone can change the trajectory of the weekend. A noon game behaves differently from an evening game. A weekday game creates a different stay pattern than a weekend game. The opponent can change the level of demand. The home team’s performance can change it again.

But one late-season game created unusual uncertainty. 

The market knew the game would happen during a specific weekend, but the exact day and time would not be confirmed until close to arrival. That meant the hotel did not know which night would become the peak. 

Guests did not know either.

Instead of following the usual high-rate, highly protected strategy, John chose a more open approach. Rates were set lower than they would normally be for that type of event, and lower than much of the market.

But the uncertainty influenced how guests booked. 

Because travelers did not know the final schedule, many booked longer stays to cover themselves. The hotel captured more three-night demand earlier than its competitors. It still performed well on the peak night, but the real advantage came from the surrounding nights.

“It ended up being the best game of the year for us,” John says.

The key was capturing the surrounding nights, not just the peak one.

“What caused us to really win the weekend was Friday night,” John says. “We had substantially higher occupancy than everyone else, even at a lower rate, because we had that more appealing strategy to begin with.”

The longer stays also helped operationally. Three-night bookings meant fewer arrivals and departures, fewer full room turns, and less pressure on the team than the same occupancy built through a series of one-night stays.

The lower rate worked because it was a deliberate strategy based on demand, rather than just a discount.

Because guests did not know which nights they needed, the more open strategy gave them a reason to book earlier and stay longer.

Both calls came down to the same question

In Mallory’s case, the better move was to hold rate longer. In John’s, it was to open lower than the market expected.

Both were really questions about booking behavior.

Was demand missing, or just arriving later? Were guests unwilling to pay, or simply unsure which nights they needed? Was the hotel protecting value, or creating friction? The rate move only made sense once those questions were answered.

That is why the “obvious” revenue decision can be misleading. It is usually based on the signal that is easiest to see, whether that is soft pace, a high compset, an event on the calendar or an occupancy gap that is making the team uncomfortable. The better call often comes from understanding why the signal looks that way.

Reading pace when the booking window shifts

Pace remains one of the most important signals in revenue management, but it can become dangerous when treated as the whole answer.

“How are we performing versus the same time last year? Are we ahead? Are we behind?” John says. “When you’re talking about forecasting and predicting future performance, pace is absolutely critical.”

The challenge is that pace depends on the booking curve being comparable.

This year, John has seen shorter transient lead times across several markets. Some hotels have gone into the month flat or slightly behind on occupancy compared with the same time last year, only to recover through stronger in-month pickup.

A hotel that is behind pace may genuinely be facing weaker demand, or it may simply be looking at a shorter booking window than last year. 

If the lead time has shortened, the same on-the-books position can mean something different than it did in the previous comparison period.

“The sooner you’re able to recognize that,” John explains, “the more confidence it gives me to assume that, although we may head into the month down in occupancy, we’re probably going to pick it back up because that’s what we’ve done the last few months.”

This is where historical comparison can be both useful and challenging. 

Pace against last year is important, but only if the booking behavior is still comparable. If lead time has moved, pace needs to be interpreted alongside that shift.

The first question should not be, “Are we behind?”

It should be, “Are we behind because demand is weaker, or because demand is booking later?”

Those are very different problems, and they require very different responses.

Why it’s hard to go against the grain

Revenue decisions like these seldom occur with the luxury of time or certainty; they always happen under pressure. 

If pace is soft, teams want to protect occupancy. If a major event is coming to town, owners and commercial leaders may expect a premium. If competitors are holding high rates, nobody wants to be the hotel that fills too early at a lower ADR.

In a market where everyone appears to be charging high rates, it can feel risky to move first. Without visibility into competitor occupancy, a hotel may not know whether the rest of the market is genuinely strong or simply holding an optimistic position.

Sometimes hotels drop too quickly because they are uncomfortable with soft pace. Other times, they hold too high for too long because it feels easier to defend protecting rate than to explain why the hotel sold out too cheaply.

John sees that pressure clearly.

“If I go into a revenue meeting and our hotel has had a bad week and I completely missed the mark on our performance, most people probably feel like it’s easier to say, ‘Well, we wanted to protect the hotel. We didn’t want to fill up right away. That ended up being the wrong decision,’” he explains. “As opposed to the counterpart, which is, ‘We weren’t paying attention. We weren’t protected. We sold out at $200 and everyone else sold out at $300.”

That fear is understandable. But it can also delay the right move.

Data becomes important here, not because it replaces judgment, but because it supports the argument.

“If you can’t back up your opinions, then they have no weight,” John says.

A revenue manager making a decision that feels outside the normal playbook needs evidence to bring the team with them.

“If you try to do something that’s outside of the box or unusual or could be a risk, you absolutely have to have data to support your decision-making, or else no one’s going to get on board.”

That might mean checking competitor occupancy alongside lead-time trends, not just rate position.

One metric is unlikely to settle the decision. The confidence comes from seeing the signals together, especially when the call still feels uncomfortable.

“If you try to do something that’s outside of the box or unusual or could be a risk, you absolutely have to have data to support your decision-making, or else no one’s going to get on board.”John StanfieldData needs market knowledge

Data becomes more valuable once a revenue manager understands the market it’s describing.

“The biggest thing honestly is knowing your market,” Mallory says.

That means understanding what the hotel is capable of, where it normally sits against the compset, what rates it can realistically achieve, which competitors are truly comparable, and what might be driving their behavior.

A competitor dropping rate may be a sign of weak market demand. It may also be a sign of a property-specific issue. A hotel may appear underpriced or overpriced on paper, but the numbers alone do not always explain product quality, operational challenges, location advantages, brand strength or guest perception.

Mallory’s advice is to understand the market first, then trust the data.

“Not every hotel is going to be number one,” she says. “If you’re not normally number one, but you’re normally number three, then that’s where you’re supposed to be, as long as you’re getting your fair share.”

Time in a market is important too.

Taking on a new property starts the clock over, John says. It can take about a year to really understand a hotel and its market: the competitors, seasonality, recurring events, corporate accounts and local demand patterns.

That learning curve gets shorter with experience, but it never disappears entirely.

The more time he has with a hotel, the less he has to spend decoding the basics of an event or account. That leaves more room to focus on current performance and the decision in front of him.

Experience changes how quickly and accurately the data gets interpreted.

Getting to the right checks faster

Before a hotel reacts, the first check should be whether the issue is market demand or hotel performance.

• If pace is soft, start by checking whether the market is also behind. 

• If the compset is in the same position, the issue may be demand timing rather than hotel performance. 

• If similar properties are pacing ahead, the question becomes whether the gap is coming from price, restrictions, visibility, or the hotel’s position in the market.

• For a major event, look beyond the event name. The hotel needs to assess whether demand is actually materialising for its specific dates, location, and target segments.

• When the hotel needs base, decide how much base it needs and where it should come from. A controlled amount of lower-rated business can support the strategy. Uncapped discounting can quickly become a mix problem that is hard to unwind.

The pressure remains, especially when the hotel is behind pace or ownership expects a major-event premium. The right checks give the team a clearer reason for acting, and a clearer point at which to change course. The challenge is getting to those checks quickly enough.

A revenue manager may need to compare pace against market demand, rate position against competitor movement, and recent pickup against the booking window the hotel expected to see.

None of that is especially complicated in theory. In practice, it takes time. And the longer it takes to pull the signals together, the more the obvious move starts to look like the safest one.

That is where connected data can shorten the path from signal to decision. With Lighthouse, pace, market demand, pricing and performance data are all in one place – the team starts their conversation at “we know what to check” rather than “something looks off”.

Ernest makes the next step more direct: the team can ask what changed in plain language, which dates are moving, or whether the gap looks more like a demand issue or a hotel performance issue, and get an answer grounded in the same commercial data.

That does not make the decision automatic. It gives the revenue manager more time to use their judgment, and a better way to defend it when the right call does not look obvious yet.

FAQs

Does being behind pace mean demand is weak?

Not necessarily. Being behind pace can mean demand is weak, but it can also mean guests are simply booking later than they did in the comparison period. Booking windows have shortened in many markets, so a hotel can go into the month behind on the books and still recover through stronger in-month pickup. The first question to ask is whether you’re behind because demand is softer, or because it’s arriving later. Those are different problems with different responses.

Should you drop rate when you’re behind pace before a big event?

Usually not, at least not right away. When demand for an event is real but arriving late, dropping rate to close an occupancy gap can fill the hotel with lower-rated bookings that displace higher-value demand booking closer to arrival. The more disciplined move is to hold, and if you genuinely need a base, allow a limited amount of lower-rated business, then cap it and protect higher-rated demand as the booking window develops.

When is a lower rate the right revenue strategy?

A lower rate works when it’s a deliberate response to how guests are booking, not a reaction to soft pace. When guests face uncertainty – for example, an event whose exact date isn’t confirmed – an open, lower-rated, flexible strategy can capture longer stays and earlier bookings than competitors holding high rates. The advantage often comes from winning the nights around the peak, not just the peak itself.

How do you know if a rate looks wrong or is actually wrong?

Start with market knowledge. A rate that looks too high or too low on paper often makes sense once you know where your hotel genuinely sits against a relevant compset. A competitor dropping rate might signal weak market demand, or it might reflect a problem specific to that property. Check competitor occupancy and lead-time trends alongside rate position before concluding a price is wrong – one metric rarely settles it.

Joe Hanly

Joe Hanly is a writer and content creator at Lighthouse, helping hoteliers navigate industry trends with clear, engaging storytelling. He believes the best insights come from real experiences – that’s why when he’s not writing about travel and hospitality, he’s out exploring it firsthand. It’s all research. Sort of.

About Lighthouse

Lighthouse (formerly OTA Insight) is the leading commercial platform for the travel & hospitality industry. We transform complexity into confidence by providing actionable market insights, business intelligence, and pricing tools that maximize revenue growth. We continually innovate to deliver the best platform for hospitality professionals to price more effectively, measure performance more efficiently, and understand the market in new ways.

Trusted by over 65,000 hotels in 185 countries, Lighthouse is the only solution that provides real-time hotel and short-term rental data in a single platform. We strive to deliver the best possible experience with unmatched customer service. We consider our clients as true partners – their success is our success.

Source: View the original article at Lighthouse.