Some hotels close certain meal plans during periods of high demand or once they reach a particular occupancy level. Others always keep all available meal plans open for sale, whatever the circumstances. The choice often depends on how the organisation calculates its average rate.
In my view, average room rate should be calculated after deducting the value of the services included, using allocations agreed within the organisation. For example:
- Price paid: two adults on half board — €120
- Internal breakfast allocation: €7 per person
- Internal lunch allocation: €13 per person
Average room rate = €120 − (2 × €7) − (2 × €13) = €80 before VAT, or €72.73 excluding VAT.
Revenue managers and commercial directors who calculate average room rate this way tend to price the meal-plan supplements above their internal cost allocation. That is generally the right approach: you should not look only at your own costs, but also at competitors’ prices so that your offer remains in line with the market. As a result, the accommodation portion represents a larger share of the total price.
Closing meal plans can make sense for hotels whose operation is built around one specific plan, such as all-inclusive resorts. In other cases, it can be a disadvantage for two reasons:
- A lower meal plan, such as room only or bed and breakfast, can be the hook that encourages guests to choose a higher plan. At certain times of year, pricing a lower plan just below the next option can help create demand for the higher plans.
- You may disappear from the top positions on metasearch sites and OTAs. These platforms make it easy to filter by category or price, and “lowest price” is one of the most commonly used filters. If your lower-priced plan is closed, your hotel may no longer appear near the top.