By Jean Francois Mourier 
April 9, 2013

When most hoteliers think about the factors that have an effect on their revenue management strategy, they think of RevPAR, ADR and occupancy. They think about historical and current local demand. Most hoteliers don't think about star ratings, beyond when they initially start working with an OTA and are creating their profile.

But that doesn't make good business sense. What many hoteliers sometimes forget is that the star rating is a hugely important factor, both in marketing your property and in determining the best price for your rooms on a given day.

First, let's look at the importance of star ratings in a property's operations and financial performance.

A three-star, a typical 100-room hotel in the United States earns $110 of RevPAR per room, per day. But if that same property went up to a three and half-star rating, their RevPAR would increase by $42 per room, per day. If you extrapolate those numbers, the property can increase their annual revenues by approx. $1.5 million, simply by increasing their star rating by one half-star (from three-stars to three-and-half-stars)!

Impressive numbers right? Star ratings DO have a direct impact on your property's bottom line!

Some hoteliers even believe that if their property bumps up their star rating, potential customers will have much greater expectations about their property that they may not be able to meet. They operate under the belief that it is better (both financially and for customer satisfaction rates) to be the best hotel in a lower star rating, rather than one of many in the higher rating. That is not necessarily the case.

From a consumer standpoint, a higher rating is perceived to be a "better" property but it is very subjective. Not all travelers use the same criteria for judgement. Some customers would perceive a hotel with better amenities to be a four-star property, whereas others would have different expectations, like perhaps simply a clean hotel. The point being, you can't always please every single customer but by having a higher star rating, you're more likely to secure more, higher priced bookings.

So are you convinced? Perhaps you're looking at your own revenue management strategy to see if your star rating needs updating? Keep in mind though, like every other aspect of the online channels, chaos reigns supreme. Many properties will likely have different star ratings on different OTAs, because each site uses different criteria to determine their ratings.

So what now? Focus on optimizing your actual star rating on the most popular, top-performing OTAs in your region (i.e. Expedia in the North America, Booking.com in Europe, Agoda in Asia, etc.). Since this is the site that brings you the majority of your OTA business, the effort you put into increasing your star rating (on this site) will be a worthwhile investment. Additionally, you want to make sure you review your comp set's star rating so that you can know if your property has an advantage (making it more valuable to the customer) or a disadvantage (which would entice customers to book elsewhere).

And of course, my recommendation is to use a sophisticated revenue management system to make the whole process easier and less time-consuming. A sophisticated RMS will be able to monitor your property's and your competitors' star rating on the important channels - as well as the performance of your competitors and market conditions - on an ongoing basis, and then adjust your pricing accordingly. It is constantly collecting and analyzing data, and will adapt to increase your property¹s revenues without you lifting a single finger (to push the buttons on your calculator). See, isn't that so much easier?!

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Jean Francois Mourier is CEO and Founder of REVPAR GURU, a company that provides hotels around the world with an alternative revenue management software system designed to deliver maximum bookings and profits.  You can reach Jean Francois through www.revparguru.com or by calling 1.786.478.3500.