If you have spent any time in a revenue role, you know how much energy is invested in base pricing, forecasting, and competitor price monitoring. But one area that quietly drives huge, easy revenue is often overlooked because it feels routine. Room type differentials. The price gaps between categories.
The incremental dollars guests will willingly pay for something better than the standard room.
When these gaps are set correctly, hotels can unlock hidden revenue that requires no marketing budget, no additional staffing, and no operational change.
When they are set poorly, hotels end up giving away their premium rooms for free because the value is not clearly priced or presented.
Why Room Type Differentials Matter More Than Most Think
Finding what sells in your market and where is crucial. Is it a balcony? A better view? A specific room configuration? Often, operators and owners have a perceived value expectation for a room type, but what actually happens is that the guests have a different perception.
These misalignments happen because teams are influenced by too much day-to-day pricing “noise,” and Luxe explains this clearly in a previous post on noise reduction.
This leads to hotels pricing high converting upgrades too low or inconsistently, while pricing rooms with low conversion too high and out of reach.
Even a modest price gap can change the financial story of a hotel. A ten-dollar increase on a premium category, applied consistently across the year, can translate into six figures of incremental revenue for a midsize property.
Unlike base pricing lifts, these dollars drop almost entirely to profit.
A Personal Example: One Small Adjustment, Big Impact
Early in my revenue management career, I learned just how powerful room type analysis can be. I was working with a property that had always priced its high-floor rooms only ten dollars above standard. It had been that way for years. “Ten dollars feels fair,” the team would say. “People don’t want to pay that much more just to be on a higher floor.”
But something didn’t add up. Every week, those premium rooms sold out first. Not some of the time. Not on busy weekends. Every single week. Meanwhile, the standard rooms were always last to fill. We assumed this was just the natural demand pattern of the hotel… until I dug deeper.
I looked at competitor pricing and saw that similar high-floor or view rooms in the market were priced anywhere from twenty-five to fifty dollars above standard categories. The demand was there. We were simply undercharging.
I suggested a small test. Increase the differential from ten dollars to twenty-five and watch the pickup.
Within two weeks, the pattern stayed the same. Premium rooms were still sold out at first. Pace didn’t slow at all, and most importantly, the guests did not push back.
That single adjustment generated roughly an extra $110,000 that year. Same rooms. Same demand. Same operation. The only thing that changed was the offset between one category and the next.
It was the moment I realized how much money hotels leave on the table when room type pricing is treated like an afterthought.
The Hidden Drain of Free Upgrades
On the other side of our example above are the scenarios when rooms are priced too high. We often have a preset expectation of value, but when that preset expectation is challenged by the market, it is important to identify it and react to it.
If a room type is constantly being filled with free upgrades due to overpricing, you are leaving money on the table.
These issues are often amplified by friction in daily yield processes, something Luxe breaks down here effort in yield management.
Know What Your Premium Inventory Is Worth in Your Market
Internal perception is rarely the best benchmark for pricing. The market around you determines value. Your premium room comp set might justify a much higher differential than you think.
Examples of commonly overvalued and undervalued features include:
- balconies
- high floors
- ocean or skyline views
- corner rooms
- renovated rooms
- unique layouts or larger footprints
Some markets support extremely high premiums for these features; some don’t. You cannot know that until you compare category against category, not just your standard room against a competitor’s standard room.
Finding the Sweet Spot
The art is discovering the point where guests still convert confidently. This usually requires:
- watching pickup patterns
- monitoring which categories sell first
- testing upward adjustments
- comparing competitive ladders
- reviewing pacing on premium vs standard
- checking how early high-value categories book
Most hotels find they have been underpricing for years without knowing it.
Strong Upsell Programs Need Strong Differentials
Upselling only works when price ladders make sense. When the value is clear, staff feel more confident about offering upgrades, and guests feel better about the purchase. Strong differentials make upsells more natural and reduce the pressure for free upgrades.
How Technology Helps
This is where systems like LUXE Pricing come in. LUXE evaluates category-level demand, pacing, and competitor pricing to identify the right offsets for each room type. It can flag categories that are selling too fast, underperforming, or priced out of alignment with demand.
Instead of guessing the right differential, hotels can optimize their ladders with real behavioral data.
Final Thoughts
Room type differentials are one of the most reliable, underutilized sources of incremental revenue in hospitality. The inventory already exists. Guests already want it.
The only step left is pricing it with intention and aligning the differential with true market value.
With careful analysis, small tests, and the support of tools like LUXE Pricing, hotels can find that sweet spot where premium rooms sell naturally and year-round.
The revenue impact can be substantial, as I learned early in my career.
One adjustment. One room type. And a six-figure difference in performance.
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