Why Optimized Inventory Controls Outperform Open Pricing

In parts one and two of our Inventory Optimization series, we explored the evolution of revenue management and the unintended consequences of Open Pricing. In the conclusion of our series, we’ll examine how an Optimized Inventory Controls strategy drives more revenue, higher profitability, and a superior guest experience compared to Open Pricing.

Maximizing Revenue Over an Entire Booking Window

Open Pricing strategies prioritize rate flexibility, adjusting pricing dynamically to capture demand at any given moment. However, this approach often focuses on individual nights rather than maximizing revenue across an entire booking window.

Let’s look at a simple example of a boutique hotel, the ATLien, during a five-day period where a major conference is driving peak demand on Tuesday and Wednesday. Demand for one-night stays is high for both nights, and the hotel will easily sell out those peak nights.

With an Open Pricing strategy, the hotel would aggressively raise the Best Available Rate (BAR) and reduce discounts to zero, focusing on maximizing revenue for each individual night. As a result, the last available rooms for Tuesday and Wednesday would likely be booked by one-night guests, closing out availability for longer-stay guests.

The revenue in this scenario totals $658, but the hotel has now blocked itself from capturing multi-night bookings that would have filled shoulder nights.

Now, let’s apply Optimized Inventory Controls instead. By strategically setting length-of-stay (LOS) restrictions, the hotel proactively blocks one-night stays for Tuesday and Wednesday, holding space for guests booking longer stays.

Even with slightly lower BAR rates on peak nights, this approach leads to a three-night minimum stay requirement, increasing total revenue to $724—a 10% revenue uplift over Open Pricing.

Taking it a step further, if demand exists for even longer stays, LOS controls can be applied more aggressively, requiring a four-night minimum. In this case, total revenue increases to $902, a 37% revenue increase over Open Pricing.

Driving Profitability Through a Better Business Mix

Beyond revenue, profitability is significantly impacted by how hotels manage inventory. Longer stays tend to be more profitable than shorter ones for several reasons:

• Lower operational costs: Turning a room multiple times for one-night stays increases housekeeping and labor costs. Longer-stay guests reduce these expenses, making them inherently more profitable. Even if one-night stays could fill peak nights, the increased cost of servicing multiple shorter bookings diminishes overall profit margins.

• Higher ancillary revenue: Guests who stay through shoulder nights are more likely to spend on food, beverage, and other amenities. According to STR, 32% of total hotel revenue comes from ancillary sources. If a room sits empty on Monday or Thursday due to a one-night Open Pricing booking on Tuesday, the hotel misses out on additional non-room revenue from those nights.

• Smarter channel management: Modern RMS platforms, such as Revenue Analytics’ N2Pricing, factor in the cost of acquisition by channel. Open Pricing, by keeping all rate plans open at all times, accepts bookings as they come in without prioritizing more profitable channels. Optimized Inventory Controls ensure that high-cost third-party bookings don’t displace direct bookings that contribute more to the bottom line.

Protecting the Guest Experience

Another often-overlooked consequence of Open Pricing is its impact on guest perception. When hotels rely solely on price increases during peak demand, they risk creating what industry experts call “insult pricing”—rates so high that they erode guest trust and damage long-term loyalty.

Let’s go back to our ATLien hotel example. Open Pricing proponents might argue that a one-night stay could be priced so high—say $600 or $800—that it generates the same revenue as a three-night stay at a lower rate. But that approach carries significant guest experience risks. A guest who normally pays $200 per night might accept a modest rate increase for a peak period, but seeing an extreme spike could feel like price gouging. Instead of booking, they may abandon the reservation, damaging brand perception in the process.

Bill Marriott put it best: “You’ve got to do everything you can to be fair to the customer. As long as they know you’re being fair, you’ll be fine. They’ll come back, and they’ll feel good about you.”

The Future of Revenue Management: A Balanced Approach

For many hoteliers, the best way to unlock future revenue and profit opportunities is to return to the original principles of Revenue Management. My father, Robert G. Cross’s, book Revenue Management established the core concept of saving your products for your most valuable customers decades ago. That lesson is just as critical today, and is supported by an Optimized Inventory Controls strategy.

Open Pricing strategies seek more flexibility in setting BAR rates and adjusting discounts. However, leaving everything open all the time leads to revenue leakage and a less profitable business mix.

Optimized Inventory Controls ensure that hotels:

• Maximize revenue by capturing longer, more profitable stays.
• Boost profit by reducing turn costs and capturing more ancillary revenue.
• Drive a better guest experience by avoiding extreme rate spikes that erode trust.

With today’s advanced RMS technology, hoteliers are no longer required to choose between pricing flexibility and inventory optimization; they can have both. The right system will apply sophisticated analytics to yield the best revenue opportunities, ensuring both short-term gains and long-term profitability.

For a more in-depth examination of the evolution of Optimized Inventory Controls and the pitfalls of Open pricing, download our white paper: The Hidden Cost of Open Pricing.

And to understand how an Optimized Inventory Controls strategy could benefit your properties, set up an intro call with an expert on our team.