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What is minimum stay: pros and cons

Absolutely everything you should know about minimum stay in hotels.

What is minimum stay: pros and cons - Smartpricing

Years ago, in hotels in Rimini or in Trentino, it was common practice to request a full week's stay from their guests.

But with revenue management and dynamic pricing, people realized that they could maximize revenue by remaining more flexible, so this practice has disappeared.

However, minimum stay, or the requirement of a minimum length of stay, is coming back into use.

This is thanks to the arrival of more competent revenue managers (who are not just doing dynamic pricing) and software capable of supporting their decision-making with data.

So here is some more information to delve into the practice of minimum stay, with pros, cons and tips for using it to your advantage.

What is minimum stay?

The minimum stay defines the minimum number of nights of a stay. 

If a guest wanted to stay for shorter periods, they would not be able to do so (or would still have to pay the full minimum stay).

The minimum stay is part of a set of tools available to hoteliers, managers, and operators that are used to optimize occupancy of accommodations.

These tools, called "stay controls," are used to keep occupancy under control at particular times when sudden peaks and slumps in demand occur.

Other stay controls besides minimum stay are maximum stay, closed to arrival and closed to departure.

If you would like to learn more about the meaning of these terms, we recommend you consult our revenue management glossary.

Why should hotels require minimum stay?

In revenue management, the main tools for maximizing revenue are price management and occupancy management.

Basically how, when and where to sell your rooms.

Minimum stay is one of the ways you can control occupancy.

But what is the reason for requiring your guests to have a minimum length of stay?

There are several, but the main one is to "spread" market demand over several nights that, if left to operate on its own, would be concentrated on only one or two days.

This would create a very short excess demand that would then go on to negatively affect the days immediately preceding and following as well.

If you were running a leisure hotel in late spring, for example, you might find yourself with a very strong demand for Friday and Saturday nights.

If you accepted all requests for those dates, you would end up with a full hotel at high weekend prices.

However, you would prevent those potential guests who also want to stay on Sunday or Thursday from booking. 

You would then have high weekend revenue at the expense of overall weekday revenue.

For this reason you would, at least for some rooms, set a minimum stay that, by reducing demand for the weekend, allows you to accept tourists who want to make longer stays.

This maximizes the hotel's revenue.

The benefits of minimum stay

Maximize hotel occupancy

With minimum stay you can better manage demand during peak periods by reserving rooms for guests who intend to stay longer.

Maximizing occupancy in this way allows you to improve both short-term and long-term bottom lines.

You can offer discounted rates for longer stays

A longer stay equals lower costs for the hotel due to less paperwork and staff time savings.

Therefore you have more leeway with prices and can offer discounted rates for longer stays further increasing demand.

You optimize your work and that of your staff

As mentioned earlier, longer stays allow you to optimize your operations at the hotel

In fact, try comparing a sale to 3 different guests staying one day each with a sale to a single guest staying 3 nights.

In the first case you will have to do 3 bookings (triple e-mail work, triple reservation entry work, triple edit work), 3 check-ins, 3 check-outs, 3 hotel explanations on arrival, 3 payments, 3 rooms to redo on departure.

In the second case, you will have to do all these things once.

The downsides of hotel minimum stay

You limit customers' flexibility

And you may cause dissatisfaction.

Imagine a legacy guest of yours who suddenly can't book at the time they prefer because you've set the minimum stay (if they're really a legacy guest, maybe you could make an exception, right?).

Or a guest who has already booked and unexpectedly would like to reduce their stay, but can't because they are already at the minimum stay limit.

As a result, they are forced to choose whether to stay anyway but pay for an extra day's stay, or change hotels completely by starting the search process all over again.

Difficulties with optimization

The decision on when to apply the minimum stay is based on historical data that help you define patterns of future customer behavior.

Simply put, based on past behavior, you predict future behavior.

But this is not necessarily going to be true.

If you received 70 booking requests for 3-night stays for a certain period last year, it may not necessarily happen again this year.

If you set a minimum stay based only on historical data and do not have tools capable of assessing demand trends in real time, you may therefore find it difficult to fill the hotel.

You risk losing customers

As we saw earlier, setting a minimum stay reduces customers' flexibility and potentially makes them unhappy.

If you use this practice excessively, guest frustration may increase to the point that they may change hotels and never return.

Let's go back to the example of the regular guest from before: if you apply the minimum stay they might even decide, for once, to stay an extra day.

But if the next time they find themselves "forced into a corner“ again by the rigidity of the minimum stay, then they might change hotels definitely out of frustration.

Tips on how to apply minimum stay

Minimum stay is a very useful tool when applied well, so it is necessary to apply some precautions.

Analyze the data

Analyzing the data and statistics you have, even if they give imperfect information, is critical to setting minimum stay.

Try to understand on what dates periods of peak demand followed by a sudden collapse occur.

For some you may decide that it makes sense to set the minimum stay (New Year's Eve, Easter, pre-summer weekends), while for others there is no need (one-time events, spikes in demand that you could not explain).

Stay flexible

When you first go to set a minimum stay, you may realize that it was a mistake.

Maybe it's because there are not enough guests requesting a long stay to justify it, or because the demand on those days is not as strong as you expected.

If this happens, don't worry: all is not lost!

Just stay flexible and take immediate action to reduce or cancel it.

Always remember: the goal is to maximize revenue, not to be right at all costs and force a decision that, given the results, turns out to be wrong.

Stay flexible and willing to change strategy.

Learn from experience

Applying minimum stay is a skill to be practiced to learn how to make the most of it.

For this reason, especially in the beginning, start by setting only a few rooms with minimum stay. 

Maybe the last 10 on a day you know will have a lot of demand.

You will learn how far in advance to apply the minimum stay, how to communicate it, how to set prices, etc.

As you gain more confidence, you will find that you apply it with increasing mastery and that it will yield better and better results.

If you want to manage minimum stay even better and maximize your hotel's revenue even more, try Smartpricing!

Smartpricing is a dynamic pricing and revenue management software that leverages artificial intelligence to continuously analyze and cross-reference your historical data with market data, react quickly to any changes, and help you make better pricing decisions, including minimum stays.

If you want to learn more about Smartpricing and find out if it's right for you, book a personalized demonstration now!