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Franca Landerer
May 23, 2024

Restrictions - the Balancing Act Between Revenue Optimization and Blocking Bookings

Restrictions, the deliberate limitation of the guest's options, sounds bizarre in a service-orientated industry such as the hotel industry. But in reality, restrictions are a powerful tool with both advantages and disadvantages for hoteliers and guests. Before looking at the significance of restrictions and delving deeper into the subject matter, this article will first explain the different types of restrictions and look at the practical application options.

Restrictions refer to specific rules, conditions, or limitations that are set by hotels to control their business operations. These restrictions can cover various areas, including pricing, booking conditions, availability of rooms and services, and general capacity restrictions.

Different Types of Restrictions

Minimum Length of Stay (MinLos) This restriction specifies that the guest must stay at the hotel for a certain number of nights to be able to book on that day.

For example, a hotel can set a MinLos of 2 nights for the weekend to ensure that the rooms are booked from Friday to Sunday, thus achieving a higher occupancy rate.

Maximum Length of Stay (MaxLos) If a Maximum Length of Stay is set as a restriction, this limits the maximum number of nights that guests can book at the hotel.
Minimum StayThrough Unlike the MinLos, which applies to specific days, the Minimum StayTrough can apply to a period such as vacation periods or special events. This restriction helps the hotel to encourage longer stays during periods of high demand and maximize capacity utilization.

For example, if a Minimum StayThrough of 2 nights is set to a Saturday, once Saturday night is involved, the guest must stay two nights. This can then be Friday and Saturday night or Saturday and Sunday night. This also shows the difference to the more rigid minimum stay, which only refers to the nights on which it is set.

Maximum StayThrough The Maximum StayTrough restriction refers to the maximum duration over which a guest can book to cover certain dates or events such as vacation periods or special events.
Closed to Arrival (CTA) If this restriction is set, no arrival is possible for potential guests on this specific day or in this specific period. This type of restriction enables the hotel to plan resources such as staff and cleaning more efficiently and avoid capacity bottlenecks or to protect high-demand days by not allowing arrivals and redirecting them to shoulder days.
Closed to Departure (CTA) If a Closed to Departure restriction is set, potential guests cannot depart on this specific day or in this specific period. They must therefore either book an extra day or depart earlier.

Further Restriction Possibilities

Cancellation Policies: With this restriction, you define the conditions under which guests can cancel their booking. Different fees or deadlines can be set for cancelations. Clear cancellation conditions serve to minimize unwanted booking changes and ensure planning security for the hotel.
Restrictions on Room Categories: These restrictions are used to limit the availability of certain room categories for certain guest groups or booking channels.
Booking Window Restriction: With this type of restriction, bookings are linked to the booking period. This includes, for example, early booking discounts or last-minute offers.
Rate Code Restrictions: Various rate codes can be used to determine who is allowed to book which rate. Accordingly, special conditions can be reserved for certain groups of guests.

Reasons Why Restrictions Can Be Useful In Hotels

At their core, restrictions are supposed to make operations more efficient and maximize revenue by optimizing the flow of bookings and the use of resources. This benefits not only the economic aspects of the hotel but also the guests. Restrictions can improve the perceived quality of service by providing a pleasant and relaxing experience. For example, if restrictions are used to make the hotel facilities less crowded, this leads to a more relaxed atmosphere, and long queues at check-in, check-out, or the breakfast buffet can be avoided. Some examples and reasons of how restrictions can be beneficial for a hotel can already be seen in the table above. To shed more light on this, we will look at two scenarios below:

Imagine that a hotel offers very flexible cancellation policies that allow guests to cancel their booking without charge, even at short notice. In the event of bad weather, many guests then tend to cancel or postpone their city trip at short notice, as they do not have to fear any financial consequences. However, with appropriate cancellation policies, the hotel can ensure that guests think carefully about their bookings and plan in advance, which stabilizes the occupancy rate and thus the profitability of the hotel.

Another useful use case can be found in the application of the “Closed to Departure” restriction. Suppose a hotel expects a large number of departures on a certain day, whether due to events or seasonal fluctuations. In this case, the hotel could decide to set a “Closed to Departure” restriction for this day. By limiting the maximum number of departures, the hotel can ensure that sufficient time and staff are available for room cleaning to guarantee a smooth check-out process with the usual quality of service. There is also the possibility that a potential guest will extend their stay by at least one more night when booking, which can close booking gaps. In summary, restrictions not only help to increase operational efficiency, generate additional revenue, and reduce staff workload but also improve the overall guest experience. This in turn helps to improve the hotel's reputation, which also has a positive impact on future bookings and revenue.

More insights into reputation as a revenue generator

## Why Restrictions May Not Necessarily Serve a Good Purpose

Goethe once said “Only in restriction does the master reveal himself”, but does this also apply to restrictions in the hotel industry? Used correctly, they can increase a hotel's turnover and boost bookings. But there is a flip side to every coin. Restrictions can take away some of the guest's freedom to book, which in the worst case can inhibit bookings. This is because overly strict booking or cancellation conditions can deter potential guests and encourage them to book with competitors who have more flexible policies. An overly rigid restriction policy could ultimately play into the hands of competitors and impair your competitiveness. It is therefore crucial to know the strategies of your direct competitors and to offer appropriate booking conditions that take into account the market, the interests of the hotel, and the needs of the guests. For this reason, Hotellistat's revenue management system has an integrated restrictions table that allows the hotelier to quickly and easily keep track of all the restrictions set. This table not only provides an overview of existing restrictions but also makes it possible to define new restrictions as required. It should be noted that the options for defining new restrictions are only limited by the capabilities of the hotel PMS.

The Balancing Act

How many restrictions do I need and how much is too much? Unfortunately, there is no general answer to this question. After all, every hotel has its own target group, its own strategy, and due to its geographical location, different levels of fluctuating demand and competition. In revenue strategy consultations, we regularly see hoteliers complaining that there is no pick-up for a certain period, even though demand in the market is high and competitors with a similar price level are receiving numerous bookings. In such situations, it is often enough to look at the restrictions that have been set. These often overlap and increasingly longer minimum stays make it impossible for guests to book. In order to stick to the minimum stay, you should always ask yourself whether you would accept a booking for a high room category at a premium price, even for one night. If the answer is yes, the minimum stay should only be set for the lower (cheaper) room categories. As a general rule of thumb, if your team can no longer understand why a restriction was set, then neither can the guest. Sometimes less is more.

## Summary

Restrictions in the hotel industry are a balancing act between optimizing revenue and avoiding booking barriers. Diverse in their application, from minimum and maximum length of stay to restrictions on room categories and cancellation policies, they can help to make operations more efficient and improve the guest experience. However, a balanced approach to setting restrictions is crucial. Restrictions must be used strategically and with the market and guest needs in mind to best meet the needs of the hotel and its guests. Used correctly, restrictions are and remain a powerful tool for revenue management in many ways.

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