.png)
Frameworks, core principles and top case studies for SaaS pricing, learnt and refined over 28+ years of SaaS-monetization experience.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
In today's competitive hospitality landscape, choosing the right software solution isn't just about features—it's about finding a pricing structure that aligns with your property's unique operational patterns. As hotels increasingly rely on technology to streamline operations, the question of how hospitality SaaS is priced becomes critically important to your bottom line.
The two dominant pricing models—per-room and occupancy-based—offer distinctly different approaches to hotel software costs. Understanding the nuances between these models can be the difference between a technology investment that delivers ROI and one that becomes a financial burden.
The Evolution of Hospitality SaaS Pricing
Before diving into specific models, it's worth noting how hospitality software pricing has evolved. Traditional on-premise solutions typically required substantial upfront investments, annual maintenance fees, and costly upgrade cycles. Modern cloud-based hospitality SaaS has shifted toward subscription models that offer greater flexibility and predictability.
According to Phocuswire, the global hospitality software market is projected to reach $12.5 billion by 2025, with subscription-based models accounting for over 70% of all new implementations. This shift reflects hotels' preference for operational expenses rather than capital investments.
Per-Room Pricing Model: Predictable Scaling
How It Works
The per-room pricing model is straightforward: hotels pay a fixed fee for each room in their property, regardless of occupancy rates. For example, a 100-room hotel might pay $5 per room per month, resulting in a $500 monthly subscription.
Advantages
Predictable Budgeting: Finance teams appreciate the stable, predictable nature of per-room pricing. Your costs remain consistent regardless of seasonal fluctuations.
Simplicity: There's no need to track changing occupancy rates or negotiate complex contracts—the math is straightforward.
Full Feature Access: All rooms receive access to the software's capabilities, ensuring consistent service delivery throughout your property.
According to a Skift Research report, approximately 65% of property management systems (PMS) use some variation of per-room pricing, making it the most common model in the hotel software market.
Disadvantages
Inefficiency During Low Occupancy: The primary drawback is paying for rooms that may sit empty during off-peak seasons. For seasonal properties with significant occupancy fluctuations, this can result in periods where you're paying for unused capacity.
Disproportionate Costs for Larger Properties: As hotel size increases, costs scale linearly even though the incremental cost to serve additional rooms is minimal for software providers.
Occupancy-Based Pricing: Aligning Costs with Revenue
How It Works
Occupancy-based pricing ties your software costs directly to your actual occupancy rates. Instead of paying for every room in your inventory, you pay only for occupied rooms. This might be structured as a percentage of room revenue or a fixed fee per occupied room night.
Advantages
Cost Alignment with Revenue: Your technology expenses rise and fall with your business volume, creating natural alignment between costs and revenue generation.
Seasonal Flexibility: For properties with distinct high and low seasons, occupancy-based pricing automatically adjusts your technology expenses to match business volume.
Reduced Risk: During unexpected downturns (like pandemic-related travel restrictions), your software costs decrease proportionately with occupancy.
A 2021 study by Hotel Tech Report found that hotels using occupancy-based pricing saved an average of 22% on software costs during low season months compared to per-room models.
Disadvantages
Unpredictable Costs: Budget forecasting becomes more challenging when your software expenses fluctuate monthly.
Implementation Complexity: These models typically require integration with your property management system to track occupancy data accurately.
Potential for Higher Costs: During periods of consistently high occupancy, you might end up paying more than you would with a flat-rate model.
Hybrid Models: The Best of Both Worlds?
Many hospitality SaaS providers now offer hybrid pricing structures that combine elements of both models. Common approaches include:
- Base fee plus occupancy-based component
- Tiered pricing based on room count ranges
- Usage-based pricing with minimum guarantees
According to Hospitality Technology's 2022 POS Software Trends report, hybrid models are gaining traction, with 38% of new hotel software implementations featuring some form of blended pricing structure.
Choosing the Right Model for Your Property
When evaluating hospitality SaaS pricing models, consider these key factors:
Occupancy Patterns
Properties with stable, high occupancy year-round may benefit from per-room pricing, while those with significant seasonal fluctuations might see greater value in occupancy-based models.
Size and Scale
Larger properties often have more negotiating power to customize pricing structures. Enterprise-level hotel groups might negotiate entirely custom pricing based on their specific needs and volume.
Technology Budget Structure
Consider how your organization budgets for technology. Some finance teams prefer fixed, predictable expenses, while others are comfortable with variable costs that align with revenue.
Growth Plans
If you anticipate expanding your property or adding locations, consider how each pricing model scales with your growth strategy.
Questions to Ask Hospitality SaaS Providers
When evaluating hotel software options, ask potential vendors these critical pricing-related questions:
- Are there additional fees beyond the base subscription (implementation, training, support)?
- How do pricing tiers change as my property grows?
- Can I transition between pricing models if my needs change?
- Are there volume discounts for multi-property implementations?
- How are system upgrades and new features handled under each pricing model?
The Future of Hospitality SaaS Pricing
The hospitality technology landscape continues to evolve, and pricing models are following suit. Industry experts anticipate several emerging trends:
Value-Based Pricing: Some innovative providers are exploring models that tie software costs directly to measurable outcomes, such as revenue increases or efficiency gains.
Microservices Approach: Rather than all-in-one solutions, hotels may increasingly adopt a modular approach, paying only for the specific functionality they need.
Performance-Based Models: Future pricing may include elements tied to agreed-upon performance metrics, creating shared success incentives between hotels and their technology partners.
Conclusion
There's no one-size-fits-all answer to the hospitality SaaS pricing question. The ideal model depends on your property's specific characteristics, business patterns, and financial priorities.
Per-room models offer simplicity and predictability but may result in paying for unused capacity. Occupancy-based pricing aligns costs with business volume but introduces budgeting variability. Hybrid approaches attempt to capture the benefits of both while mitigating their respective drawbacks.
As you evaluate hotel software options, look beyond features and functionality to carefully assess how each vendor's pricing structure will impact your total cost of ownership and return on investment. The right pricing model isn't just a financial decision—it's a strategic choice that can significantly impact your property's technological agility and competitive positioning.
By understanding these models and asking the right questions, you'll be better positioned to select not just the right hospitality technology solution, but the right economic relationship with your technology partners.