Derived Pricing (Rate Derivation)
Derived Pricing, also called rate derivation or linked pricing, is the practice of setting one "master" rate and letting every other rate plan and room type calculate itself from it by a fixed rule — a percentage, a fixed amount, or both. A hotel changes the master BAR for a date, and the non-refundable rate, the breakfast-inclusive rate, the suite and the twin all move with it automatically.
How it works
Derivations are configured once in the PMS, CRS or RMS as offsets from the parent rate:
- Room-type derivation:
Junior Suite = BAR + €40,Family Room = BAR × 1.35 - Rate-plan derivation:
Non-refundable = BAR − 10%,Bed & Breakfast = BAR + €18 per person - Chained derivation: a child rate can itself be the parent of another rate, though deep chains become hard to audit
Example
A hotel sets Saturday BAR for a standard double at €150. With derivations of non-refundable at −10%, breakfast at +€20, and the junior suite at +€45:
- Standard double, flexible:
€150 - Standard double, non-refundable:
€135 - Standard double with breakfast:
€170 - Junior suite, flexible:
€195 - Junior suite, non-refundable:
€175.50
One entry sets sixteen or more sellable prices across the rate grid.
Why it matters
Derived pricing is primarily a control and workload decision. It keeps a rate grid internally consistent, so a discount never accidentally undercuts a more restricted rate, and it removes most of the manual updating that causes parity errors and rate-loading mistakes across channels. For properties with dozens of rate plans and several room types, maintaining every price independently is not realistic.
The cost is pricing precision. A fixed offset assumes the price gap between a standard room and a suite should be the same on a sold-out Saturday as on a quiet Tuesday, which is rarely true — suites are usually less elastic and can hold a wider premium in compression. Revenue managers therefore increasingly favour open pricing, where each room type and segment is yielded independently, and reserve derivation for rate plans whose relationship genuinely is fixed, such as a breakfast supplement equal to its actual cost plus margin.
Related
- Open Pricing — the contrasting approach of yielding every room type and segment independently
- BAR (Best Available Rate) and BAR by Day — the usual parent rate for derivations
- Rate Plan / Room Type Mapping — how derived rates are exposed to each channel
- Rate Parity — derivation reduces the manual errors that cause parity breaches
- Price Elasticity — the reason fixed offsets leave revenue on the table