What is Rate Fencing?
The rate fencing It is a Revenue Management tactic that sets conditions or “fences” to control access to specific rates. Fences can be physical (room type, view, package) or non-physical (cancellation policy, advance purchase, minimum length of stay). The aim is to offer differentiated prices in a justified way and optimise revenue without harming perceived fairness.
Why it matters Rate Fencing?
- Enables profitable demand segmentation.
- Protects brand perception when price differences are justified.
- Supports dynamic pricing and product differentiation.
Practical example of Rate Fencing
Rate A: €70 — non-refundable, booked at least 30 days in advance.
Rate B: €95 — flexible, free cancellation up to 48 hours prior.
Rate C: €120 — includes breakfast and late check-out.
Each rate has a clear fence and the guest chooses according to preference and willingness to pay.
Rate Fencing differences with other terms
- Ethical Rate Fencing applies the same techniques as Rate Fencing but with a focus on transparency and fairness towards the guest. This means that restrictions and benefits are clearly communicated, avoiding misleading or discriminatory practices. The goal is not only to maximise revenue but also to strengthen trust and the hotel’s reputation.
- Price discrimination may be perceived negatively if there’s no clear benefit or rationale for customers. Rate Fencing aims to segment with transparency and added value.
- Market segmentation is the strategic grouping of customers (corporate, leisure, MICE, etc.) by behaviour and attributes. Rate Fencing is a tactical application that determines how those segments access different prices — segmentation answers who, Rate Fencing answers how you monetise each group.
- Channel mix refers to the distribution breakdown (direct website, OTAs, GDS, tour operators). Rate Fencing can shape the channel mix (e.g. cheaper non-refundable rates to drive direct bookings), but it is not the same: channel mix measures distribution, Rate Fencing governs access and conditions to rates.
👇 Rate Fencing puts polite signs on the doors — “meet X and you get Y rate” — so you sell the right product to the right guest.
