Minimum stay: advantages, disadvantages and a "trick" to manage it without mistakes

Every lodging establishment, whether it is a luxury hotel, a small B&B or a short-term rental apartment, has to deal with a delicate activity: the study of operating costs.

This is an important annual task, because a proper analysis not only allows you to choose the best sales strategy, but also to protect your income.

Operating costs fall into two broad categories: fixed and variable. If you want to know how to calculate them and download a ready-to-use Excel spreadsheet, you can find everything in our article on calculating fixed and variable costs in hotels.

While fixed costs remain the same regardless of the number of stays (think rent or taxes), variable costs (such as laundry and cleaning fees) affect each reservation.

This is where minimum stay policies can make a difference, allowing you to spread variable costs over time and protect your margins.

Let's take a concrete example.

Suppose the cleaning and laundry costs for an apartment are €60, while the ADR (average daily rate) is €100. If a customer booked for only one night, he would have to pay 60 percent more just for the cleaning costs.

However, if the same customer stays two nights, the cleaning cost percentage would drop to 30%, three nights to 20%, and so on. Consequently, the longer the stay, the less the cleaning cost will affect the customer.

This mechanism is especially relevant for properties that do not charge the cleaning fee separately, but include it in the reservation.

To continue with the example just given, imagine that you offer a night's stay for €160 without specifying that part of the price is for cleaning. If your facility is perceived as adequate for a rate of €100 per night, you will have difficulty selling at €160. On the other hand, if you were able to sell three nights for a total of €360 (at an average rate of €120 per night), the price would be much more acceptable in the eyes of the guests.

Where is the risk? If you set an average rate of €120 and a customer decides to book only one night, you may not be able to cover your variable costs.

This is where the minimum stay comes in: by setting a minimum of three nights, you not only avoid losing revenue due to cleaning costs, but you also create a more attractive proposition for customers, ensuring that your property remains competitive and sustainable.

A common problem for many accommodations is the creation of small "availability gaps" between bookings.

Here's an example: Imagine that January 1 falls on a Thursday. Now imagine that you already have 100 percent occupancy for the nights through December 31, and you have already sold out the Three Kings Bridge from Friday, January 2 through Tuesday, January 6. This means that the night of January 1st could easily remain empty, creating a gap in availability.

Why? Because it is unlikely that anyone would choose to stay only that night, especially after the New Year's Eve festivities. Unless you offer exceptionally low rates (resulting in a loss of profitability), you risk leaving that room unsold.

Again, the minimum stay is an indispensable tool. By setting a minimum stay of two or more nights for the entire holiday period, you can avoid these gaps in availability.

The result? You maximize occupancy, reduce the risk of "holes" in your calendar, and ensure a more stable and predictable revenue stream, even during the most sensitive periods.

So far, we have seen how minimum stay can be an effective tool for maximizing occupancy and reducing availability gaps in the calendar. However, like any strategy, it can have a downside: gap nights.

A gap night is similar to an "availability hole" and occurs when two reservations are close but not consecutive, leaving one night free.

However, if you have minimum stay restrictions enabled, that night will remain "orphaned," meaning it will no longer be bookable in any way.

To better understand this, let's take the example of the night of January 1: let's say that to avoid an availability gap, you decide to set a minimum stay for the entire holiday period. You're confident that you've made the right choice: the restriction should help you fill every strategic date, minimizing gaps.

But here's where bad luck (or rather the unpredictable dynamics of reservations) comes into play. You get a reservation that covers the nights of December 30, 31, and January 1. Next comes another reservation for the Three Kings bridge, with check-in on January 3 and check-out on January 6.

What about the night of January 2, Friday? It remains isolated, stuck between two reservations, and the minimum stay restriction makes it unsaleable.

At this point, the only solution seems to be to intervene manually and remove the minimum stay restriction for that specific date. This means constantly monitoring the situation and reacting quickly, an activity that requires time and attention.

But is this really the only way?

No, and in the next section we'll look at how revenue management and dynamic pricing software such as Smartpricing can help you manage the minimum stay quickly, accurately and automatically, allowing you to focus on other priorities.

With Smartpricing, managing minimum stay and especially gap nights becomes easy and automated. You no longer have to worry about constantly monitoring all bookings by hand, looking for isolated nights to take action on: the software will do it for you.

In the example above, Smartpricing automatically detects the presence of a gap night and dynamically reduces the minimum stay for that specific date to 1 night, making it immediately bookable. This allows you to maximize occupancy without manual intervention.

What if one of your existing reservations is canceled? No problem: Smartpricing will automatically restore the original minimum stay and return to the original configuration. This not only optimizes real-time availability, but also protects your pricing strategy.

You can also further customize the gap night feature by setting rules for specific periods or days of the week: just set the number of nights you want to reduce the minimum stay to, and the software will do the rest.

With Smartpricing, you will not only be able to automatically manage gap nights, but it also allows you to set all restrictions related to the minimum stay from a single interface and down to the smallest detail: you can choose the periods and days of the week that the restrictions apply to, as well as the type of accommodation and the type of rooms.

The minimum stay can be managed in two ways: static or dynamic. Let's see the differences!

This feature is dedicated to the basic management of the minimum stay, exactly as you would do it within your channel manager.

What is the difference from doing it with the channel manager?

By setting the minimum stay directly in Smartpricing, you can manage everything from one centralized platform, eliminating the need to constantly go through your channel manager. This not only simplifies the process, but also reduces the risk of errors and saves you valuable time.

As you can see in the screenshot below, to manage the static minimum stay, all you need to do is select the room type (but you can also do this for the entire property), the period you are interested in, and the minimum number of nights required for the booking. You can also customize the number of nights for each day of the week.

The Dynamic Rules feature allows you to flexibly and strategically manage minimum stay restrictions and adapt them to different booking windows. This option allows you to optimize room sales based on demand trends.

How it works:

You can create rules that automatically vary the minimum stay based on the time between the booking date and the arrival date. Here's a real-world example:

• Bookings made more than 30 days in advance: You could set a 7-night minimum stay to incentivize longer-term bookings, ideal for periods of low occupancy or to maximize revenue.
• Bookings between 30 and 7 days prior to check-in: For this interval, you could reduce the minimum stay to 3 nights to encourage faster occupancy without affecting the average length of stay too much.
• Bookings less than 7 days in advance: You could remove the minimum stay restrictions entirely to capture last-minute bookings and maximize occupancy.

Minimum stay, dynamic rules, and gap nights can be used individually or in combination to create customized strategies. This flexibility, combined with automation, allows you to reap the benefits of minimum stay without risk or constant manual intervention, maximizing occupancy and revenue.

Smartpricing is not only the best solution to enjoy the benefits of minimum stay without any worries: its algorithm also constantly analyzes your internal and market data to help you find the best price for you, 500 days in advance.

At the same time, you no longer have to manually update every price change in your PMS or channel manager: Smartpricing will synchronize your rates automatically. So you'll have all your prices up to date on each of your booking channels, without wasting time or risking mistakes.

The result? More than 4,000 hoteliers who have already chosen Smartpricing have achieved an average revenue increase of +30%.

Want to see how Smartpricing works and how it can help you? Request a free personal demonstration.