What are the pros and cons of dynamic pricing?ĭynamic pricing has an upside and a downside, like most hotel revenue strategies. Dynamic pricing can be tweaked and targeted in many different ways depending on the revenue goals of a specific property. Hotels may choose to offer discounted rates on OTA bookings, increase or decrease rates based on hotel occupancy levels, or set boundaries on the number of fluctuations that occur during a specific time period. The success or failure of price optimization often depends on how the strategy is specifically implemented at an individual property. Detailed market research allows hoteliers to anticipate market fluctuations and develop a rate strategy aimed at increasing ADR, RevPAR, and occupancy. They use market research to better understand their customers and what they are looking for. Successful hotel revenue managers understand their peak seasons, shoulder seasons, off-seasons, areawide special events, market segment performance and other demand generators for their market. The average length of stay (ALOS) of guests.To accurately focus the algorithms to increase occupancy without sacrificing ADR and RevPAR, hoteliers must understand their customers and their customer behavior.ĭynamic pricing algorithms can be targeted to focus on: When hotels implement dynamic pricing, they are constantly adjusting their room rates based on mathematical algorithms aimed to increase occupancy based on area demand. Hoteliers can also change their pricing strategy with a few quick clicks thanks to impressive software developments, compared to the much more time-consuming and tedious process in the past. High speed internet connectivity, revenue management monitoring software, and faster data processing capabilities allow revenue managers all over the world to track moment-to-moment changes. While the concept of demand-based pricing is not new, it has become more popular as technological developments have allowed hoteliers to manage and measure demand information in real-time. When travel demand is high, however, such as during an area-wide special events or during peak season, room rates are raised-reflecting the heightened demand. When demand is low, room rates are lowered in an attempt to capture their fair share of the minimal demand in the market. Hoteliers that use demand-based pricing strategies see their room rates fluctuate based on traveler demand. By focusing on area supply and area demand, hotel dynamic pricing allows room rates to fluctuate constantly to capture more business.ĭynamic pricing is also commonly referred to as “demand-based” or “time-based” pricing. Rates can change from day-to-day, or even hour-to-hour, based on real-time market data. Hotels that use static pricing techniques know their market well, have closely monitored year over year trends, and are confident in the occupancy and rate they will be able to capture.Ī hotel using dynamic pricing, however, constantly fluctuates room rates based on market trends like occupancy and overall demand. Room rates do not fluctuate based on market trends like occupancy or demand, but instead remain the same night after night. Static pricing occurs when a hotel keeps the same room rates over a period of time. Hotel room rate pricing strategies can be broken down into two primary categories: static and dynamic pricing. While there is no one-size-fits-all answer to hotel revenue management, many hoteliers find that dynamic pricing helps to increase hotel revenue, even in these ever-changing markets. With different services offered, amenities available, and different markets to work within, pricing strategies will vary from property to property. Save this guide to use when adjusting your hotel dynamic pricing strategy! In this article, we’re taking a deep dive into hotel dynamic pricing: what it is, how it works, and how to use it to boost occupancy and revenue. Whether you’re looking to implement dynamic pricing for the first time, or brush up on the current tools available for hoteliers, we’ve got you covered. We’ve created a comprehensive guide for hoteliers that breaks down hotel dynamic pricing. For many revenue managers, implementing hotel dynamic pricing strategies have helped them stay afloat during uncertain times. As demand changes, successful hotels need to be able to quickly adjust revenue strategies to capture as much business as possible, even when overall travel to the area is lighter. Hoteliers and hotel revenue managers know how quickly markets can fluctuate and how fast demand for travel can change.
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