The Art of Dynamic Hotel Pricing

Dynamic Hotel PricingDynamic hotel pricing, also known as Revenue Management is the art of selling the right room to the right person at the right moment & at the right price.

Running a hotel business is complex & requires important decision making regarding what to sell, when to sell, how much to sell & whom to sell. All these answers are provided by a revenue management tool which uses market analysis & novel campaigns to attract potential guests & visitors, thereby increasing revenues.

Smart pricing options play a good role in enticing guests & building a strong customer base. Revenue management analyzes the guest behavior, combines data mining, operations and research with strategy. Revenue management doesn’t mean selling a room at low price & sell it the next day at a higher price. It actually means selling a room at a low price today if it doesn’t see higher demand for the room. It gathers information about the market so that you can be proactive in adjusting your rooms through distribution.

Dynamic room pricing – then and now

One who runs a hotel business would often come across price variations which is a very common issue. Hotels & resorts are prone to seasonal pricing so one has to be dynamic in pricing the hotel room. These practices have been common in the industry since the time Brick & Mortar travel agencies have been in business.

Initially, hotels used to offer promotions to guests who would stay for a longer period of time or to those who would make their bookings in advance. This offer was given to stimulate the booking pace. Back in the days, it used to be the hotel manager who would be aware of the season 3-6 months in advance and would accordingly strategize in order to maximize revenues. This has changed with the invent of Online Travel Agents (OTAs) as hotels now deal with rates in a more interactive & effective manner that allows the front desk executive to manage the rates manually. One can actively adapt to the changing market trends with dynamic pricing module unlike olden days when the contract rates were sent out 12 or 18 months in advance. However, there are hotels that still send out 1 rate plan or 3 seasons plan for 12 months.

The branded hotels have adapted to the change by managing their rates through the revenue managers on daily basis to drive more revenue per sellable room. What started with the Airline industry has quickly become a standard in hotel management as they require a revenue manager who will keep a record of the daily rates of the hotel. Managing these rates with a simple click of a button can be done by implementing a channel management system. This enhances the speed of how we can manage rates & availability.

But this is only the start of new game of pricing. Technology such as cloud computing makes it possible to manage rates every single moment. By integrating Channel Manager with the Property Management System (PMS), the revenue manager is up-to-date with changes in the grid on pick up, booking pace & last room availability.

The art of dynamic pricing is to use all these tools together, to out-perform the competition and offer the right rate at the right time to the right customer for the right product. As we are moving ahead in the mobile shopping era, we are put to the challenge to work with this 24 hour economy in the most effective manner. When guests are at your doorstep inquiring about the rate, the Revenue Manager must react in a short momentum of time.

As this is just the starting trend in the industry, we have seen many hotels that are yet to change their pricing methods from that of the travel agency and make it more dynamic & flexible to fit into the online world.

Dynamic pricing is definitely a boon for hotels as it helps utilize perishable room inventories. Similarly, it also proves beneficial to the guest by creating offers at attractive prices. What do you think about this? Share your views with us.