How to Create a Dynamic Pricing Strategy in the Hotel Industry?

In the age of peak convenience, with bookings made minutes before the event, dynamic pricing comes in handy to improve hotel revenue, guarantee maximum occupancy and help regulate the right price for every season.  

What is Dynamic Pricing? 

In the hotel industry, dynamic pricing is a type of pricing model that tweaks it’s prices based on time and the demand. Hotels, with the help of algorithms, can use its data fluctuations, like in current occupancy, demand of consumers, holiday seasons, and other external factors to calculate prices in real time.  

Benefits of Dynamic Pricing for Hotels 

• Change the rates for rooms every hour or even every minute 

• Ensure that the price of the rooms are not underpriced or overpriced 

• Opens different room types for customers while also allowing the hoteliers to offer them, thus raising capacity and RevPar (revenue per room) 

• Use intelligent software to compare prices and keep track of inventory 

How To Determine your Dynamic Pricing Strategies  

Establish your lowest cost limit. Your lowest cost will be determined by

• The price below which the revenue would be lower than the expense to accommodate the customer 

• The lowest price that upholds the brand image of the hotel. 

• Other legal reasons that regulate price 

This will help increase sales during low demand, while still not damaging the image of the brand.  

Define your optimal price

• This should be defined well in advance. By analysing the previous year, you can determine a price that is not too low and not too high 

• Keep in mind that holidays have different optimal prices that the days before or after them. 

Decide your highest price

• In seasons of high bookings, like holidays, the highest price will be used to keep sales open, because of possible cancellations, and this price will help sale of cancelled rooms.  

Maintaining the Pricing system 

• Look at the online reviews to gauge if the room prices have been reasonable, and the algorithm is working fine. 

• Review the sales to see if they have improved or declined or even stayed the same. • Anticipate external challenges and alter prices accordingly. 

Creating dynamic pricing hotel industry can be a complex process, but by gathering data, identifying price limits, using revenue management dynamic pricing in hospitality industry, monitoring competitors, testing and refining, communicating transparently and being flexible, hotels can increase revenue and improve customer satisfaction. If you are also looking for the right dynamic pricing strategy in hotels for your business then connect with RateGain now.