Booking Engine

Dynamic Pricing – The Future of Hotel Revenue Management

Hotel businesses across the world need to continuously tweak their room rates, which are subject to demand and supply. This constitutes dynamic pricing, while static pricing is alternately a method where the price remains constant, irrespective of the demand and supply situation. Because the hotel industry is a highly volatile industry, switching to dynamic pricing is a must if you want to have successful hotel profits!

The fact is, dynamic pricing is a must for all smaller hotels, which in contrast to larger hotel chains, do not have a steady inflow of capital when there is a lull in the market. For those hotels planning to be around for a long time in the market and stay competitive, ensuring they follow the principle of demand and supply is a must. When the off-season arrives, the hotel should be able to sell a $200 dollar at $90, without incurring a loss. Static pricing does not offer this facility as seasonal occupancy rates are not in play.

As a business owner opting for Dynamic Pricing, software or automated revenue management software will be a prudent decision in the long term for the business. The reason why this software is successful is they utilise the latest state-of-the-art algorithm, something which as humans we cannot compete with. The software will consider all variables like demand forecast, seasonal occupancy rates, competitive pricing etc. It will calculate and give you the best price at which the rooms should be rented. This is a sure way to increase room profitability.

An Effective Way to Generate Revenue

effective way to generate revenue

While occupancy is critical for any hotel business, earning revenue is as vital. Dynamic pricing offers the facility to offer the best rates, taking into account the slump in occupancy. This will ensure that adequate revenue generation until the slump improves. The advantage of using dynamic pricing is it is not essential to let out all the rooms to get maximum profits.

Help to Capture a Larger Market

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The drawback with static pricing is a hotel owner can only cater to a niche category of guests, with no alternative to wait in the price slump. Dynamic pricing offers greater flexibility and a hotel can cater to a larger market segment. The price of a room is instrumental in making a prospective guest decide where to book. Even regular guests that stay at the property may reconsider their decision if the room rates are not at par with the market rate at that time. With the use of PMS, hotel room rates get updated in real-time with OTAs. Any guests using these OTAs will see the lower rates and be attracted to book with your hotel.

At the end of the day, the decision of opting for dynamic or static pricing is the decision of the hotel owner. However, we have to be in tune with the market trends and with more hotel businesses all over the world shifting to the dynamic pricing model; it is for definite that dynamic pricing is here for the long haul. Still, the decision ultimately is at the hotel owner’s discretion!