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Hotel Dynamic Pricing: You Can Nail It!


Hotel Dynamic Pricing strategies formulation and implementation.
Hotel Dynamic Pricing: You Can Nail It!

Hotel pricing strategies are one of the most important components of hotel revenue strategies. Pricing is influenced by demand and supply, and in turn, also influences the demand for hotels. Hotels either use static or dynamic pricing. Before we understand how we can implement hotel dynamic pricing, we need to first understand the concept.


Hoteliers have heard about hotel dynamic pricing, but they are confused about what it means. In some cases, hoteliers do have some idea about the concept, but, as they say, half-knowledge is worse than no knowledge. This is what many hotel businesses struggle with.


Don’t worry, we present you with a guide that explains hotel dynamic Pricing in detail, and how you can nail it like a pro!


Table Of Content



What Is Hotel Dynamic Pricing?


Hotel Dynamic Pricing is one of the most popular pricing strategies to implement for hotels. It means tweaking and adjusting the hotel pricing in real-time, based on demand and supply. The tweaking of prices is based on an algorithm that can apply to all classifications of hotels, such as luxury, suites, budget, mid-range and more.


The hotel dynamic pricing algorithm considers various factors. Some of the major factors include competitor pricing, and demand for rooms, which is based on seasonality.


Hotel dynamic pricing has gained popularity because it relieves the burden of revenue managers to keep adjusting rates. With the help of hotel revenue management tools, automated dynamic pricing has become a possibility. It has now emerged as a common practice in the hotel industry.


How Does Dynamic Pricing Work For Hotels?


Hotel dynamic pricing utilizes artificial intelligence that determines hotel pricing based on various factors. The AI algorithm monitors different aspects such as the target audience, their booking patterns, the length of stay, etc. It also keeps an eye on the competitor's pricing.


The main aim of hotel dynamic pricing is to increase bookings, increase occupancy rate and most importantly, increase hotel revenue. It changes rates based on the ever-changing preferences of customers based on seasonality and trends. It also takes into account off-season and peak-season demand for hotels. It also takes into account the prices of the hotel’s competitors, since a hotel cannot diverge too much from its competitors in terms of pricing.


Hotel Dynamic Pricing strategy is quite different compared to static pricing. In static pricing, one uniform rate is charged throughout the year, or any specific time period.


Static Pricing Vs Dynamic Pricing


Before dynamic pricing, hotels used to use static pricing as a prominent part of their hotel pricing strategy. Under static pricing, the price remains the same throughout the year, or throughout a particular time period.


One of the main disadvantages of static pricing for hotels is that it restricts the profit you gained based on the volume you sold, meaning that you will earn the same revenue per room. Hotels that used static pricing, didn’t have the facility of forecasting. This prevented hotels from making better pricing decisions. It is also time-consuming since hotels need to manually change prices every season, or every month.


Hotel dynamic pricing, on the other hand, is more efficient compared to static pricing. It is time-based, meaning that prices change in real-time based on demand, occupancy, seasonality and competitor's price. It also provides you with forecasts based on customer behaviour. It can also automatically change rates based on competition.


This way, you can increase your hotel revenue, since the algorithm will change prices keeping revenue and bookings in mind.


What Are The Benefits Of Hotel Dynamic Pricing?


Hotel Dynamic Pricing has several benefits. It has now emerged as the major pricing strategy for hotels. Let us discuss the benefits of dynamic pricing for hotels in detail.


1. It Increases The Demand


Hotel dynamic pricing increases or creates demand formulating the best prices for various target audiences. With the right pricing, you will be able to get the right guests at the right time. It reduces the number of rooms unsold.


2. Offers Better Prices


With the help of AI, dynamic pricing tools formulate pricing based on competitors’ prices. It ensures that the hotels stay in line with the competitors, and are not diverging from the hotel’s comp set too much. It also looks into the demand of the property, and hence, they can change prices to increase bookings, while at the same time not compromising on revenue.


3. Saves Time


With the help of hotel dynamic pricing, hotels can save a lot of time. Instead of wasting time by changing the prices manually, dynamic pricing can change the rates for you! It changes the rates automatically based on demand, seasonality, competitor's rates and so on.


4. Increase Revenue


This is one of the best advantages you can gain from hotel dynamic pricing. With it, you can optimize pricing to gain the maximum revenue for your hotel. AI changes pricing based on demand, occupancy, and seasonality. These factors are crucial from the point of hotel revenue management. Dynamic pricing takes care of that. An increase in revenue ultimately leads to an increase in profit.


To Conclude


Dynamic pricing has now become an integrated part of hotel marketing and pricing strategies. It is an essential component of hotel revenue strategy as well. With the help of professional revenue managers, hotels can make full use of dynamic pricing to gain maximum revenue.


Read our blogs to know more about the hospitality industry.


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