Flexible pricing, open-pricing, demand-based pricing, roll pricing, time-based pricing or real-time pricing- Call it what you will. Today, dynamic room pricing is one of the most widely used Hotel revenue management strategy not just in the US but across the world. The dynamic pricing strategy in hotels is barely two decades old, but it has proven effective for the hospitality industry just as it did with airlines and other industries.
Ok, so what is dynamic pricing in hospitality industry?
Dynamic room pricing refers to a continual tweaking of hotel room prices based on demand and supply. Static pricing, on the other hand, is the contrary- where room prices remain static regardless of fluctuations in demand or supply- fluctuations that are inherent and plenty in the hospitality industry. This is why hoteliers must switch to a dynamic pricing strategy so that these fluctuations don’t threaten the profitability of the hotel.
In this blog we will discuss everyday reasons why dynamic pricing strategies in hotels is the smarter option, especially the small-scale ones.
How to use dynamic pricing to increase revenue:
Let’s take a very simple example. You run a 10-room property and your best-case scenario to stay afloat is to make a $1000/night. Now this can be achieved in multiple ways. With static pricing, you will probably sell each of them for $100/night and it remains so constantly. Your revenue depends solely on how many rooms are occupied, putting way too much pressure on you during low seasons. To make a $1000, you’ll have to sell every single room and this can be a massive challenge.
Dynamic room pricing, on the other hand, lets you play with the pricing depending on multiple factors. During weekends, you could increase room rates to $200/night. Meaning, you will make a $1000 just by selling 5 rooms. And during such times of of high demand, you are likely to sell out all your rooms. If there’s a music concert or a business conference or any popular event taking place in your city/locality, you are sure to see even greater demand for rooms.
