The idea sounds tempting: prices that adapt to the individual guest. Those who book often get better conditions.
NB: This is an article from RateBoard
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Those who prefer a certain room type will receive exactly the right recommendation. And those who are flexible can benefit from particularly attractive offers.
This has long been standard in e-commerce. But does it also work in the hotel industry?
Now it gets tricky. After all, hotels are not interchangeable products, but places with character, atmosphere and individual experiences. A hotel stay is not a mass-produced good. And this is precisely why personalized pricing must be thought of differently to airline tickets or online stores.
A recent study shows that guests often perceive price differences within a booking platform as unfair and, depending on the context, blame either the hotel or the booking platform (Ying et al., 2024). Personalization that is too obvious can therefore generate scepticism rather than loyalty.
More than just dynamic prices
Dynamic pricing, i.e. the adjustment of prices to supply and demand, is now a matter of course in the industry. But personalized prices go further:
- They not only take market data into account, but also the individual guest.
- They aim to find the perfect offer for the person in question.
- They can help to increase the perception of value – if they are used correctly.
But this is precisely where the challenge lies.
The danger of comparability
What happens if the wife suddenly sees a different price for the same trip on her tablet than her husband sees on the PC? The answer is simple: guests are trained to become bargain hunters. Anyone who notices that prices vary for the same service will try to find the best deal – and trust dwindles.
This is the fine line of personalized prices:
- Transparency vs. value perception – How much should guests know about the pricing logic?
- Individuality vs. comparability – How do you avoid guests feeling tricked?
- Experience vs. transaction – How can a hotel booking remain an emotional moment and not turn into price poker?
The solution? Incomparability.
Scientific studies, such as an impressive study conducted at Princeton University by Nicholas Buchholz and his colleagues, show that personalized prices influence consumer behavior in the long term. If customers are trained to actively compare prices, this can lead to an increased bargain mentality – with negative consequences for customer loyalty (Buchholz et al., 2024).
