Hotel Room Pricing: Dynamic Pricing 101

No hotel—at least no successful hotel—charges the same room rate all the time. However, even if you have different price structures for different types of rooms, for high and low demand cycles, and for different types of customers (i.e., business vs. leisure vs. groups), your revenue management will be most effective with dynamic hotel room pricing.


What Is Dynamic Pricing?

In the hotel world, dynamic pricing means being flexible with the amount charged for a particular hotel room based not only on customer demand, but on the perceived value the customer places on your limited room inventory. A whole slew of factors affect what you charge and when—and to whom—including knowing:

  • Your target customers and different segments thereof, how far in advance each segment tends to book a room, and how long they tend to stay.
  • What type of room and amenities each segment gravitates toward.
  • Which segments tend to spend more of their discretionary funds on on-site attractions such as restaurants, spa services, and business services.
  • What your competition is doing/charging/marketing.
  • How to stimulate demand when it is traditionally low through smart marketing practices.


Software for Hard Data

Sound complicated? It can be! It requires a pile of historical data, research, and a willingness to take carefully calculated risks. A good revenue management software package can certainly help, but it’s at least as important that you (or the employee assigned to the task) understands the numbers you’re crunching.


The more you can fine-tune what you’re asking for a room and when you’re asking it—sometimes day by day—the less revenue will fall through the cracks between what you’re charging and what the customer is willing to pay.


Charge too little, and bargain hunters will snap up all the rooms before customers who would have been willing to pay more typically book. Conversely, if there’s a gap between what you perceive the value of your rooms to be and how the customer values the room, too many rooms will go unsold.


That’s why it’s imperative to be dynamic both in your hotel room pricing and also by raising the level of quality, service, and amenities to which customers are attracted. For further solutions in this area, contact us today.

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