By implementing dynamic pricing, hotels swiftly respond to market changes and change prices accordingly. It has two goals:
- to earn more during periods of high demand
- to get booked in the off-season.
Dynamic pricing is an effective but complex strategy. However, it is not suitable for any accommodation type. Before introducing dynamic rates for your hotel, check if it meets the following requirements.
Annual average occupancy is higher than 40%
If room sales are going well and you get booked all year round, it is time to create dynamic rates and increase your income.
Otherwise, it is too early to introduce dynamic pricing. First, find out why there are few guests. Analyze the performance of the hotel staff and the sales team, study competitors, and check your rating on Booking.com and TripAdvisor.
To calculate price levels, you need the data on occupancy for the last 1-3 years. The more information you get, the more accurate your dynamic price calculations are.
Elastic demand
If demand is elastic, even minor price changes affect it. When you lower a price, there are more guests; when you raise it, clients book less often. Demand elasticity indicates whether special offers and discounts can benefit your hotel.
Elastic demand | Inelastic demand |
Hotel “Dali”
|
Hotel “Picasso”
|
↓ Price changes influence demand. Introducing dynamic rates will be effective. |
↓ Price changes do not affect demand. Dynamic rates will not be effective. |
Hotel of a lower-mid market
Guests of inexpensive hotels are more responsive to price changes. Well-off clients value high service and pay for it. In this case, if a competitor lowers a price, your customer base will still stay at your hotel, as the price was never a reason to book.
Inventory of more than 10 rooms
If a hotel can host few guests, there is no point to introduce dynamic pricing. There will not be enough bookings to cover the cost of expenses related to introducing dynamic rates.
Apart-hotel instead of apartments
Clients see no difference between apart-hotels and apartments. Hotel managers need to know these differences to select the right pricing strategy.
Apart-hotel | Apartments |
|
|
↓ Apart-hotels need dynamic pricing. |
↓ Apartments should implement seasonal rates. |
If your accommodation does not meet one of the points above, it does not mean that dynamic rates are off-limits. To make sure, consider the factors altogether. If you still doubt, contact us to get help: manager@travelline.pro.
If you already know that you need dynamic rates, set up “TravelLine Price Optimizer”. It automates dynamic pricing management.