Dynamic Pricing Strategies You Can Automate to Maximise Hotel Revenue
Gone are the days when you only had to change your hotel room prices once during the peak holiday season. The concept of any fixed room rate itself is outdated now. The same room becomes regular, queen, deluxe and super-deluxe based on occupancy and demand. There are a million factors that influence the rise and fall of room prices now. What this means is that, you cannot just manually change the room prices of the overall hotel once or twice a year. No. The room prices need to change not only on a daily basis but often on an hourly basis. This is known as dynamic room pricing.
Dynamic room pricing is not at all something new. How many times during the day does Amazon change its prices for the same product? How many times during the day do you see Uber and Lyft prices go up due to surge pricing?
That is exactly what dynamic pricing is. And it is currently being used by all industries.
Why Dynamic Pricing Is A Must
If all of your competitors are using dynamic pricing (which, let’s be honest, they are) and you aren’t, then you are leaving money on the table. The bookings that you’re getting are based on sheer luck or extreme loyalty of the customers. And obviously, you cannot depend heavily on either.
Plus, you have to keep in mind that you need to raise your prices as the occupancy rate increases. This is because the rise in occupancy rate is an indicator that demand is increasing. If the customers see that the prices are steadily rising, they will be much more likely to hurry to make a reservation. This is exactly why you need to employ dynamic pricing to raise the occupancy and demand of rooms.
On the contrary, raising the room prices too much can serve to redirect customers to your competitors. This won’t do either. So, there are times when you need to know when to cut your losses and sell your rooms at discounted prices. After all, a discounted room still gets you more revenue than an empty room.
This is exactly why dynamic pricing is a necessity in this day and age.
Why Should You Automate Dynamic Pricing Strategies
This is going to become clearer as I discuss the particular dynamic pricing strategies later. But, as you can already understand, you cannot manually update your room prices multiple times in a day. And you have to do this across hundreds of OTA channels as well. This is exactly why you need automations to do your work for you.
There are two reasons main reasons to automate your dynamic pricing strategies:
- Dynamic pricing is based on certain factors that are already calculated by your Property Management System. StayFlexi, for example, keeps track of your occupancy rate in general. It is much easier for the software to use the data that it already has than to hand over a report to you. Then you won’t have to interpret that report to manually change the room pricings. If you try to do this manually, you simply won’t have enough time to do it multiple times during the day across myriad channels. Automations are faster, more accurate and most importantly- they already have the data that is to be used.
- You have to keep the prices on your hotel site and all the OTAs in sync. This is almost impossible without a Property Management System like StayFlexi. The two-way sync process of the dynamic pricing system is one of the most important assets of a PMS.
Now, I’ll tell you three strategies in which you can effectively implement dynamic pricing in your hotel.
3 Dynamic Pricing Strategies You Can Automate to Maximize Hotel Revenue
How to sell each room at the highest possible price while still keeping up the surge in demand? This is the ultimate aim of dynamic pricing. Let’s see how it is practically done:
Occupancy Rate Based Fluctuations
When the last few rooms are left unbooked, the room rate increases. So, demand drives up prices. With StayFlexi, you can simply set conditions like:
“When occupancy exceeds 70%, raise room prices by $40.”
“When occupancy dips below 20%, lower room prices by $20.”
But it’s not quite that simple either. Raising room prices to an exorbitant level will just dissuade guests from booking those last few rooms at all. In such a situation, giving the rooms away at a discounted price would be a better idea. But say there is an event in town that guarantees some last minute customers who will be pressed to make reservations. In such situations, it is definitely a better idea to keep the prices high.
So, not only does occupancy rate matter, the particular situation also matters. The great part about having a PMS like StayFlexi is that it can tell you how this situation is likely to pan out. This is mostly based on past data. For example, say StayFlexi has consistently recorded a high number of late bookings during particular local events. It is going to give you an idea of approximately what kind of occupancy rate you should expect. This will let you take an informed decision on whether to raise or lower the pricing.
Not only does StayFlexi automatically fluctuate the prices according to occupancy. But it also gives you an idea of what to expect based on past recorded patterns.
Minimum Stay Restrictions
Let’s say there’s a particular one day event somewhere near your hotel (for example, a concert). A huge number of guests are going to start pouring into town. Some of these guests will check in on Friday, attend the concert and then spend the entire weekend before checking out. However, some will turn up after the concert is over, spend the night and then leave.
Which category of guests should you prefer? In most situations, you should prefer the former. Getting three-day bookings is a lot better than getting overnight bookings just from a profit-making standpoint. This is why you should employ certain Minimum Stay Restrictions. You can do this by informing the guest that you would be taking only three-day bookings. Or, you can even incentivise longer bookings by providing discounts.
Property Management Systems allow you to implement these Minimum Stay Restrictions easily. You can also implement stay Maximum Stay Restrictions. This is not very common because this is implemented only in very specific circumstances.
Say there is a highly-anticipated sports event in your locality. You know that guests are going to start pouring in on Saturday night. And they will be willing to pay exorbitant prices to stay because of the limited boarding options in the area. This is when you need to ensure that your other guests check out before Saturday. This way you can fill your hotel up with these high-paying overnight guests. However, this is a risky move. And you definitely need to know what your competitors are doing before you attempt this.
Competitor Pricing Based Fluctuations
Your room prices should always be $5-10 below or above your competitors’ prices. This is because they are also trying to predict the surge or fall in demand at all moments.
The first thing you need to do is list out a bunch of similar properties. This means hotels which belong to the same area and offer the same kind of hospitality. Don’t try to compete with the prices of a hotel that is extremely different from yours.
Then, you need to keep a constant eye on their prices. This is because they all have dynamic pricing models too. You should always try to beat their prices but you cannot do this by lowering your prices too much. This will just serve to assure the guests that your property is not of the same standard. This is exactly why you need to have closely competing room prices.
Now, of course, you cannot personally check what the room pricing of all competing hotels are at all times. The good thing is- a PMS will do it for you. You can set alerts that inform you whenever there is a large difference between you and your competitors’ prices.
Also, demand completely depends on whether your competitors have available rooms. So, you need to keep track of your competitors’ approximate occupancy rates as well.
Occupancy-based price fluctuations, stay restrictions and competitor pricing triggers- all of these are taken care of by Property Management Systems. These are processes that can be easily automated. If you want to implement dynamic pricing, make sure you depend on the data supplied by a Property Management System like StayFlexi. These are some of the most basic strategies that you can employ to boost your hotel revenue.
Wondering how else StayFlexi can help you automate your dynamic pricing strategies? Leave a comment below!