Dynamic Pricing for Hotels: The Fastest & Smartest Way To Increase Revenue
May 10, 2021
The hotel industry is constantly growing today and will definitely continue to do so as Southeast Asia continues to develop and attract both domestic and international tourism. But with the changing market demands and scenarios like Covid19, deciding on the rates that maximize revenue while maintaining a lucrative offering for guests still remains a never-ending struggle for hoteliers.
Should you sell your rooms on fixed rates? Should you adjust your rates based on the season? How can you ensure that whatever you decide on, travelers will book your hotel? These questions always come up whenever a hotelier is deciding on the pricing strategy.
With that in mind, setting up room rates can be really challenging and that’s why it is important for hoteliers to adopt a future proof method of pricing that uses advanced technology and insights to ensure best rates for a room in all times.
In order to increase revenues, a lot of factors must come to mind—understanding your customers, figuring out your way of working, and even anticipating the future. Today, more hoteliers are shifting to Dynamic Pricing that helps them set the rates based on the demand and supply without risking too much loss in revenues. However, dynamic pricing requires more effort because it needs extensive data analysis. Thanks to AI-based technology and advanced revenue management softwares, implementing dynamic pricing can be an easier and faster way of pricing that takes care of all the above factors while requiring minimal effort from the hotelier. It’s almost like magic.
In this blog, we will talk about the dynamic pricing in the hotel industry and how it can help hotel owners to increase their revenue. We will cover the advantages it has over the old Static Pricing Strategy.
What’s inside this guide?
- Dynamic Pricing: What it is and how it works
- Dynamic Pricing vs Static Pricing
- Advantages of Dynamic Pricing
- Choose the Right Dynamic Pricing System
- Frequently Asked Questions About Dynamic Pricing in Hotel Industry
Dynamic Pricing in the Hotel Industry: What it is and how it works
Also known as time-based pricing, dynamic pricing refers to a frequent adjustment of hotel room prices based on the demand and supply. Dynamic pricing projects the best available rates at the right time for the right season and for the right guest.
Dynamic pricing uses artificial intelligence (AI) to monitor your target audience, their booking patterns, the length of their stay, their preferences, and the segments of your hotel that attract maximum guests while keeping track of your competitor’s pricing structure.
Dynamic Pricing vs Static Pricing
Today’s competition in the market is getting tougher and the pandemic that’s challenging every industry is here to stay for quite some time, so it’s important to make the right strategic decisions on the pricing in order to increase revenue. As mentioned earlier, dynamic pricing is one of the most widely used strategies today because of its flexibility. In fact, most big hotel chains have been using this strategy for quite some time already, and with the advent of technology, this system is now being offered to smaller hotels for a more affordable rate.
Static pricing, on the other hand, is when a hotel keeps the same room prices regardless of the demand and supply, and market trends. This strategy is considered outdated and risky as it does not allow your hotel to have a pricing strategy that adapts to the market trends, threatening the profitability of your hotel.
Differences between Dynamic Pricing and Static Pricing
|DYNAMIC PRICING||STATIC PRICING|
|Flexible pricing based on the demand and supply||Fixed rate regardless of demand and supply|
|Can reach a wider market||Limited market|
|You can increase revenue from adjusting the room rates depending on the demand||Your revenue only only depends on the volume sold|
|Setting room rates automatically using AI||Setting room rates for each day or every season that takes a lot of time|
Advantages of Dynamic Pricing
According to ZEN’s survey:
- 90% of hoteliers are heavily impacted by COVID-19
- 75% of these hotels need an automated solution that provides dynamic rates in hotels to reduce cost burdens during COVID-19.
Now, more than ever, is the right time to apply dynamic rate strategy in hotels to ensure you’re on the right track for recovery. To help you out, here are the top three benefits of adopting dynamic pricing as your hotel management revenue strategy.
1. Can increase revenue by up to 30%
Dynamic pricing allows you to increase room revenue, Average Daily Rate (ADR) and RevPAR (revenue per room) depending on multiple factors like competitive pricing, seasonality, demand forecast, and so on. Data from ZEN eManager Express’ clients tells that there’s an average increase of 24% in revenue or more than USD 3,000 per hotel.
This pricing strategy presents to you the best price at which you should be selling your room to generate more sales regardless of the season. Plus, it observes competitor pricing to match the changing market trends in minutes.
2. It expands your reach to a wider audience
With dynamic pricing in the hotel industry, you can reach a much wider audience by updating your room rates in real-time. Your room rates adjust to what your guests are willing to pay depending on the season, the guests’ booking patterns and preferences, and both in domestic and international demands.
3. It offers the right price at the right time
The good thing about dynamic pricing in the hotel industry is that it achieves balance between underpricing and overpricing because you will never end up charging too less than the perceived value of your rooms, or charge too high that all your rooms remain unsold.
When the demand is high, dynamic pricing helps to capitalize on the higher guests’ willingness to pay by increasing the prices. On the other hand, when the demand is low, dynamic pricing helps to fill up occupancy by decreasing the prices accordingly.
Choose the Right Dynamic Pricing System
With so many dynamic pricing systems available for hotels, finding the right one that offers everything you could ask for can be a struggle. With ZEN eManager Express, consider your job done as we help you to increase revenue with the best price in the market.
ZEN eManager Express features AI-backed intelligent pricing, real-time automated updates, and in-depth analytics for performance review. Save time and stop losing money. Leave the most crucial aspect of your hotel to be handled by the experts in the industry. Let ZEN help you bounce back and increase your revenue. Book your free appointment now at https://www.zen-hs.com/book-a-meeting/.
Frequently Asked Questions About Dynamic Pricing in the Hotel Industry
Q: What is dynamic pricing for hotels?
A: In the hotel industry, dynamic pricing is a revenue management technique of tweaking room prices dynamically based on consumer demands, competitor pricing, seasonality, current occupancy rate, and other external factors. Currently, most of the dynamic pricing is done automatically using a smart pricing engine, instead of human intervention, as dynamic pricing requires extensive analysis of an immense amount of data points within a very short period of time.
Q: What is an example of dynamic pricing for hotels?
A: One example is when you book a hotel room during the Christmas period, you will notice that the dynamic rates of hotels are higher than the usual rates during the normal period. This is caused by the fact that the hotel is trying to maximize its revenue during high demand periods.
Q: Do hotels use dynamic pricing?
A: Yes! Most 4 and 5-star hotels have been using dynamic pricing for quite some time. They’ve dedicated revenue management teams and expensive tools to forecast the demand and set the appropriate prices. Nowadays, after the democratization of technology, ZEN is able to bring these capabilities to small and medium hotels at extremely affordable rates. Now is the time to start implementing dynamic pricing before your competitors do it!
Q: What are the benefits of dynamic pricing?
A: Dynamic pricing helps hotels in maximizing their occupancy rates, and hence their revenues. It also helps hotels reach a wider audience and achieve a balance between underpricing and overpricing. Moreover, with smart pricing engines such as ZEN eManager Express, this all can be done automatically, saving time and costs for the hotels to be invested in other areas.
Q: How can I implement dynamic pricing for my hotels?
A: There are several dynamic pricing software available in the market. When choosing the right dynamic pricing hotel system, you can count on ZEN eManager Express. With years of experience and hundreds of properties across Southeast Asia, ZEN ensures hotel owners an increased revenue through ZEN eManager Express.
Book your free appointment now at https://www.zen-hs.com/book-a-meeting/
Article by Cielo Fernando