If, in your day-to-day life, you have ever noticed surge or drop in price of seasonal food items, you must be aware of ‘dynamic pricing’. It may be due to the increased demand of particular item. Earlier, I was in vegetable market when I noticed that demand of carrots has increased, thanks to the Gajar ka halwa (carrot-based sweet dessert). This has further affected the price of carrots.
‘Dynamic pricing’ isn’t a technique used in vegetable market, and many other sectors also use it to increase their revenue considering the demand of a particular item during a particular time. For example, prices of cab services like Uber and Ola surges during rainy days or rush hours. Airline sector also practices the time-based pricing system whenever passenger numbers increase or decrease. In the technology-friendly world, hotel industry is also experimenting with numerous sophisticated technologies to invite more guests and increase the revenue. Right from booking hotels and smart check-in/checkout facilities to online payment options, there are several things that the advanced technology has made easy for travelers.
While many hotels stay updated with latest technologies and use smart strategies to win more customers, there are some in the industry that still use traditional approaches. One such approach is fixed accommodation service pricing. Where high prices during off-season can break the business for a hotel, fixed prices during peak season can hold back the hotel from earning profit.
‘Dynamic pricing’ is beneficial when nothing interesting is happening in the town. Hotels can use the strategy to lure customers who cannot afford luxury services in high season.
How to apply ‘Dynamic pricing’?
During high seasons, there are high chances that all rooms of a hotel will be booked. It could be due to an event in the city or a traditional ceremony that takes place every year. It shows that the property will reach its maximum potential in no time and the owner has the opportunity to increase revenue. Instead of simply putting higher price tags on rooms, there should be price changes on accommodation as well as other hospitality services. In case of low demand of rooms, guests can be attracted by offering them special accommodation packages as well as heavy discounts.
The best way to apply ‘Dynamic pricing’ strategy is through pre-determined forecast of room bookings. The hotel can make multiple plans to apply the pricing strategy in a more effective manner. There should be plan B if the plan A doesn’t work well. For example, if the hotel fails to see desired bookings by the afternoon, changes in price can be made to lure guests.
Important Points To Consider
The change in price should be temporary and must be changed considering results it gives.
- Different rooms should have different prices.
- While applying the ‘Dynamic pricing’ system, prices of competitors should also be observed. In addition, details of their booking plans and their output also be continuously watched to understand the trend.
Digital Technology and ‘Dynamic pricing’
A major part of travel and tourism industry has already adopted advanced management software tools to increase revenue. Hotel industry has also started using new technologies to enhance guests’ experience and manage hotel resources in an efficient manner. When it is about applying ‘Dynamic pricing’, many still struggle. There are travel websites and software tools that help a hotel understand online booking trends and make decision on ‘Dynamic pricing’ according to them. Using these advanced tools, the hotel can check the number of reservations made for a particular night and decide prices for the next day of the season.
While ‘Dynamic pricing’ is a simple and profitable approach, it should reach the right audience at right time. You can use social media as well as many other types of digital marketing approaches to grab attention of many potential travelers at one time. Before applying the ‘Dynamic pricing’ approach, analyze it and try to understand how it can be changed over the course of next few days of a season to increase revenue of your hotel.