How do you use dynamic pricing to boost occupancy and ADR?

One example of utilizing dynamic pricing in the is the practice of offering different rates for the same guest room depending on the time of day, day of the week, and even the time of of the year. Specific instances include but are not limited to peak seasons, holidays, sold out sporting events, compression, and city-wide festivals. During these occasions, Hotels have the opportunity to charge higher rates for their rooms to take advantage of the high demand. Also, hotels may offer lower rates during off-peak seasons or on weekdays when demand is low.

To be successful with dynamic pricing, do your research. Look around you and see if others in your market are successful doing it and monitor what those changes look like. Plan and plan some more. Make sure your staff has a very clear understanding so they are easily able to handle questions that arise from guests. They need to feel confident to sell at fluctuating prices. Invest in the right RM platform and revenue manager. This will make all the difference if you are monitoring closely and frequently. Know that there is a trial and error period, like with anything. In one instance, a change might work great, but the same change could be implemented at a later time and have a different effect. Be patient and do it at the right time.

One obvious benefit is that dynamic pricing lets you change your prices based on current demand from various customer groups and channels. This means you can keep up with the latest trends and maximise your revenue by offering the right price to each customer without leaving money on the table from other segments of customers. It also allows you to participate in a wide array of demand pools with different price points to maximise your revenue and market share. For example, you might elect to get some last minute business at a lower rate to maximise your occupancy to improve your rewards redemption revenue, which may boost the overall ADR for the night.

Rate wars are the last thing you want to get into. You won't be able to keep up with the ever changing pricing around you and your guests will notice. It's important to know your product against others, the demand, the market trends and what is still reasonable pricing for your product. It can be easy to find yourself going up in rate because the comp set did, when you might lack the occupancy or base they have that gives them the ability to push. It's always important to know what your goal is and what changes will help you be effective to achieve that goal. Try not to participate in tit for tat rate changes without cause. You could ultimately lose adr and occ if your pricing changes solely based on what your competitors' strategy is.

One item experienced hoteliers have discovered is that value to price is critical for both customers and operators. Customers desire that the hotel’s product, service, and brand delivery lines up with their monetary expenditure. Hotel Owners/Operators must ensure that their prices align with the perceived value of their brand, products, or services. If there is a disconnect between price and value, negative repercussions are likely to occur through communication vehicles such as brand guest reviews and Social Media platforms, which can have long term negative effects to the business.

I am a huge proponent of utilizing dynamic pricing for both occupancy and ADR, with some parameters. I get concerned when I see properties making drastic adjustments to rates. Having too drastic of a swing in rates can cause confusion among your guests and also make your property look unstable. You have to be mindful of the clientele you are catering to, as well as the image and reputation you are trying to maintain. Yes to dynamic pricing strategies, but don't cut too low just for a couple more heads in beds. Know your property's worth and stand firm even in the slow season! Doing so consistently will help you to build both ADR and occupancy.

Not only is it imperative to have a top-notch revenue management system, it is equally important to have a strong and knowledgeable revenue manager assigned to handle that system for you. Often times, there is a shortage of qualified revenue managers, and hotels find themselves assigned to a RM that is fresh out of training, who might lack knowledge, experience, the skill to analyze properly, as well as passion for the position. In my opinion, you will get your money's worth and be effective st dynamic pricing when your RM has some years under their belt and truly loves and cares about succeeding and optimizing revenue, rather than just filling the open slot. Huge gaps in daily rates will cause your guests to be alarmed and look elsewhere.