Dynamic Pricing! Two little words that can scare a lot of operators, if you’ve been in the industry for a while or even if you’ve taken a business over – you would have your ways of pricing for your business.
You may have developed (or inheritated) an old school rate sheet that shows pricing for each room, each season (low/mid/high) and breaking down the rate depending on the length of stay. A guest calls or visits your website and they get this exact price. It’s there to make your life easier right? You know exactly what you will be charging for each period and there is little guess work needed.
This was the way the world worked years ago but in the world today without dynamic pricing you are leaving your business (and your future profits!) at a huge disadvantage. Dynamic pricing will give you the ability to maximise your earning potential, keep your investors and unit owners happy and make your business a competitive force in your market.
Dynamic Pricing is easily explained by comparing to our friends in the airline industry. When its quiet, or low season, you can snag an amazing deal on a flight. But travel when its busy? Boy, oh boy – you are going to pay for it! Book in advance you might get the cheapest price, if you choose to book last minute when the flight is almost full? You will be paying more for this flight as well.
Its common knowledge that this is how airlines work, customers are willing to pay more to travel at a time when the masses do. Think of your property in the same way. You should be pricing your property for a higher rate on the desirable travel periods! Give customers the opportunity to snag a deal if they lock in some travel in a longer booking window (outside of busy periods of course!) as this will help you build base business.
Don’t just think about dynamic pricing within your seasons either. Ensure you get down into the nitty gritty of the pricing for your property and understand how to maximise your pricing day by day. If your busiest day is a Monday (maybe you’re in a corporate centric space), then Monday should be the highest price. Maybe you are in a leisure market and weekends are your guests favourite times? Well a weekend surcharge it is!
Tracking your properties demand patterns is much easier than it sounds as you know your business best. You understand what days you need some support and what days you can maximise. Reviewing a daily occupancy and a pickup report will reinforce your anecdotal knowledge. When you see your occupancy rising (remember – like the flight booking out) your pricing should be increasing as well.
There is more to the balancing act of dynamic pricing than just this, you need to ensure you are factoring in your competitors pricing as well as other things.
One of the greatest advantages of our current technology driven world is that there is a boat load of software out there to help ease the decision-making process for you. Software to help you track market movement in pricing and keep you competitive. There is software to keep an eye on your competitors pricing and then there’s some amazing benchmarking services as well! Most of these different software options won’t break the bank, some are even free, but it will give you a level of data that you would not have seen before.
As Chinese philosopher Lao Tzu once said, “The journey of a thousand miles begins with a single step”. Take the plunge into dynamic pricing, your business bottom line and owners in your letting pool will thank you to no end. Not sure where to start? Try focusing on your busiest days first!