“I fundamentally disagree with dynamic pricing,” an industry professional said recently. This quickly ignited a debate! “What’s that?” someone else interjected. “If the airlines can do it, why can’t guesthouses and hotels?” said another. “I’m fed up with it,” a senior manager groaned emphatically, “it causes war with my sales manager wanting to go down one road and my revenue manager another…”
So what is dynamic pricing? Well, it is the practice of varying a price for a product or service to reflect changing market conditions. Airlines were early adopters of this strategy which is why we are all now aware that bagging the first seat for sale on a flight is likely to cost far less than the last available seat.
Roll back to the early 2000s and this strategy was creeping into Ireland when rooms went from being charged at a fixed price that rarely or never changed to a fluctuating price that raised or lowered according to demand. As time moved on some visitor attractions began to apply the principles too- for example, by offering lower priced online advance purchase, non-refundable entrance tickets versus full-priced tickets purchasable on-site.
So why did our friend exclaim that he fundamentally disagreed with dynamic pricing…? Well, the day before he had found himself stuck in a random location calling a dozen hotels for a last-minute room. It was late, he was eager to find a solution, and quickly….
From one call to the next, the telephone voices quoting prices for the “last available room” became all the more outrageous. Eventually, our friend paid what he defined as a crazy room only rate (“not even a sausage,” he complained) for a ground floor room in a basic 3/4-star hotel at the side of a motorway, surrounded by an industrial estate.
After the Night Manager returned his credit card, our friend proceeded to his room which (while clean) had a ground-floor window held together with gaff tape.
At this stage, the debate evoked a few expletives. “It’s like a tug of war between dynamic pricing and value,” one lady interjected. “Unfortunately for you, on this occasion dynamic pricing won.”
The consensus… VALUE IS KING.
Irrespective of demand, no product or service should ever be sold beyond its true value. While dynamic pricing (used properly) has its place, a strategy that sparks disharmony among staff and sends a good customer (willing to pay a fair price) into a multi-day shock is a battlefield to be avoided.
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We would love to hear your view…. Are dynamic pricing model strategies useful for tourism and hospitality businesses?
The team at Runda Hospitality & Tourism Solutions are experts in sustainable revenue generation which means that we know how to optimise revenue generation by integrating pricing models, with sales channel, customer segmentation, market entry and data collation strategies to support livelihoods and local economies.
