As hoteliers continue to emphasize revenue management in more and more sophisticated ways, buyers are continually challenged with managing their dynamic pricing choices: accept, reject, or incorporate? Your results tell quite a story – one that concludes with what we believe you should do now.
Our recent survey asked you “As dynamic pricing has become more widely accepted which of the following applies?”, providing choices of 1) currently include for between 10-24% of our properties, 2) currently include for between 25-49% of our properties, 3) currently include for more than 50% of our properties or 4) use as little as possible.
Half of all responses answered “use as little as possible”, validating the historical arguments for negotiated rate fixed rates (even if seasonal) with the advantages of easier for travelers to understand, more level budgeting and planning and consistent quantification hotel program value calculation.
Next, at 26%, were buyers that include dynamic pricing in 10-24% of their program. Combined with the “as little as possible” 76% of respondents indicated minimal usage of dynamic pricing. Buyers routinely note the confusion of ever-changing rates upon travelers, savings indexed to the marketplace, and too much hotelier control over corporate savings through inventory management.
Last, equally represented at 12%, were the two remaining categories of “25-49% “ and “more than 50%.” While both industry publications and hotel publicity indicate wide acceptance and value of dynamic pricing, you clearly disagree.
However, the results still support that dynamic pricing has taken a foothold in a significant number of programs. We cannot be sure that the trend that brought us to this level of usage has peaked or flattened. Let’s keep a firm eye on the usage of dynamic pricing and see if one day it represents the most popular way no contracting hotel deals. At GoldSpring we used advanced analytics and benchmark information from both Lanyon and TRIPBAM and to put us in a position to accurately determine if dynamic pricing or fixed rate is the best option in for any given property.
One of the challenges of the dynamic pricing versus fixed pricing decision is the ability or inability to effectively compare the two mechanisms. The decision will be different by property. Buyers need to know exactly how their fixed rates have performed in terms of the negotiated rate versus Best Available Rate (BAR) combined with the availability of the negotiated rate. For example, if we can determine that a negotiated rate of $160 compares with the average BAR of $200 then we can calculate a 20% discount. But consider if the negotiated rate is only used 50% of the time then the effective discount rate drops to 10%. In this case, a dynamic discount of 15% off BAR with 100% availability is more effective.
At GoldSpring we used advanced analytics and benchmark information from both Lanyon and TRIPBAM and to put us in a position to accurately determine if dynamic pricing or fixed rate is the best option in for any given property.