How Dynamic Pricing Drives More Revenue
Revenue Management

How Dynamic Pricing Drives More Revenue

Ravi Taneja
Ravi Taneja

What is dynamic pricing. Do you need it?

Just look at the airline industry. Have you ever tried booking domestic or international tickets? Especially if you visit Google Flights web page, it shows you all the best rates. Google Flights is exactly like Trivago is to hotels.

You will find different prices for the same airline from different sites. Even if you visit the airline’s own website, you will find different pricing each day. Sometimes each hour. Why is that? This is called dynamic pricing.

The same tactic is now being used by hotel chains. Setting dynamic prices needs the following:

  • To create a software which can crunch a lot of past performance data
  • A special software built specifically built to generate various reports
  • An Artificial Intelligent software which can change prices without your intervention

All of this looks pretty expensive. Something large hotel chains can afford to do. However, in the last five to six years, startups have studied the dynamic pricing rules from the hotel chains and the airline industry. And ended up creating a hybrid version of the software and designed it to suit the hospitality industry. AxisRooms’ Revenue Management System – RMS is one such software.


Real time pricing to tap demand

A smart RMS will allow you to key in your past performance data – say for the past three years. Once the data is entered, then it helps your revenue manager to study how your property has performed over the past three years.

Based on your prior performance, the RMS will allow you to generate future demand. You can start with forecasting demand for the next six months. A smart RMS will also consider competitor pricing and market forces while it helps you to generate demand forecasts.

The next step is to set a minimum base price for each room category. Post that, allow the system to study demand on a weekly, daily, and hourly basis and let it hike or lower the room rates to match demand. This is the power of dynamic pricing in real-time.


Dynamic pricing allows you to maximize bookings

By allowing the RMS to change the price according to demand fluctuations – while making sure you set a minimum pricing rate so that you don’t incur losses, you are already a step ahead than thousands of properties.

Travelers always seek better prices, by matching the demand, you will generate a lot more bookings naturally. The use case of any RMS is to achieve two things:

  • A minimum RevPAR achieved consistently
  • Growth in overall revenue year-on-year


Dynamic pricing allows you to promote special offers

If you want to create special offers based on length of stay, number of guests or advertise package deals, you can do so by adjusting your property’s pricing accordingly. Email marketing is a great tool to notify your previous guests of any special offers to encourage them to book again. Creating a newsletter including your seasonal offers increases booking chances.


Who will help me set up dynamic pricing?

It is one thing to pay and buy an RMS. However, dynamic pricing is set with a healthy mixture of number crunching and human decision making elements. Our RMS software is built on years of success delivered to 100s of hotels and resorts. And is backed up by our qualified Revenue Managers who will help you install the system, key in the data, set up the RMS and start forecasting demand and set the right pricing strategy.


So, Should I buy the RMS and I start making more revenue immediately?

Dynamic pricing generated via an RMS is not a magic wand. There are factors such as these which will determine better forecasting and pricing strategies:

  • How accurate is your previous performance data?
  • How old is your data?
  • Do you want to implement competitor price monitoring alongside revenue management?


You see, any software needs time to work on your data, start generating many forecasts and then help you set up multiple dynamic pricing strategies. You will have to give a complete year to see the effects of dynamic pricing. Dynamic pricing is all about giving it the most accurate data of the longest period, and understanding forecasting and setting many prices to see which works, and which won’t.