Dynamic pricing
Setting each night's rate from current demand rather than a fixed calendar — the discipline, not any particular tool.
Dynamic pricing means the rate for a given night is a function of what is happening in the market for that night: how your comparable properties are priced and how full they are, what is happening in town that week, how the date is pacing, and how close arrival is.
The alternative — a seasonal rate card set once a year — is not wrong so much as blunt. It cannot know that a conference took every room in town on a random Wednesday, and it cannot know that the four properties most like yours all dropped 15% last week.
Done well it is unglamorous. Most nights move a little or not at all; the value concentrates in the handful of dates each season where demand genuinely diverges from the seasonal assumption, in both directions. The dates you should have charged far more for are worth as much as the ones you should have discounted.
Done badly it becomes a discount machine. A system that only ever moves rates down, or that reacts to every small movement in the comp set, will erode a year's revenue one defensible-looking decision at a time.
Where it goes wrong
Judging it on occupancy. Occupancy will often fall slightly under competent dynamic pricing while revenue rises, and an operator watching only the fuller-looking calendar will conclude the wrong thing and switch it off.
Related terms
- RevPAR (Revenue Per Available Rental) — Revenue divided by every night the property was available — the single number that cannot be improved by simply pricing yourself out of the market.
- Booking pace — How fast a future date is filling compared with how fast it normally fills by the same point — the earliest honest signal that a rate is wrong.
- Comp set (comparable set) — The specific properties a guest is actually choosing between when they choose yours — not simply the nearest listings.
- Lead time (booking window) — The number of days between when a guest books and when they arrive — the thing that decides how much time your pricing has left to work.