Dear WuBookers, as you know, the tourism industry is one of the most dynamic and unpredictable sectors. The success of a hotel depends on its ability to anticipate market demand, set the right rates, and manage distribution effectively. All of these aspects relate to a solid pricing strategy. In this article, we’ll explore how a dynamic pricing hotel approach works, why it matters, and which tools can help you make the most of it.

The difference between static and dynamic pricing

Let’s start by clarifying the difference between dynamic pricing and static pricing. Static prices are mainly fixed: this is a fairly traditional method of creating a price list, with minimal variations based on very few factors such as seasonality or days of the week (with a price increase at weekends, for example).

Dynamic pricing, on the other hand, is much more flexible and changes according to demand and other factors, which are considered in real time. These can include market conditions, competitor activity, and even weather forecasts.

Thanks to a dynamic pricing strategy, when demand is high, the hotel can increase its rates – with daily or even hourly adjustments – to maximize profits. Conversely, when conditions are less favorable, prices drop accordingly to encourage as many reservations as possible.

But who makes these changes and how do they work in practice?

Dynamic pricing for hotels: how does it work?

As we have said, a good dynamic pricing strategy depends on numerous factors, such as the performance of reservations over time, room availability and sales speed, the calendar of events in the area, the weather, typical user behavior at certain times of the year, and competitor prices. It goes without saying, therefore, that it cannot be done with a simple manual calculation, but requires the use of technology.

Revenue Management Software (RMS, not to be confused with PMS) does just that: using powerful algorithms, it cross-references hotel data and trend forecasts to suggest profitable price changes.

The ultimate goal is to increase occupancy, ADR, and RevPAR through rates that are consistent with guest expectations.

The benefits of dynamic pricing

At this point, it should be clear why dynamic pricing is preferable to static pricing, but let’s review the main benefits offered by this type of commercial strategy.

Maximize profits

The first advantage is strictly economic: by adjusting prices based on real data (rather than assumptions, however accurate), it allows the hotel to increase sales opportunities, reduce the risk of unsold rooms, and maximize profits. Let’s take an example: suppose a hotel adopts a static system. During the low season, it will set its room prices at the minimum because it knows that occupancy during this period is low. However, this means that it could miss out on opportunities arising, for example, from impromptu events such as concerts, trade fairs, or even unusually good weather that it is not aware of. All this information, if dynamic pricing had been used, would have been taken into account to set a higher price list and, therefore, generate higher earnings.

Reassure potential guests (and convince them to book)

The second advantage also has economic implications, but with an added nuance. When a user searches online and finds rates that are compatible with the chosen period and the general market average, they feel reassured; whereas significant differences between properties—with much lower prices, for example—could make them suspicious.

On the other hand, dynamic pricing works precisely to capture the attention of potential guests at the best time, even with lower prices. A last-minute offer with discounted rates could be strategic in convincing “latecomers” to book shortly before check-in.

Better understand your target audience and open up to new audiences

Analyzing the data from reservations obtained through dynamic pricing also allows you to better understand the profile of your guests, their preferences, and their standard behavior. This is valuable information for trying to cater to their tastes and improve your offering.

Not only that, but you may also discover that you have different customers than you expected, opening up new market segments.

And what about regular guests who used to book at the same price year after year? For them, you will need to offer special rates, such as discount codes, gifts, and special packages.

Optimize team operations

Entrusting rate changes to software also means lightening the load of your internal team (or external consultants).

Of course, someone will still have to check, analyze, and correct what has been done, but the effort will be significantly reduced and facilitated by the system. This way, the same resources can be dedicated to more profitable activities such as strategic assessments, creating offers, opening new distribution channels, improving the guest experience, and so on.

Keep an eye on the competition

Thanks to specific tools integrated into most revenue management systems, you can also monitor your competitors’ prices to see how they are moving and what kind of strategy they are using. This not only gives you a constant overview of the market—at least the one closest to you—but also gives you a competitive advantage: you can anticipate your competitors’ moves or adjust your offer to increase your attractiveness in the eyes of guests.

How to implement a dynamic pricing strategy

So, where do you start to implement a dynamic pricing strategy in your hotel, B&B, or vacation rental? Here are the key steps to follow:

• choose the technology: this could be an advanced RMS, or simpler solutions to start understanding how it works and what impact dynamic pricing has on your property;
• set the main parameters, including booking history (which can be obtained from your Property Management System), competitors to monitor, and minimum and maximum rates;
• connect the software to your PMS and channel manager, so you always have up-to-date availability and can set rates on all channels, avoiding the risk of unexpected overbookings;
• constantly analyze and intervene to correct where necessary, depending on actual results and user response.

All this will allow you to automate price changes and further optimize your sales strategy based on real data.

Zak for dynamic pricing

As mentioned above, for everything to work properly, you first need to equip yourself with a PMS, or property management system, such as Zak, the hotel industry software by WuBook.

Communication with the PMS is essential to ensure that the Revenue Management System collects hotel data in real time and that the management software receives and updates rates on all sales platforms. For this reason, Zak is designed to be integrated with all major RMSs on the market.

But there’s more. For those who want to start understanding how dynamic rates work before investing immediately in complex tools such as RMS, Zak offers a basic but very powerful module: Zym, the Yield Manager.

This feature allows you to set rules to automatically increase or decrease your prices based on how your room availability changes and the reservations you receive, with total freedom.

With Zak’s Zym, you can, for example:

• customize the rules according to your needs;
• create different rules for each product and each rate;
• manage prices for advance or last-minute reservations;
• act where you want: on your website, on all connected OTAs, or only on some.

Dynamic rates are a promising way to increase your earnings: if you haven’t tried them yet, now is the time to start using them!