How Dynamic Pricing Can Increase Profits On Your Existing Bookings

The hospitality industry is fiercely competitive, and success often depends on the tiniest of margins. As a hotel owner or revenue manager, you’re constantly seeking ways to optimise your revenue without drastically increasing your workload. Traditional methods focus primarily on increasing occupancy rates, but what if there was a more profitable approach—one that maximised profits from your existing bookings?

Enter dynamic pricing. This innovative approach isn’t just about filling rooms; it’s about enhancing the profitability of the bookings you already have. In this blog post, we’ll delve into how dynamic pricing can increase your profits with minimal additional effort.

The Concept of Dynamic Pricing

Dynamic pricing is a flexible pricing strategy where the price of a product or service fluctuates based on market demand, competitor pricing, and other external factors. In the context of the hospitality industry, it means adjusting room rates in real-time to reflect changing circumstances such as:

  • Historical booking data
  • Market demand
  • Competitor pricing
  • Seasonal trends and events

For example, if there’s a major event in your city that causes a surge in demand for hotel rooms, dynamic pricing would allow you to increase your rates accordingly. On the flip side, if it’s a slow period with low demand, you can lower your rates to attract more bookings.

By leveraging data and analytics, dynamic pricing can make accurate predictions about future demand, and you can sit back while your room rates adjust themselves.


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Why Focus on Profits Over Occupancy?

While increasing occupancy rates seems like an obvious way to boost revenue, it comes with its set of challenges and hidden costs:

Operational Costs

More bookings translate to an increased demand for room servicing, which means more frequent cleaning and maintenance. This surge in activity leads to higher laundry expenses as more linens and towels are used. Additionally, increased occupancy results in higher power consumption due to the greater number of guests using electricity and water. There is also a need for more guest interaction, which can add to the workload of the existing staff.

Staffing Needs

As occupancy rates rise, so does the need for additional staff to manage the increased volume of guests. This often necessitates hiring more housekeepers, front desk personnel, and other support staff to ensure smooth operations. Consequently, higher payroll expenses become inevitable, impacting the overall budget but ensuring that service levels are maintained.

Guest Experience

A fully booked property can stretch resources thin, leading to potential challenges in maintaining high standards of service. Overburdened staff and resources can result in longer wait times, less attention to detail, and a general decline in the quality of the guest experience. This can, unfortunately, lead to negative reviews and diminished satisfaction among guests, affecting the property’s reputation in the long run.

The Connection Between Dynamic Pricing and Profits

At first glance, dynamic pricing may seem like just another way to increase occupancy rates. While that is certainly a benefit, the real advantage lies in its ability to optimise profits from existing bookings.

Here’s how it works: Let’s say you have 50% occupancy at $100 per night, resulting in a revenue of $5,000. With dynamic pricing, you’re able to increase your rates by 10% during high-demand periods—let’s say $110 per night—resulting in a revenue of $5,500.

In this scenario, dynamic pricing has increased your profits by $500 without any additional bookings or significant changes to your workload.

Although it may seem counterproductive to aim for fewer bookings, reframing this idea shows that you can earn just as much with less frequent reservations. This approach results in fewer changeovers, reduced laundry costs, lower power usage, decreased time spent on guest interactions, and less consumption of supplies. Ultimately, it allows you to maximise your profits while maintaining high service standards.

How Dynamic Pricing Can Increase Profits

Dynamic pricing also helps to minimise expenses, leading to higher profits with minimal effort:

Reduced Operational Costs

By adjusting rates based on demand, dynamic pricing can help to distribute bookings more evenly throughout the year. This means fewer peak periods and a more manageable workload for staff and resources. With lower operational costs, every dollar earned goes directly towards increasing your bottom line.

Improved Efficiency

Dynamic pricing algorithms are designed to be efficient and accurate, taking into account multiple factors such as market trends and competitor pricing. This frees up valuable time for revenue managers who can now focus on other aspects of the business rather than constantly monitoring and adjusting rates. Or, if you’re a smaller business, may be the difference between hiring a revenue manager or not.

Increased Competitiveness

With dynamic pricing, you can easily and quickly adjust your rates to remain competitive in the market. This flexibility allows you to take advantage of opportunities, such as special events or last-minute bookings, without losing out on potential revenue. You can now compete with bigger players in the industry by offering competitive rates without sacrificing profits.

Enhanced Guest Experience

With a more balanced distribution of bookings, resources are not stretched thin, resulting in a better guest experience. Guests are more likely to leave positive reviews and return for future stays, increasing the potential for repeat business. This not only boosts revenue but also helps to build a loyal customer base.

Hartfield House Hostel’s Success with Preno’s Dynamic Pricing

  • Revenue Growth: Dynamic pricing by Preno led to an additional £3,473.00 in revenue with 566 automatic pricing adjustments in 30 days.
  • Mindset Shift: Embracing dynamic pricing changed Jess’s perspective on pricing strategies and customer willingness to pay fluctuating rates.
  • Seasonal Challenges Overcome: Dynamic pricing helped the hostel meet revenue targets, sustaining operations through off-peak winter months.

How Dynamic Pricing Helped Our Customer

“One of our rooms… have gone from sort of 40 pounds to 80. That’s a bit of a shock when that comes in, and you think, ‘oh my god, that can’t be right.’ Since January, when we put that in place, we’ve not had a single person say, ‘that’s a bit expensive’ at all. It’s really just around changing my mindset.” – Jess Whistance

Continue reading the case study: Hartfield House Hostel’s £3.4k Gain with Dynamic Pricing

Why Choose Preno’s Dynamic Pricing?

Our mission has always been to help hoteliers do what they can, where they are with what they’ve got. With Preno’s dynamic pricing, we’re doubling down on this mission by offering a solution that is both affordable and effective. Our algorithm takes into account historical data, market trends, and other factors to provide you with the best possible price recommendations for your property.

By using our dynamic pricing feature, you can reduce operational costs, maximise profits, improve efficiency, and enhance guest experience without any additional effort or resources. This allows you to focus on providing exceptional service while our technology works in the background to optimise your revenue.

With Preno’s dynamic pricing, you can stay ahead of the competition and increase profits while maintaining high service standards—truly a win-win situation for any hotelier looking to boost their bottom line. Especially those that aren’t working with big budgets, and with minimal staff.

That’s why, our dynamic pricing tool is included in our affordable pricing plans, along with every other feature our property management system offers. Our goal is to give small and medium-sized hotels the tools they need to succeed, without breaking the bank.

Transform Your Guest Experience With Preno

With Preno, seamless management is just a click away. Embrace the future of hospitality with our free trial, no strings attached.

Ready to boost your profits without increasing your workload? Sign up for Preno today!

About the author

Kendra, the Marketing Content Manager at Preno, brings her expertise in Marketing and Communications to help hoteliers stay ahead of the curve. With a deep passion for the industry, she is committed to providing valuable insights and strategies for success.

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