Why static pricing is hurting your hotel revenue

When your to-do list includes everything from running events to changing sheets, it’s no wonder pricing strategies get pushed to the side. If you barely have time to greet your guests, you certainly won’t have time to adjust your room rates multiple times throughout the day.

A static pricing model may simplify operations, but it’s also one of the easiest ways to kill your earning capacity. If your competitors have the capacity for dynamic pricing, you’re undoubtedly leaving money on the table. To maximize your revenue streams, you may have to rethink and revamp your toolset.

The biggest pitfalls of static pricing strategies

Static pricing is typically a set-it-and-forget-it strategy where hoteliers only make adjustments seasonally or for high-profile events.

With static pricing, you set the room rates for a specific time period regardless of demand fluctuations. This is simple to manage, giving you more time to focus on your endless responsibilities, but the flip side is that it makes your hotel less competitive.

Losing bookings during low-demand times

Low-demand periods can be some of the most nerve-racking times for any hotelier. Every empty room represents lost revenue you may or may not make back—and those missed profits mean tighter budgets in every other aspect of your operations, from marketing to maintenance, amplifying their impact.

As an indie hotelier, you’re well aware of when your off-peak time occurs, and you probably already have a plan in place to lower rates and encourage more off-season bookings. But if you’re setting and forgetting pricing for the entire slow period, you’re likely missing out on opportunities for rate increases. Even a slight upcharge on weekends vs. weekdays can help you maximize revenue opportunities when they matter most.

And if your competitors respond to these subtle shifts with dynamic pricing changes, they’re more likely to catch the few travelers who are passing through the area. For example, if a local author hosts a book signing on a weekend during the off-season, they might attract readers within a two-hour drive. Better rates or package deals can motivate fans to come down for a night or two without breaking the bank.

If you consider a room sold better than an empty room, dynamic pricing helps you capture revenue even when demand is at its lowest.

Missing out on revenue during peak demand

A consistent pricing system can make your hotel the cheapest during high season—and that probably sounds like a good thing! But the reality is that, when it’s all said and done, you may be leaving money on the table and creating more work for yourself and your staff.

Selling 30 rooms at $200 a night grosses you the same amount as selling 40 rooms at $150 a night, but the latter gets you 10 more sets of bedding to wash, rooms to clean and visitors to check in. Ultimately, that leads to a lower net profit.

Meanwhile, your competitors adjust prices during peak weekdays and weekends, capitalizing on those higher-profit opportunities.

So, whether you run a ski chalet or a bed and breakfast, your pricing structure should factor in the nuances of both peak and off-season. With dynamic pricing, you can cash in on the most committed travelers who are willing to pay higher prices.

Why a dynamic pricing strategy is the best way to drive revenue

A dynamic pricing strategy assesses real-time demand and competitor pricing, making calculated adjustments multiple times per day to maximize both occupancy and revenue. The best dynamic strategies encompass the most relevant demand metrics, such as time of booking, market trends, occupancy rates and customer behavior.

With dynamic pricing, you can set the optimal price for each room and maximize your revenue per available room (RevPAR). In the fast-paced hospitality industry, it’s the best balance between average daily rate and occupancy.

When you use dynamic pricing, you can also capitalize on the changing demand for each day of the year. For example, if your hotel always sells out during the state fair, thanks to its central location, you can cater to a crowd that understands the value of convenience during their limited PTO. During the low season, you can offset vacancies by attracting cost-conscious travelers.

When every penny counts in an independent hotel, variable pricing can maximize profits month after month. As you scale up your revenue, you can start investing back into the property to make it that much more competitive.

Stay competitive amidst fluctuations in the market

Market fluctuations may not be 100% predictable, but eagle-eyed hoteliers can use past trends to forecast future demand. They can then turn these insights into actionable steps that ultimately drive both bookings and brand loyalty.

This is critical given current hospitality trends. Even with global economic uncertainty making front-page headlines, experts predict nearly 6% annual growth in the tourism sector until 2032.

Imagine that your closest competitor slashes their prices during low season, practically giving away their weekday rooms. Instead of devaluing the hotel, this decision may actually stimulate market demand for the area. If you’re using a static pricing strategy, you may not even realize the change until it’s too late.

During high-demand periods, your competition’s RevPAR might go through the roof in the week before the holiday season because they properly weighed the limited supply against the overwhelming demand. While both of your hotels might be sold out during this week, your competition could easily net 20% more than your hotel for each room.

You can think of dynamic pricing as a win-win strategy: Your customers pay what the room is worth, and in return, you have the funds to consistently upgrade facilities and amenities to better align the guest experience with the pricing. This is the best way to foster brand loyalty, especially if you rely on repeat bookings to drive revenue.

Implementing dynamic pricing doesn’t have to be difficult

Dynamic pricing may sound time-consuming, but it doesn’t have to be. Instead of painstakingly setting every room rate, you can automate your pricing strategy with the right tools.

Dynamic pricing software can pull your data together and organize it all in a user-friendly dashboard, giving you insight into how shifting market demand dictates your bottom line. With the right tool, you can reduce your manual workload and put yourself back in control.

Dynamic pricing software

Dynamic pricing software collects both demand and pricing data, so you can make more informed choices about your pricing strategy. You’ll see how other hoteliers price their rooms and when it makes sense to undercut or match them. It’s an increasingly popular tool in the hospitality industry because it consistently results in higher profitability.

Lighthouse’s Pricing Manager offers year-round rate automation, giving you recommendations based on everything from seasonal demand to special events. Our award-winning platform simplifies your dynamic pricing strategy, and it’s all backed by our global support team.

With a simple interface and automation tools, you can boost your revenue by up to 20%. Use the autopilot feature when you want your pricing to manage itself, or update your settings when you’re ready to take the wheel back.

Drive bookings and generate revenue without compromising the guest experience

Dynamic pricing tools can help even the smallest hotels price their rooms the same way the conglomerates do. With Lighthouse’s Pricing Manager, you can edge out competitors during low season and maximize revenue during peak demand.

Our platform collects robust pricing data from multiple sources, giving you the insights you need to understand changing market conditions, what’s driving demand and how to capitalize on different types of travelers throughout the year. Instead of being at the mercy of an algorithm, you stay in control of pricing—without having to aggregate endless data sets.

Plus, you can use the platform for more than just pricing strategies. With Lighthouse, you can streamline your distribution channels, reservation management and payments. It’s an all-in-one solution that gives independent hotels just enough support to maximize the value of every room.

See how Lighthouse’s solutions were designed with independent hoteliers in mind!