Pricing recommendation tools: A buying guide for hotels

Maybe you didn’t predict it would be the first word, but it won’t surprise you to see this term referenced prominently in an article on pricing recommendation tools.

Since ChatGPT entered the public’s consciousness in late 2022, artificial intelligence has become an ever-present part of the global conversation. 

In the hospitality industry, AI and machine learning (ML) underpin numerous popular innovations. In the traveler space, Hotel Tech Report found, for example, that while guests prefer human interactions for more complex requests, 70% find chatbots helpful for simple inquiries – their top query is asking for the Wi-Fi password, followed by scheduling wake-up calls.

Clearly this makes guests’ lives easier; but it also frees up the time of hotel staff too. The same is true of AI-powered hotel technology designed with staff in mind, not least when it comes to alleviating the daily headache of trying to price rooms correctly. 

How? By automating the setting and adjusting of room prices – the subject of this buyer’s guide to pricing recommendation tools.

Hotel pricing recommendation tools 101

Pricing recommendation tools generate dynamic price recommendations for your hotel rooms.

If you don’t have a revenue manager or the luxury of time to analyze vast amounts of data, these AI-driven solutions are a godsend.

They play to a ‘revenue management lite’ approach, necessitating minimal setup and the user-friendly interface allows you to begin working with the software straight away.

A pricing recommendation tool is much less complex than a revenue management system (RMS). But they do capture some of the essence of RMS pricing recommendations. Enabling you to unlock more revenue opportunities and optimize your prices without diverting you from your day-to-day responsibilities, and they can be integrated with other tools in your techstack, such as your Property Management System (PMS) and Channel Manager.

You have the option of accepting, tweaking or rejecting the recommendations you’re given, and deciding whether to automate the process or manually intervene. So you always remain in control.

Essentially, by using a pricing recommendation tool, you no longer have to check the room pricing landscape yourself and can outsource much of the decision-making process to machines.

Pricing recommendations are based on in-depth data analysis

To calculate optimal pricing recommendations, these tools draw from a range of internal and external data sources on price, occupancy, past performance and historical data, market demand and more.

Competitor rates are one of the most important datasets they tap into but they’re calibrated to avoid simply suggested prices that undercut the competition and deliver the optimal price point to meet demand.

Why hotels use room pricing recommendation tools

Like any commercial operation, there are two fundamental things a hotel must do to make a profit and therefore stay in business: Keep costs down, so you spend less making sales, than you make on those sales and maximize revenue.

From an operational perspective, there are two key factors, which we’ll look at in turn: working efficiently, which ties in with the first bullet above; and setting the right prices, which ties in with the second.

Pricing recommendation tools deliver on both.

Save time by automating pricing calculations

If you work for a chain with a large team of revenue managers and the most sophisticated techstack, you might have the luxury to deploy your own very specific pricing strategies, with complex legacy systems, like an RMS.

For smaller, independent hoteliers, the automated processes of optimized pricing recommendations will provide competitive rates to attract guests, boosting your occupancy and saving you invaluable time.

Navigating through a sea of operational and administrative tasks, coupled with staff shortages, can be overwhelming. The last thing you need is the added strain of constantly monitoring competitor rates across various OTAs, or digging through your own historical data on rates and occupancy for comparable dates. Your time is better spent on countless other tasks that demand your attention.

Just how much time you will save with a pricing recommendation tool is hard to estimate – everyone is different. But, manually setting prices can run into multiple hours a day. Imagine if you could cut that time down to hardly anything at all and with it, eradicate the headache of complex rate analysis?

With the right pricing recommendation tool, you have extra time in your day to focus on things like:

• Ensuring an unparalleled guest experience at your property

• Creating upsell and cross sell opportunities for your guests

• Focusing on other revenue generating areas of the business

• Handling vital operational issues

• Monitoring your distribution channels for parity issues or renegotiating your OTA rates

• Developing a revenue management strategy

• Training and supporting colleagues

Drive revenue with more competitive hotel room rates

With automated dynamic pricing in place, your room rates are set at the right price point and at the right time to get the most bookings - pushing up occupancy and maximizing room revenue.

Machines can perform calculations and run AI-enhanced algorithms across mountains of data immeasurably faster than we can.

This is why setting competitive rates is always more reliably accomplished using pricing recommendation tools; operating at any scale simply isn’t as reliable if all you have access to is the raw data, however complete and up-to-date it might be.

The nature of the real-time updates of these tools means that they support dynamic pricing strategies, which should now be the default for modern hoteliers if you don’t want to miss out on revenue opportunities.

It is with having a think about how much revenue you may already be losing to competitors who are adjusting their prices with dynamic pricing software.

The extra revenue you generate from pricing your rooms in real-time and taking business from the competition can then be reinvested into your business, improving your offering, making you more attractive to potential customers and delivering a better guest experience.

Tips for shortlisting hotel software vendors

So you have a good handle on what pricing recommendation tools should be able to do for you. But take that ‘should’ with a pinch of salt, because not every tool delivers what it claims to.

Before we summarize some of the market-leaders, let’s take a look at the five key things you should consider when shortlisting vendors.

Set goals based on your property’s requirements

You can’t invest in software unless you have a clear list of objectives. So establish what yours are and evaluate them against the tools.

These goals needn’t be complicated. All you need is a clear way of assessing your needs and measuring whether they’re likely to be met.

They’re yours to define, of course, but these goals are typical when undertaking this sort of research:

• Saving time – see if you can quantity it, the first step being to record your price-setting activity to derive some averages

• Setting more competitive rates

• Increasing revenue - by how much?

• Requiring minimal effort to set up – what assurances do the vendors offer?

• Minimal training for yourself and colleagues, with good support facilities if needed

Define your budget

When it comes to budget, ask yourself these type of questions:

• Is it good value for money? Just because you can afford it doesn’t necessarily mean that it is!

• Is it competitive when compared to similar solutions?

• Is the way it’s priced transparent, with no hidden extras?

• What’s the pricing model – a one-off licensing fee, or a recurring monthly or yearly subscription?

• Can you afford this software?

Based on the goals in the previous section, is the additional revenue you make going to pay for this software, ideally several times over? In other words, what is the likely return on investment (ROI)?

The bottom line is that you can’t go over budget. So it’s good to consider all of this from the outset so that neither you nor the suppliers you deal with waste each other’s time.

Look for essential platform features

Vendors are keen to list the things their tools can do – but make sure to look out for absences.

We’d consider these features to be essential in any good pricing recommendation tool:

• Price recommendations into the future – some guests book a long time in advance; you need to be able to cater for this and offer optimized rates

• Personalized settings – every hotel is different and if you only have a one-size-fits-all tool, you’ll become frustrated

• Seamless two-way PMS integration

Don’t be afraid to request a demo and ask the sales team questions

Salespeople expect you to request a demo – so request one! They’ll be only too happy to oblige.

Choose a time that’s convenient for you and any colleagues that you want to bring on to the call. A demo is your chance to ask questions, so go prepared with a list.

How robust and convincing are the vendor’s answers? Are they prepared to get back to you when they’re uncertain or do you sense that they’re guessing? And do you trust them?

These are all questions you should ask yourself during and after the demo. As for questions to ask the vendor, you might want to focus on:

• The provenance of the data they draw from

• How complete and up-to-date it is, and how often it’s refreshed

• Support and whether it’s round-the-clock and included as part of the subscription

• Price

Document your questions and their answers, and compare each vendor at the end of your evaluation process to make informed decisions based on this feedback.

Take advantage of free trials

If the vendor offers a free, no-obligation trial, snap one up. If you and your colleagues can get your hands dirty, there’s no better way of evaluating this sort of software.

Until you’ve experimented with real-life problems and compared any recommendations you’re given with the rates you derive in other ways, you won’t know whether the pricing tool is really for you – and remember your goals; this is where you can start to test them for real.

Ask yourself:

• How user-friendly is this tool?

• How much time are you actually saving compared to your existing (manual) processes?

• Do you trust its recommendations?

• Do you understand why it’s making them? (Are they transparent recommendations?)

• If you had any teething problems, was the vendor’s support team quick to respond?

4 pricing recommendation tools to jumpstart your software search

There are a fair few pricing recommendation tools on the market. We’ll narrow things down by looking at four..

1. Lighthouse Pricing Manager

The Lighthouse Pricing Manager enables independent hoteliers to turn guesswork into revenue growth.

It’s designed with independent hotels on smaller budgets in mind, and promises to:

• Boost your revenue with data-driven rate recommendations

• Save you valuable time with user-friendly automation

• Take control of your pricing strategy with flexible settings

• Leverage the robust and most trusted industry data set

So it’ll come as no surprise that Pricing Manager offers numerous market-leading features, many of which set it apart from its competitors:

• Customization of your pricing decisions – flexible settings allow you to stay in control of your pricing recommendations.

• Visualization of your pricing at a glance – its color-coded calendar isn’t just easy on the eye; it's your revenue roadmap

• Support that never sleeps – global customer support ensures peace of mind across all time zones; we're always here, whenever 'now' is for you

• No pricing puzzles – we demystify pricing with transparent calculations: occupancy, competitor pricing, demand; it's all there to see in just a few clicks

• Effortless PMS integration – no time-consuming manual work required, so you can focus on what you do best

Prices start at $75 per month.

2. Guesty Price Optimizer

Used primarily for vacation rentals, the Guesty platform bills itself as a fully embedded revenue management tool that pushes optimized pricing to users’ channels so they can maximize revenue, save time, and grow their business.

Pricing is available by filling in a form on the vendor’s website.

3. Cloudbeds Pricing Intelligence Engine

Designed for smaller properties, Cloudbeds’ Pricing Intelligence Engine (PIE) claims to empower users to keep pricing competitive with real-time market data and automated pricing alerts.

Pricing is available by filling in a form on the vendor’s website.

4. PriceLabs Revenue Management Platform

With smaller properties in mind, Price Labs provides what it describes as a user-Friendly and cost-effective revenue management platform, including functionality that allows users to automatically adjust room rates in real-time, based on market data.

According to HotelTechReport, “This product is priced in line with the average product in the category which is usually an indicator that it is a standard product with standard functionality designed for typical operations and use cases and properties”.

Test drive the best pricing recommendation tool for hotels with a free trial of Lighthouse’s Pricing Manager

Lighthouse really is a market leader with the industry’s most accurate data sets and best-in-class solutions for independent hotels, not least in the pricing recommendation tool space.

Pricing Manager excels when it comes to:

• Ease of use

• Clearly visualized rate recommendations

• The balance between automation and user control

• The most attentive team at your side, before, during and after you sign up

• Competitive prices

If you like the sound of Pricing Manager, start a free trial today and fully optimize your rates up to 365 days in advance.