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Dynamic Pricing Strategy for Hotels

Hotel dynamic pricing takes account of fluctuating market trends in order to maximise revenue. The concept has been around in the hospitality industry for a long time, but is only now becoming an automated, fast-acting tool which calculates prices in real time, giving hoteliers a unique edge in the market.

What is dynamic pricing?

How much does an apple cost? That’s a rhetorical question, because the answer is, it depends on the seasonal availability of apples, and whether there is scarcity or a glut. In fact we would be surprised if apples were sold at static prices all year round, because supply and demand fluctuate all the time. With many goods and services, changes in cost - dynamic pricing - are to be expected, but this has applied less to the hospitality market.

Sure, room rates will go down in slack periods, and skyrocket for national holidays or special events, but for hoteliers it’s something of a lottery in assuring full occupancy, at the best profitability. Clever managers learn to increase Revenue Per Available Room (RevPAR) by ‘reading the market’ and predicting when there will be fluctuations, but it’s been an art rather than a science. Until now.

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Dynamic room pricing models for Hotel Revenue Management Systems

What’s changed is that the all-knowing algorithms of modern life are now entering the hospitality sector, in the form of Hotel Revenue Management System, which when coupled with a smoothly functioning Hotel Management System take the ‘betting’ out of room pricing. How so? - Because rather than merely relying on experience to calculate room rates, a massive dataset can be examined automatically, and in real time responsiveness to changing market conditions.

What are the rates at competitor hotels? On which days is demand high, or low? What special events are occurring around a particular date, like a coronation or a cup final?

By the way, I mention ‘coronation’ because for UK hoteliers situated anywhere near London, the crowning of King Charles on May 6th should offer a bonanza of bookings. But how will hotels fare that are still operating with static pricing around that very high demand period? Will they maximise on their RevPAR, or miss out on a golden opportunity for full bookings? The chances are that they will be left with unoccupied rooms, or occupied rooms at way below the market rate. On the other hand, any hotel operating with a Revenue Management System will be tuned to the going rates, based on demand around the date. All the key factors will be dynamically assessed, allowing competitive pricing, high occupancy, and happy customers.

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Maximising on room price

Customers are happy because they are able to see that a hotel’s pricing is ‘fair’ at times of high demand, in comparison with competitors that are still operating static pricing. It’s worth noting that sometimes guests can be suspicious if prices are apparently too low, so being in-sync with the wider market is beneficial. No hotelier wants their offering to be perceived as ‘cheap’. That said, at times of lower demand, dynamic pricing can create tempting special offer rates that attract guests. From the hotelier’s point of view a Revenue Management System goes a long way to ensuring that a room isn’t unsold, and when a reservation is made, the price is maximised.

There’s also a ‘reverse advantage’ to using a Revenue Management System, since it educates hoteliers in understanding how guests select a hotel: Information on room preferences, duration of stay, and cost are all collated and highly accessible. Knowing your customer is a key element for all hoteliers, so seeing trends as they develop in real time provides valuable feedback that can positively increase the RevPAR.

Hotel dynamic pricing software

So far in this article we’ve introduced two automated system types - the Hotel Management System (also known as a Property Management System, or PMS), and hotel dynamic pricing software, usually referred to as a Revenue Management System (RMS). So do you want an apple, or an orange, or both?

Here’s the good news: the SabeeApp Hotel Management System is now integrated with RoomPriceGenie, an automated, intelligent RMS that ensures every room is sold at the maximum price. Previously SabeeApp’s software enabled dynamic pricing, but it had to be initiated by hotel staff, which was not always done in a timely manner. The new SabeeApp cross-promotion with RoomPriceGenie means that hoteliers are now able to automatically deploy dynamic pricing within their Hotel Management System, tracking changing market dynamics.

Booking patterns are also monitored, and naturally the system is tuned to be ‘aware’ of upcoming high demand periods. RoomPriceGenie works seamlessly with SabeeApp for all types and sizes of accommodation, providing super quick reaction to booking or market changes, with pricing updates 12 times a day. Now that is dynamic, and far more responsive to market fluctuations than even the most diligent manager could ever be.

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The Benefits of dynamic pricing with RoomPriceGenie

RoomPriceGenie reports that hoteliers can increase revenue by up to 22%, ‘charging more when you can, and less when you need to.’ There is also the opportunity to ‘save 10 hours of manual work each week, so that you can focus more on what makes your hotel special.’ 

Now, think about what a system of dynamic pricing can do when coupled with the multiple benefits of an automated Hotel Management System, and it should be clear that SabeeApp and RoomPriceGenie working together is a winning combination. An important point about this software combo is that while it is automated, the hotelier is in control, and is able to adjust all the parameters to define their ‘pricing comfort-zone’. In other words, the system works within your defined minimum and maximum prices, and your defined room types.

Fine-tuning the system for seasonality and day-of-week cycles also ensures that every hotel has a custom solution. Once those key parameters are input, then the power of the algorithms takes flight, tirelessly trawling the massive datasets from competitors, guests, Online Travel Agents, and more.

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Consider using a Revenue Management Tool in your hotel business

The guest experience is now at the heart of all good hotels and is often the differentiator that ensures success. SabeeApp combined with revenue management system like RoomPriceGenie brings happier guests, less admin, and more revenue. Dynamic pricing sharpens the edge, boosting sales when there is low demand and occupancy, and raising prices when there is high demand and high occupancy. Automation of pricing decisions makes for a much faster response to market conditions, and customer demand.

A hotel which doesn’t price dynamically is either underpricing, or charging too much at specific times, and therefore missing out on occupancy. Either scenario can mean dramatically reduced revenue, and according to hotellab, a hotel operating with static pricing is only fulfilling 60-65% of its financial potential. In comparison, dynamic pricing using a Revenue Management System can deliver around 85% of a hotel’s financial potential, with a typical uptick being around 20%. That sounds like a convincing case - especially when two innovative hospitality software companies join forces to bring the best solutions to contemporary hoteliers.

Whether you are a Hotel, Hostel or Vacation Rental you can leverage the benefits of a revenue management tool like RoomPriceGenie, with SabeeApp as your PMS provider you can test RoomPriceGenie now within a special deal, only available for SabeeApp clients.

Start your 4-weeks free trial today!

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