Demand-based Pricing for Hotel

Demand-based pricing is a pricing strategy, in which rates depend on market demand. Basically, many hotels alter their rates based on demand to maximize their earnings. For example, when there is an event in a city, there is a surplus of demand for rooms, which leads to an increase in hotel prices in that city.

Demand-based Pricing has many different forms, but they are all characterized by how they capitalize on consumer demand. These might differ depending on several aspects, such as a company’s commercial objectives, position in the market, clientele, and service quality. These forms include but are not limited to IP-based Pricing, Yield Management, and Price Skimming.

IP-based Pricing

IP-based Pricing Strategy means that hotels apply different rates for different regions. It is smart to utilize a Demand-based Pricing Strategy while using IP-based pricing. This means analyzing the demand of a specific region to be able to decide on that region’s pricing accordingly. Countries use different currencies. Thus, potential guests have different levels of purchasing power. That’s why their willingness to pay is higher in comparison to those countries with less valuable currencies. This implies that you may apply high rates for regions with high demand and high purchasing power to maximize your profit. IP-based pricing enables hotels to charge higher rates for the same room if a guest is from a region with significant purchasing power.

Yield Management

Yield Management is based on the supply and demand theory, which allows hoteliers to set pricing based on demand. For example, if a customer searches for the earliest dates available for reservations, the price for those days will be greater than the price for a later date. Hoteliers can increase their profits by increasing the price for those soon-coming dates, as the demand is higher for those dates.

Price Skimming

Price Skimming indicates applying high rates right after opening a new hotel to convince guests that you provide service of high value, and then lowering rates step by step according to the demand. It may be utilized in a way that you apply high rates according to the demand for more luxurious hotels in your region in the beginning. This would affect your hotel’s market positioning in a positive way. It helps you build your hotel’s reputation. Then, you may lower your rates gradually regarding the demand for your hotel and hotels of your segment in your region. Thus, you may attract a larger market segment.

Demand-based pricing enables hotels to make the most of travel demands. Thus, it maximizes hotel revenue. Demand-based pricing also keeps you ahead of your competitors if you implement your strategy properly and are aware of your competitors’ pricing levels. The hotelier can attract more guests by offering unique demand-based pricing levels in comparison to other hotels in that area.

On the other hand, Demand-based Pricing requires extensive research Finding the best approach to use with visitors and ensuring that you maximize your profits from that strategy and service is extremely difficult to research and determine, even though you must test your ideas and strategy before using. Additionally, demand might be unpredictable and difficult to forecast. There is no assurance that demand will behave as you anticipate it to despite the fact that your approach is supported by significant market research.

We, as BookLogic, provide the best tools for Demand-based Pricing. They have been used by many hotels and enhanced by our technical team upon their needs. Hotels can utilize this demand-based pricing strategy across many online channels in just a few clicks via BookLogic’s travel technology solutions. If you want to maximize your revenue, connect with BookLogic today!