Dynamic Pricing in your B&B
Dynamic Pricing
….you may not know the term, but I bet you have been subject to it somewhere.
In it’s crudest form, it’s the massive price hike you see in holiday accommodation when the school holidays start.
In its’ more subtle form, you’ve probably seen it when trying to book flights…£50 on one day, £300 on another for the same flight..it’s all down to ‘Supply & Demand’ and historically in the accommodation industry your room rate would only alter from summer to winter, but these days it is becoming more and more the practice to review it more often.
There is software out there that will do this on a minute by minute basis, but before you think of taking on a new piece of kit, it’s always recommended to get a feel for it yourself by doing it yourself for a short while first.
You may find that you doing it works out fine for you, if you only have a few rooms, but it’s good to have a basis of knowledge before you start getting any automatic software involved.
Your Dynamic Pricing Strategy
So, here’s some steps to follow:
1.Determine the demand for room nights
The first step in implementing dynamic pricing is to understand the demand for room nights. You should look at your historical sales data from the past year to gain an understanding of the peak and off–peak periods. This will give you a better sense of when to apply the dynamic pricing model.
2. Research the Competition:
You should conduct research to understand the market rate for a room night in your area. This will be important to ensure that the dynamic pricing model will be competitive with other B&Bs in the area, but still maximize profits.
3. Set Up a Pricing Model:
Once you understand the demand pattern and the market rate for a room night, you can set up a pricing model. This will involve deciding how much of a discount or premium to charge depending on the time of year, the day of the week, the occupancy rate, etc. The pricing model should be flexible enough to allow you to adjust the prices as needed, and you should end up with the Minimum price you would be prepared to sell a room for and the Maximum that you would expect for that room.
4. Introduce the Dynamic Pricing Model:
Once the pricing model is set up, you should review your existing dates and identify any dates where demand is already high and apply the higher rate to those room nights. If demand is low, then apply the minimum price to generate sales(should you wish), the aim being, that you will sell some rooms, create a scarcity which will then allow you to charge the higher price on the remaining rooms.
5.Review your bookings
You’ll then review your bookings, I’d say minimum weekly, to highlight where changes may need to be made and then alter prices accordingly. As a new booking comes in, you can review the surrounding dates, to see if a price amendment needs to be made.
It can be as time consuming as you want it to be….I found once I had done it for a few weeks, I was able to review quickly as I knew my bookings so well(I had one b&b with 4 rooms and a 2 bed self catering to manage).
If you have a few properties, this will be more time consuming, but you could even do it just once per month.
It’s the same as anything, doing your socials as an example, the more effort you put in, the better results you will achieve.
The ultimate aim of the game is that you end up with a higher Revenue per available room(RevPar), over a time period, compared to if you had left room rates at a static.
If you need help with this just drop me a line- info@fieldslodge.co.uk
