Pricing in the hospitality industry is more complicated than in any other industry. It seems like retail/ecommerce is always portrayed as the industry with the most competitive pricing, but hospitality has retail beat. In ecommerce, the main variables affecting prices are competitor prices and profit margin. But in hospitality, there is much more to take into account in addition to competitor prices and profit.
What is pricing based on in the hospitality industry?
Pricing in the hospitality industry is based on availability, the amount of time before the booking date, the level of demand (which fluctuates regularly), as well as competitor prices and profit. This pricing strategy applies to airlines, hotels, vacation rentals, car rentals, and all other varieties of hospitality companies. The thing that makes this industry different is that consumers expect this type of pricing model. They know that the sooner they book their trip the better, because prices go up as time passes and as availability becomes more scarce. So, the challenge is, how can hospitality companies manage this complex pricing model most effectively? Keep reading to get the answer to that question.
What are some of the different pricing strategies?
Hospitality companies have a few choices for how they want to structure their pricing model. Here are a few of the possibilities:
Most pricing models in hospitality involve a price increase as availability goes down. However, the weight that a company gives this variable can differentiate them from their competition. For example, a hotel or airline that charges the same price for the first booking as they do for the last available room or seat might get more business if that appeals to consumers. The value hospitality companies give to availability is a choice they must make when building out their pricing model.
Discounts for booking in advance
Similar to availability, most hotels, airlines, and vacation rentals offer lower prices further away from the booking date. So if consumers book their trip months in advance they will pay a lower price than if they book last minute. But again, the weight this holds in the resulting price can vary from pricing model to pricing model. Each company has to decide to what degree they want their prices to change based on the time remaining before the booking date.
Every data-driven company uses competitive data as a foundation for business decisions, but what that means to each company is different. Some hotels may analyze competitor prices, but not change their prices in response, while others may want their prices to always stay a certain amount above or below their competitors. The difficulty with this aspect of the pricing model is that it requires external data. It can be difficult to acquire accurate and up-to-date data on all of your competitors. That’s where dynamic pricing comes in.
What is dynamic pricing?
Dynamic pricing makes building and implementing an ever-changing pricing model easier. A dynamic pricing software extracts the data needed to implement the pricing model and actively updates the prices listed online. This allows companies to set the rules they choose for their pricing model and then let go, letting the dynamic pricing system handle the rest.
What information sources are needed for dynamic pricing?
In order for dynamic pricing to work, the software has to pull data from multiple sources. These include competitors’ prices from each of their websites, availability info from your internal enterprise data, and more. It can be challenging to acquire all of the necessary data accurately from internal and external sources. When data is aggregated from multiple sources it often becomes inaccurate and unreliable. This is especially true if you are using a traditional web scraper to extract competitors’ prices from the web. Hand-coded web scrapers leave room for human error such as missed parameters that result in missing data or including irrelevant data.
How to leverage web data for dynamic pricing
Import.io understands the challenges associated with implementing a dynamic pricing model in the hospitality industry. That’s why we created Web Data Integration. WDI allows vacation rentals, car rentals, travel data providers, and other online travel agencies to easily implement dynamic pricing. Web Data Integration is the most accurate and reliable way to get data from the web. With built-in quality control, you can be sure that the data is consistent and accurate every time. Not only is WDI more reliable, but it also extracts data much faster than traditional web scrapers. Web Data Integration will pull the data needed for your dynamic pricing strategy continuously and implement the dynamic prices in real time.
If you’re ready to learn more about how Import.io can help you implement dynamic pricing, contact one of our data experts today.