Dynamic pricing - the ninth wonder of the world

Albert Einstein is widely credited with coining the phrase: “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”

The jury is still out about whether he actually said this or not, but that doesn’t make the statement any less true. Warren Buffet prefers to call this financial phenomenon The Snowball and has built an empire around its principles. 

Today, we’ll be discussing a financial phenomenon of our own, called Dynamic Pricing. We’d like to think of it as the ninth wonder of the world. 

For the hospitality industry in particular, dynamic pricing strategies offer the best means to automate revenue management. Let’s explore how easy it can be to set up dynamic pricing in your management software and the potential advantages it affords.

The sweet science.

The hospitality industry is no stranger to using trend-driven pricing strategies. However, we believe that there’s a delicate balance between adjusting prices to maximise revenue and creating uncertainty amongst potential customers.

Let’s take hotels as an example. Using real-time market trends, hotels can maximise a room’s potential value by raising prices during periods of high demand. During off-peak periods, this same room would be sold at below its value to limit vacancies. On paper, this makes sense, but we’ve all been there: the frustration of a room’s pricing being inordinately high just a few minutes after you last checked. Here’s where the balance comes in.

Imagine being able to plug into multiple data points all at once, then let a sophisticated analytics tool adjust the pricing for you. For a hotel, these data points could include historical occupancy, current market fluctuations, peaks in season, guest patterns, room types, trends and local events (such as concerts). By digesting each of these data points, the right system could adjust pricing on the fly and ensure room revenues were fairly maximised, ADRs maintained, without price gouging potential customers or negatively impacting the brand.

How we approach dynamic pricing at Nexudus. 

Demand prediction

One of AI’s strongest suits is looking for patterns, crunching numbers and building a cohesive understanding of the future. Our native AI tools, built into the dashboard, allow users to predict how busy a particular resource will be at any given time.

A sophisticated AI model crunches the numbers of bookings made in the last year, extracts fresh data from the last four weeks and takes into account each room’s differing properties, the locations they’re in, as well as how holidays impact usage. 

The result is an ideal balance between fair pricing and revenue maximisation.

Demand prediction in action

Last minute requests

We’re big proponents of using trends to define pricing. On the Nexudus platform, users can automatically adjust booking rates based on forecasts automatically gathered from usage. These can further be supplemented with custom data points to provide a more comprehensive picture of pricing possibilities. Here’s a preview of how we allow users to define custom percentages during periods of high demand, average demand and low demand.

Gradual dynamic pricing on the Nexudus platform

For example, you can increase booking rates by up to a third (33%), when customers book resources last minute - this percentage could increase based on the number of hours notice provided before booking. In cases of extra high demand, those looking to book one hour before could see a rate increase of 25%, with those looking to book 10 minutes before receiving the full 33% increment. 

Capacity-based pricing

Only a few rooms remaining? Only a few minutes left to book a room? Now we’re talking.

Users can jump into the Nexudus platform and define their own parameters for ‘full capacity’ for any given space. When a popular area, room or resource runs low on the bookable time you’ve assigned it per day, it will kick into dynamic pricing mode without you having to lift a finger. 

Sure, we assign you a suitable limit to begin with, but where’s the joy without a healthy level of customisation built in? Users can set values to each stage of capacity for the room - eg, a different price at 50%, a new one at 25% and another at 10% to make the best possible use of capacity limitations.

Users can set their own preferred limits for capacity-based pricing

The ninth wonder, without the worry.

We believe that any dynamic pricing strategy has to be informed by more than just an opportunity to increase revenue. We understand that this is not always possible, especially if a hospitality organisation faces the technological barriers of integrating multiple systems together in order to maintain a healthy pricing balance.

Using an analytics-driven system like Nexudus ensures that all the data points for your space live alongside your operations dashboard, so your pricing is always informed by real-time data from your workspace trends. Book a demo with us today to learn more.