Dynamic pricing means changing the nightly price of the same villa or room according to the season, the day of the week, demand and the time left before the stay. The goal is not to sell every night at the highest price, but at its true value.
The hidden cost of a fixed price
It is easy to prepare a price list at the start of the season and leave it unchanged all year, but it loses money in two directions. On dates when demand is high, the villa or room goes for less than it is worth. On dates when demand is low, the price stays too high and the night remains empty. Dynamic pricing aims to reduce both losses together.
Which data sets the price?
- Season and holiday calendar. School holidays, public holidays and the summer months raise demand noticeably.
- Day of the week. Stays that start on a weekend and stays that start midweek may not carry the same value.
- Time left before the stay. Early bookings and last-minute demand behave differently. Adjusting the price gradually for upcoming empty dates is usually healthier than waiting until the last day and giving a big discount.
- The market. Prices and occupancy of similar villas and hotels in the same area. You position your price against them; you do not copy them.
- Last season’s data. Which weeks filled, at what price and how far in advance?
- Your own listing’s performance. If it gets many views but few bookings, the problem is the price or the listing content.
- Room type (hotels). Each room type has its own demand.
Villa versus hotel
In a villa you sell a single unit, so the price reflects the value of that villa. In a hotel, each room type has different demand; a sea-view room and a standard room do not fill at the same pace. That is why hotels manage price separately by room type (see occupancy and rate balance in a small hotel).
Minimum stay is part of the price too
Short gaps between two bookings often stay unsold. Instead of trying to fill these gaps with discounts, relaxing the minimum-night rule or arranging the calendar to reduce gaps protects revenue.
Price also affects visibility
According to industry sources that relay Booking.com’s partner help pages, price competitiveness against similar listings is among the factors that influence ranking. A wrong price therefore affects not only that booking but also the listing’s place in search results. We cover this in our Booking.com visibility article.
Five common mistakes
- Showing different prices on different channels. This is unavoidable if price and calendar are not managed from one place (channel manager).
- Chasing occupancy and cutting the price all the time. Occupancy and revenue are not the same thing (ADR and RevPAR).
- Following a competitor’s price blindly. Their location, listing and reviews may differ from yours.
- Thinking about cancellation terms separately from price. For many guests a flexible policy matters as much as the price.
- Selling very cheaply at the start of the season without thinking about the end of it.
By hand or with a tool?
Managing the price of a single villa or a small hotel by hand is possible, as long as you review the calendar every week. With more than one villa, hotel or channel, pricing tools that provide market data speed things up. But a tool produces suggestions; it does not make decisions. Someone who knows the region, the property’s location and the guest profile should approve the price. A price left entirely to an algorithm also causes problems.
Where to start?
First export last season’s bookings by date, channel, room type and price. Seeing which weeks filled early shows you the periods in which you can raise the price. Seeing which weeks stayed empty tells you what needs fixing besides price (listing, calendar, minimum nights).