Question for Our Revenue Management Expert Panel:

Are Revenue Managers updating prices too frequently or not often enough? Both pose risks, especially for last minute sales. When is the best time to update prices? (Question proposed by Nikhil Roy) 

Industry Expert Panel

Our Industry Expert Panel exists out of professionals within the hospitality & travel Industry. They have comprehensive and detailed knowledge, experience in practice or management and are forward-thinking. They are answering questions about the state of the industry. They share their insights on topics like revenue management, marketing, operations, technology and discuss the latest trends.

Tanya Hadwick
Tanya HadwickGroup Revenue & Yield Leader, SunSwept Resorts

“I think this really depends on the market and the business mix; are you in a heavily dynamic market or a fairly static seasonal market? With a lot of the RMS, the algorithms are designed to take all the relevant data into consideration prior to updating pricing with the aim of maximising the revenue. When demand is strong and you are in a position to update pricing, assess the data when people are typically shopping and booking, understand the customer behaviour and adapt the pricing around these factors.

It also comes down to the forecast and potential peaks/troughs in the business; have you suddenly seen a decline in demand for a week that was anticipated to be busy? What could the potential reasons for this be? Do you price lead or follow in the market? In reality, the best times to price update are when you see an opportunity to maximise the revenue, whether that is dropping to secure incremental occupancy or increasing to maximise the ADR, all with the aim of exceeding the targets.”

Chaya Kowal
Chaya KowalDirector of Revenue Management, Potato Head Family

“I would say that this depends on various factors and there is no “one fits all” approach to this. Some elements to consider here are: type of hotel, lead time, demand, how the consumer reacts to your changes in pricing (analysis and past data), etc. For a city hotel during a high demand period for example, you can change rates several times a day and you will see a great pickup. Try doing the same for a resort where people book at least 3 months in advance, and it won’t really make sense!

Being on top of current happenings in the area where the hotel is located is another important aspect. For example, there might be a big event in a nearby area and the hotels get sold out. So the demand will shift to your area for example. It also depends on how you are managing your inventory for last minute sales and LRA for example.

I would not say that there is an “ideal time” for price updates. It is also important to know your guest behaviors like day of the week, time of the day, conversion, search traffic etc., and this will help a Revenue Manager to adopt the correct strategy for the type of hotel that they are managing.
There is definitely the risk of revenue loss, but I would say that calculated risks are also part of effective revenue management.”

Krunal Shah
Krunal ShahCluster Director of Revenue, Dorsett Hospitality International

“Depending on the requirement of the property and the location they are in, price changes become an integral part of a Revenue Manager’s role. If the property has a lot of competitors around their area, frequent pricing updates happen due to the continuous live rate shop of comp sets. In some countryside hotels/resorts, prices are changed not too frequently.

I would rather disagree with the risk of losing revenue for last-minute sales. Primarily RM’s have to construct base occupancy for future months in order to gain incremental rates on last-minute sales. Comp Sets normally follow or benchmark certain top-performing properties. They don’t check if their pricing is relevant to the amount of occupancy they have On The Books. This leads to some properties performing above their fair share and some performing lower than their fair share.

Rate Changes or pricing updates need to be done after the daily pick up report is released every morning. This is the best time for any price changes as it gives you the opportunity during the day to monitor the bookings coming in or even wash.”

Theresa Prins
Theresa PrinsFounder, Revenue Resolutions

“The demand and pace of your property will determine the frequency at which you update rates. It is important to wait enough time for demand to move or remain stagnant before you change the pricing strategy to a new level, but also wait enough time for demand to get traction at a specific price point. Your on-the-book demand will also determine the frequency.

If you are running a last-minute deal and it is selling well but you have 60% on the books, you might want to wait before you start increasing this until you have at least 80% on the books (as an example), but if you have a last-minute sale and it is topping up the last 20% of your capacity, you may want to stay on top of this price point and amend it more often. In my normal daily tactical tasks for a busy CBD property, I will review rates not more than 3 times a day.”

Daniel Feitosa
Daniel FeitosaRevenue Management Specialist

“It ultimately depends on what tools the RM has access to. When done manually, I know that we can’t do it properly; the RM is always in doubt if it could be better and be questioned about that.

That’s why I believe it is a matter of test and result analysis, which can be done in the right way with an RMS or very efficient tools where you can apply different strategies, compare results and understand gains and losses.

Last-minute sales are also a very good point and can be very tricky. That’s why I recommend that RMs can propose a meaningful test strategy aligned with the decision-makers of the hotel. Hotels need to have a strategy that makes sense for this.”

Silvia Cantarella
Silvia CantarellaRevenue Management Consultant, Revenue Acrobats

“I don’t believe that too many or too few price changes is something we can judge on. I believe in what makes sense based on the demand conditions, trends and forecasts. During the pandemic, some suggested that it would be “wise” to keep the price stable in order not to confuse the customer. I think this is a false myth – of course in low demand you probably might not need to change prices every day, but still, as the demand is volatile, you need to be prompt and flexible in your pricing.

I also think there are not any best timings to update your rates, or there might be if you are overdependent in one market that has a different time zone but that is a really borderline thing. I remember in the 2008 crisis with the US market, some hotels dropped the pricing right before the US started to book (based on their time zone). But again this was 2008 and right now we can hopefully leverage advanced RMS systems that adapt in real-time based on demand, let’s just leverage that.”

Heidi Gempel
Heidi GempelFounder, HGE International Pte Ltd

“Rates should be changed according to demand. The deeper the understanding of the revenue manager on demand and pace patterns, the better he/she will be able to set their strategy. This should also take into consideration the operational implications (system changes and other guest-facing teams)

Hotels with a lot of last-minute demand should consider front office upselling strategies, room type availability when building the pricing strategy for the day as well as reviewing the hourly demand throughout the day. Routine rate strategy checks should be done 2 to 3 times during high demand days and more often if unusual activity is noticed.”

Edyta Walczak
Edyta WalczakRevenue Management Expert

“Hotel pricing is determined by a combination of many factors like location, season, reputation and facilities but also some very dynamic factors like newly announced events or even weather.

There is no perfect recipe as to when and how other rates should be changed, as it often depends on the property’s business mix and the market it operates in. For instance, an airport hotel may need to look at their pricing several times throughout the day, given there is strong last-minute demand driven by flights delays and cancellations (due to the bad weather for example).

Business district hotels often rely on static corporate contracts and allocation, so sudden changes in demand might be less likely. Hotels located close to event venues and convention centres are prone to sudden spikes in demand when an event gets announced or tickets for a concert go on sale. Dynamic pricing involves regular daily checks and pick-up analysis, to assure rates are updated allowing the hotel to maximise the rate opportunity.”