Dynamic pricing is a concept that has been recently adopted by several hotel chains including Hilton, Marriot, and InterContinental. Instead of having fixed and inflexible room rates, hotels that use dynamic pricing systems change their daily rates according to anticipated demand.
Does this sound like a strange concept? When was the last time you purchased a car? Car dealers routinely sell an identical make and model to different customers for wildly varying prices depending upon the customer’s negotation skills and his or her knowledge of the car market.
Credit card companies often charge higher rates to customers with poor credit histories.
Insurance companies charge safe drivers with excellent records lower premiums than “at-risk” drivers who have been repeatedly ticketed for speeding.
In the bed and breakfast industry, some B&B’s have used elements of this system by introducing seasonal rates as well as weekday and weekend rates. These rates tend to be higher at the height of the busy season, especially on weekends. They tend to be lower during the off-season, especially on weekdays.
Innkeepers who are willing to “make a deal,” knowing that they have several vacancies are certainly engaged in dynamic pricing.
Dynamic pricing is not a new concept. It goes back to the days when customers haggled with street vendors or the owners of market stalls over the price of their wares. On days when business was brisk, the wares were more expensive. On days when business was slow, the wares were offered for lower prices.
The art of haggling is still seen in many parts of the world including Africa, southeast Asia, and the Middle East.