1. Dynamic pricing for accommodation - what is it?

One of the ongoing "trends" in short-term rental pricing is "dynamic pricing".

The principle of dynamic prices is that the price is not set by the operator of the accommodation facility, but is calculated by the algorithm of a commercial company based on current demand, competitive prices in the area and other factors.

This is how the software changes the price calendar every day.

2. Do I need dynamic pricing?

The system of dynamic prices probably originated in retail and e-shops selling interchangeable goods.

If, as a shopper, you choose an e-shop in which you buy a standard model of a standard brand of the same goods offered by 500 e-shops, then in addition to credibility, e-shop rating and delivery speed, price will be a very important factor for you.


In the area of ​​accommodation, however, the principle of selection is completely different. As a guest of an accommodation facility, in addition to references, you mainly choose the location, capacity, layout and layout of the accommodation unit and beds, the necessary equipment of rooms, kitchens, bathrooms, proximity to attractive points of your interests, shopping opportunities, transport options in the area, interior design. Price is also an important factor for many guests, but its fluctuations in the order of percentages have minimal influence on decision-making. They will have a hard time getting a fisherman looking for proximity to a dam to rent a luxury penthouse next to a shopping mall, even if he drops the price by 20%.


The interchangeability of accommodation can play a role if there are 2 competing hotels standing next to each other on the same street with the same concept, the same range of rooms and the same quality of service. In that case, you don't need software to calculate the price, but you just need to occasionally look at the price list of a competing hotel.


Therefore, you almost certainly do not need dynamic prices for your accommodation.

3. Technical complications of dynamic pricing for accommodation facilities

The concept of dynamic e-shop prices is also extremely difficult to use for accommodation facilities.


1 e-shop item has 1 price. If we change 1 price per day, it is technically not a major problem.

But 1 accommodation unit usually has several thousand different prices at the same time.

If we price 18 months in advance, that's 540 different daily pricing calendar entries for 1 unit.

Then we can have prices for a different number of guests in a room, discounts for longer stays, prices for a non-refundable rate and so on.


In the case of dynamic pricing, you must change thousands of different prices daily (the entire future price calendar) for 1 accommodation unit. And you must post these changes daily to all connected systems.

4. Are dynamic prices for accommodation worth it?

Will your sales increase?

Hard to say. Fluctuations in your prices will mean that sometimes you sell the same room for a slightly higher price, sometimes a bit cheaper. As a result, your sales will probably be more or less the same as if you didn't use dynamic pricing. But let's be optimistic and believe that sales will be a few percent higher.


Will your costs increase?

In any case. You pay a hefty fee to use dynamic pricing software, say $150 per month for a guest house. But that won't be your biggest expense.

If you want to integrate such a tool, you will incur integration costs. And we already know from point 3 that they will be extremely high due to the nature of accommodation facility pricing.


Let's compare the costs with a standard Channel manager

The standard Channel manager carries out a complete revaluation of the accommodation facility at the beginning when the system is established, and then on average 1-2 times a year.

The channel manager for the dynamic pricing software will perform a daily import from the dynamic pricing software for each accommodation unit, e.g. a room, i.e. an internal change of 540 future price list entries and daily exports of prices to all connected catalogs (i.e. 365 times a year complete price calendar revaluation).

The costs of operating such a system will therefore be approximately 180x greater, and all of this times the number of catalogs connected by the Channel manager.


Your PMS system will have to update daily for 1 room at least 540 internal records and perform daily at least 540 API exports for price changes times the number of systems connected by the Channel manager (i.e. for 3 catalogs = 1620 API exports one room per day). For simplicity, we do not consider the possibility of multiple price categories at all - in such cases, they would be multiples of this number.


So if the costs of operating 1 unit in the classic Channel manager will be, for example, $1.7 per month, when connecting 3 catalogs, then a total of CZK $5.1per month.

Comparable costs for dynamic pricing software will then be 180x higher × the number of catalogs, i.e. 180 × $1.7 × 3 catalogs = $918 per month for 1 unit (e.g. room).


As a result:

  • expected sales are likely to be the same
  • but the costs of running dynamic can easily exceed the revenue of the accommodation unit outside the high season.

So, in our opinion, this is a prime example of an extremely inefficient system with minimal benefit and astronomical operating costs.

5. What about catalogs?

Catalogs will certainly not be happy about overloading their API systems by daily revaluation of the entire price list.

API catalog systems are not built for daily revaluation of millions of redundant requests.

And using dynamic pricing software increases the load on all participating servers to at least a thousand times the standard load.

If only a fraction of a percent of operators in catalogs like Booking used dynamic pricing systems, it would cause their servers to crash.

Catalogs have full control over the frequency of use of API requests by each partner and have set limits on their use.

When the limits are exceeded, the partner is automatically temporarily disconnected, and in case of repeated violations, they have the contractual option to permanently close the account of the partner who abuses their API.

6. The future of dynamic prices in short-term accommodation

Of course, we cannot predict the future.

But we can guess.

One possibility is that catalogs include their internal dynamic pricing tools.

Operators who either want to feel that their price list is "high-tech" or want to try "gambling" with their accommodation price list will be able to set minimum and maximum price limits and leave it on the catalog to adjust according to current demand tried to dynamically reduce and increase the price within the allowed limit.

The operator is also unlikely to gain significantly more revenue, but neither will his costs increase.

The whole business of forwarding millions of unnecessary API requests between servers back and forth every day will just disappear.

An example of such a development is the new Smart Pricing tool from Airbnb