October 02, 2014

Dynamic hotel pricing - has its time come?


Dynamic pricing in hotels for corporate traveler managers continues to be a well-received cost-saving measure, according to a new study by the GBTA Foundation. The study surveyed nearly 200 travel managers to understand why current adopters use the dynamic pricing model for lodging and why it has been slow to catch on with others.

Nearly one-quarter (22 percent) of the respondents have “adopted” the dynamic pricing model and are currently using it with at least one hotel company. All current adopters noted they were likely to continue using dynamic pricing agreements and are generally satisfied with the service. In fact, two-thirds of the respondents indicated they are likely to enter into a new dynamic pricing agreement with at least one additional hotel in 2015. The majority of adopters reported it is the only discount available at hotels for travel managers who book a lower volume of rooms.

“Dynamic pricing can allow corporate travelers to obtain a discount on rooms, particularly in a market where companies do not have sufficient volume to negotiate a set rate,” said Joseph Bates, GBTA Foundation Vice President of Research. “Our research finds, however, more education is needed to counter confusion and misconceptions about the dynamic pricing model.”

The benefits of dynamic pricing, as described by travel managers using the pricing structure, include:

- Cost savings (indicated by 47 percent of adopters)
- Access to more types of rooms (33 percent)
- Transparency of rates (25 percent)

The study found there is room for education, particularly among travel managers from companies with a hotel spend of less than $5 million annually and low volume need. Travel managers with these companies represent an untapped market, as they stand to benefit the most from the dynamic pricing structure, yet are the least likely to have heard of dynamic pricing. For companies that typically would not qualify for a corporate discount, dynamic pricing is an effective cost-saving tool.

According to the report, the majority of non-adopters who have been offered dynamic pricing said that concerns about confusion, price fluctuation and uncertainty prevented them from adopting dynamic pricing. The research indicates that effective communication would provide managers with increased clarity about dynamic pricing that could be converted into higher adoption rates.

The GBTA Foundation will also hold a webinar, Dynamic Hotel Pricing - Has Its Time Come?, on October 2 at 2 p.m. ET. Click here to register