Dynamic Pricing

1
Dynamic Pricing????

• Wendy Huang
• Regional Director, Revenue Management, Greater
  China
• Starwood Asia Pacific Hotels Resorts

2
Deloitte Report????
3
What is Dynamic Pricing????????

• Dynamic pricing is offering variable rates for
  rooms, instead of fixed rates, that change based
  on market conditions. The strength of customer
  demand, the quality of the products, the
  availability of alternative products and
  services, the time of day, the day of week, and
  the season of the year are all critical factors
  in determining price.
• ?????????????????????,???????????????????,?????,?
  ?????????,???,???,????????????

4
Characteristics of Fixed and Dynamic
Rates????????????

• Fixed Rates ????
• Static and do not fluctuate based on demand
• ????????????
• Contracted based on volume expectations
• ???????????
• Reviewed / re-negotiated based on actual
  production
• ??????????
• Availability maybe restricted due to rates
  contracted on some room types only or due to RM
  restrictions based on hurdle pricing
• ????????????????.
• Limited flexibility to optimize demand / price
• ?????/?????????

• Dynamic Rates????
• Market Rates
• ????
• Fluctuate based on
• ??????????????
• Demand / Supply conditions
• ??/?????
• Seasonality
• ???
• Day of Week
• ???
• Competitor Pricing
• ???????
• Available at most points in time
• ??????????

5
??????????
6
??????????
7

• Common Misconception
• ??????
• Bigger is better ! Or we give you so much
  business.
• ????,??????????????

8
Its not all about rate and/or volumeits about
overall revenue/profit to the hotel ????????????

• How far in advance do you book? (Booking Pace)
• ?????????
• Are your bookings predominantly on the busiest
  nights for the hotel? (DOW Distribution)
• ????????????????
• On an average what is the length of stay of the
  bookings you make (LOS)
• ???????????
• Which are the months you book the most
  (Seasonality)
• ?????????????
• Which are the room categories that you
  predominantly book (Room Type)
• ????????????

9

• What channels do you book (Channel Distribution)
• ????????????
• Do you cancel or no-show (Wash Factor)
• ??????????NO-SHOW
• What additional revenue you bring to the hotel?
• Meeting packages ????
• Banquets??
• In-house dining?????
• Laundry???
• HSIA????

10
Hotels are also interested in??????????

• Business to Hotel Company
• ??????????
• Performance guarantee, what share of business do
  we get?
• ????

11
Earlier Forms of Hotel Dynamic Pricing???????????
?
12
Dynamic Pricing Current Trend?????????

• Seasonal Pricing ????
• Two contracted rates ??????
• Giving you the best deal in each
  season????????????
• No overpaying in low seasons???????
• Complete Dynamic Pricing ??????
• TMC/Consortia
• Corporate rates (Global, Regional, Local)?????
• Packaging???

13
Packaging Dynamic Pricing Example????????
14
Sample Rate Structure ???????
15
How do hotels manage rates now????????? Rate
Buckets / Rate Categories????
16
Advantages of Dynamic Pricing???????

• Corporate??
• Price integrity and consistent saving????????????
• Availability of a wider range of room types
  ?????????????
• Reduced reliance on LRA for guaranteed product
  availability???LRA???
• Reduce workload involved in the RFP
  process??RFP???????
• Ability to have access to a larger number of
  hotels than traditional fixed price
  contracting????????
• Hotel??
• Reduce workload involved in the RFP
  process??RFP???????
• Ability to flex prices in markets with high
  demand uncertainty, so as to optimize
  revenues.???????????????????????

17
Disadvantages of Dynamic Pricing???????

• Corporate??
• Difficulty in budgeting and allocating
  accommodation expenditure
• ????????????
• Difficulty in estimating savings with fluctuating
  rates
• ???????????
• Hotel??
• Price war and eroding profit margin in a very
  competitive environment
• ??????????????????
• Threat of losing business base due to shared
  demand
• ?????????????????

18
Thank You!