Which pricing strategy should you use?

• Option A: Manually set your rate and leave it.
• Option B: Use a dynamic pricing tool to adjust your rates automatically based on the market.

Now, this is a bit of a trick question because the right answer I'm looking for is…

You should be working towards a Custom Revenue Management System.

Why?

If you manually set your rate, you’d better hope you can time the market right. Otherwise, you’ll probably end up:

• Pricing too low and maxing occupancy (with a lower ADR)
• Pricing too high and having excess capacity (with lower overall revenue)

And the problem with just using a dynamic pricing tool is that it sets your rate based on what the average property in your market is doing.

So the “best” it can do is help you be more average.

But with a Custom Revenue Management System, you charge what your property is actually worth on every single date.

Now, this isn't something that happens overnight.

Full disclosure, it took me a couple of years, so it’s totally fine if you’re not there yet. But I wanted to show you why you should start moving in this direction sooner rather than later.

For example, after I took the time to build a Demand Engine (with custom pricing) for my 2 Onera properties, here’s how they’re both doing right now:

• Direct Booking (%): Wimberley is currently at 84% and Fredericksburg is at 82%
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• Average Daily Rate (ADR): Wimberley at $514 and Fredericksburg at $470
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• Monthly Direct Revenue: Wimberley is generating $285K per month and Fredericksburg is $255K per month (on average)

Along the way, I've learned there are 3 levels of pricing.

Level 1: You set your rates yourself.

This is where many operators start.

You pick a nightly rate, add a bump for weekends and peak season, and adjust it whenever you remember to.

What's nice about this is it's very simple, and you have complete control.

But because it’s all on you to adjust your rates, you often end up underpriced on your busiest dates and overpriced on your slowest ones.

If you're here, you should see a noticeable improvement in your revenue and occupancy by moving to the next level here:

Level 2: A dynamic pricing tool sets them for you.

This is where most operators I talk to stop.

In case you’re not already familiar, a dynamic pricing tool adjusts your rates every day based on market data.

One of the first things we help operators with is setting their dynamic pricing tool up with best practices and settings (even if they haven’t used one before).

For example, here’s what a fishing resort had to say after this initial setup:

Now, as they implied, this is just a starting point.

A downside to dynamic pricing tools (like PriceLabs, Duetto, Diamo, etc.) is they base their recommendations off the average in your market.

Even worse, the tool can't see the demand you create yourself.

When your content starts filling your calendar, the tool reads that booking pace as "normal," and can leave your rates sitting right where they were on your best dates.

A good tool gets you to average, but it won't get you past it.

Level 3: You build a Custom Revenue Management System.

It’s not:

• Airbnb Smart Pricing
• PriceLabs on autopilot
• Or any other smart-pricing tool

These tools can certainly have a place in your setup (again, we use PriceLabs every week).

But a Custom Revenue Management System is built using:

• Your guest profile
• Your booking history
• Your market position
• Your own competitor set
• The pricing floors you set

The result is a system that actually knows your property and reacts to your property's patterns.

Which is how this 5-house mountain vacation rental was able to increase their ADR by 20% in July - about 1 month after joining our Modern Hospitality Accelerator:

(They even got comfortable turning down 2 requests that were asking for a discount because they’re more confident in their higher pricing.)

And for the next 12 months, you can have my team of experts advising your business as well.

This way, you can:

• Get your dynamic pricing tool set up with the same best-practice settings we use
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• Build your own Custom Revenue Management System, with our revenue team reviewing your rates as you go
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• Create content that fills your calendar with direct bookings, with feedback from our content advisors
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• Get answers anytime in your own private Slack channel (plus 2 live sessions every week)
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• Bring your whole team in, so they learn what "good" looks like too

So if you're ready to increase your ADR and revenue, let's start building your Custom Revenue Management System inside the Modern Hospitality Accelerator.

​Click here to book a call and see if the Modern Hospitality Accelerator is the right fit for your property.​

Talk soon,

Ben Wolff

Founder, Oasi & Modern Hospitality Accelerator

PS… "But Ben, what if I'm not a numbers person? Custom pricing sounds way over my head."

Most of our Modern Hospitality Operators were not expert data analysts when we started working with them.

Many have become a lot more comfortable with custom pricing strategy. But also, some still prefer to lean on us as much as possible when it comes to that.

We built our Modern Hospitality Accelerator so operators (like yourself) can scale their business without having to become an expert in every single area.

Instead, we’ll give you the answers and best practices we’re using right now.

​Click here to book a call and see how we'd help you build your Custom Revenue Management System (even if you hate spreadsheets).​