For some years now we have heard a lot about open pricing, a pricing strategy that is based on various factors and can change over time.
Strategy that is chosen by many because it can help a structure to maximize its revenues.
In tourism revenue management, there are two ways we can talk about open pricing: simple open pricing and open pricing between types.
Let’s see them both together.
Open pricing is a pricing strategy that allows you to offer different prices for the same product or service.
But on what is this determination based?
There are many variables to take into account, including the characteristics, the period taken into account, the booking time, etc.
Put simply, with the open pricing strategy we can vary prices according to supply and demand, so as to maximize profits and meet customer needs.
Open pricing is particularly prevalent in the tourism industry, as demand varies greatly depending on the season, local events or other external circumstances.
For example, hotels can offer higher prices during high season periods, but also reduce prices in case of low occupancy or to stimulate early bookings.
Among the various pros that this strategy has, one specific is to be able to maximize the value of the structure, and therefore the revenue for tour operators, thanks to this variability of pricing choice.
Open pricing between types
Open pricing between types is an open pricing variable in which the pricing strategy is based on the different type of accommodation within an accommodation facility.
This strategy implies the possibility of offering different prices according to the characteristics of the various spaces.
Always based on an analysis of supply and demand, we can vary the price according, for example, to size, view, location, furniture, not necessarily linked to the objective value of the same characteristics.
Compared to its “classic” version, the one between types is particularly useful to maximize the revenues of accommodation, since it allows you to differentiate prices according to customer preferences and demand for different types, maximizing adherence to market preferences.
To give a concrete example, a structure that usually offers a higher price for rooms with sea view or for luxury suites, compared to standard rooms or rooms without view, may be in a situation where it is convenient to proceed in a completely opposite way, thus increasing the price of rooms without a view compared to those with a view.
This can happen when higher value rooms are not chosen by the market for a number of reasons (periods in which particularly price-sensitive customers travel, incorrect pricing strategies at the start, reduced reputation on high-value housing or growth on low-value accommodation).
So what is the best strategy for the structure?
That of maximizing revenues by optimizing the occupancy rate of high value rooms, working on the average price of the most chosen at that juncture and reserving, possibly, free upgrades for both the customer and the property itself.
Is this strategy good for anyone?
Although the open pricing strategy is optimal in most cases, we must start from the knowledge that it cannot be applied to each structure.
While, in fact, for accommodation like apartments is a strategy that we can always choose, in the case of structures such as farmhouses and B & B each situation must be evaluated individually based on various factors, which must be weighed well before deciding the pricing strategy.
That’s why we at Full Price are here to help you understand if this strategy is the best for your reality.
But now the word to you: what do you think about open pricing? Have you ever used it? Do you think it’s the right direction for your business?
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And as always… Good Revenue!