Room Pricing: Using Relevant Data and Machine Learning for Precise Pricing

By Gino Engels Co-Founder, OTA Insight | November 04, 2018

Emerging technology is always a hot topic. It's gone from Big Data to data science, artificial intelligence, machine learning, predictive analytics, and most recently, blockchain. Keeping up with these technologies is never easy, especially for the hotelier focused on running a strong, profitable operation with a memorable guest experience.

As a third-party partner to the industry, we pride ourselves on being shepherds across this emerging technology landscape. There are new channels emerging regularly, such as alternative accommodations and niche booking engines; hoteliers are bombarded with new places to distribute their content.

And with each new channel comes an additional burden: ensuring parity and competitiveness of room pricing across channels.

For us at OTA Insight, we believe that Big Data is an overused-but-descriptive term that has helped us all understand the latent value within large datasets. The evolution of machine learning, which empowers decision-making to happen in real-time without further human input, now means that this value can be rapidly unlocked in real-time.

This evolution to real-time has created a world in which room rates are adjusted in seconds, rather than days. Dynamic pricing allows hotels to change prices rapidly in response to changing market demand.

While this maximizes profitability, it also dramatically increases complexity. It's not unheard of for there to be multiple price changes in a given hour. Consider the variables at play: seasonality, local events and conferences, room types, amenities, variations of packages (such as breakfast included)...the rate permutations across hotels in a given market can easily run into the millions.

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Social Media: Getting Personal

There Social media platforms have revolutionized the hotel industry. Popular sites such as Facebook, Twitter, Pinterest, Instagram, Snapchat, YouTube and Tumblr now account for 2.3 billion active users, and this phenomenon has forever transformed how businesses interact with consumers. Given that social media allows for two-way communication between businesses and consumers, the emphasis of any marketing strategy must be to positively and personally engage the customer, and there are innumerable ways to accomplish that goal. One popular strategy is to encourage hotel guests to create their own personal content - typically videos and photos -which can be shared via their personal social media networks, reaching a sizeable audience. In addition, geo-locational tags and brand hashtags can be embedded in such posts which allow them to be found via metadata searches, substantially enlarging their scope. Influencer marketing is another prevalent social media strategy. Some hotels are paying popular social media stars and bloggers to endorse their brand on social media platforms. These kinds of endorsements generally elicit a strong response because the influencers are perceived as being trustworthy by their followers, and because an influencer's followers are likely to share similar psychographic and demographic traits. Travel review sites have also become vitally important in reputation management. Travelers consistently use social media to express pleasure or frustration about their guest experiences, so it is essential that every review be attended to personally. Assuming the responsibility to address and correct customer service concerns quickly is a way to mitigate complaints and to build brand loyalty. Plus, whether reviews are favorable or unfavorable, they are a vital source of information to managers about a hotel's operational performance.  The February Hotel Business Review will document what some hotels are doing to effectively incorporate social media strategies into their businesses.