dynamic pricing - good or evil?

Coming to this discussion late - the question of yield management is getting louder in the hostel market. Its been around for Hotels and Airlines for years, and they are the experts at pricing based on occupancy and also booking trends and historical data.

Many hostel operators I speak to have the same sentiment that Mr Moriarty comments on here, and that there is a belief that this sort of thing does not fit into the hostelling industry.

There are two sides to that argument, and as a PMS software provider we are constantly being asked for more and more yield management controls in the booking process at many hostels.

There are also two sides to what defines "Dynamic Pricing"...

1) Per se, Dynamic Pricing might simply be defined as a hostel having the ability to charge a different rate on a different day of the week. Without using any revenue management techniques other than "Monday Rate = $15, Tuesday Rate = $25. Wednesday Rate = $30" for example.. This is yield by proxy, but having locked in rates for certain days or dates without massive variances in prices.

2) Dynamic Pricing with Yield then adds in yield "rules" - when occupancy gets to a certain level on the hostel, increase all rates by $1. Or when a hostel bed availability gets to a certain level, increase that bed only by $1.

I think personally that hostel travellers are travel-smart that they might understand the logic in changing prices and whilst I am sure we will continue to see such complaints already listed above from some travellers, many others don't have an issue with it.

Again, as a software vendor providing PMS systems which have quite complex revenue management and dynamic pricing abilities, our experience is probably 60/40 of users wanting dynamic pricing with yield or daily rates. And we can give those options if wanted. Either choose to sell the bed for a fixed cost daily, or opt to run a rule that increases or decreases bed rates on availability. The system is also smart enough to let you ensure that a Male 6 Bed Dorm price is also the same as a Female 6 Bed Dorm price - so that the guest is not faced with different prices for different genders which is discriminatory in many markets round the world!\

We are also seeing some of the larger hostels trialling dedicated revenue management software solutions which increase rates back into the hostel PMS. These R/M systems usually have a "min" and "max" value configurable so that a rate will have a high and low range that the price will not drop below, or increase above. This generally fits into the hostel ethos more than say an airline or large hotel who will just keep pushing charges higher and higher until the last room or seat is sold.

Small side story to this one too. At a hostel conference a couple of years back, heard from an operator who spoke who refused to increase costs under any circumstances... her beds were always the same price. Another delegate asked her what did she do when there was high demand in the area, for example local events, concerts or festivals.... The answer was "I borrow mattresses from family and friends and put them in the common room, add more beds to the dorms even have had beds in the kitchen".

When asked about her bed count licence, and how many guests she was legally allowed to have in the building, came the response "the local fire chief is a good friend of mine. He turns a blind eye to this because it doesn't happen that often.....".

The audience was rather aghast. We all know that hostelling is a way of life, which is why I love being involved in the industry even as a supplier, still is worrying that someone's idea of increasing revenue could be a tad on the dangerous side!

(Sorry - wasnt planning on posting such a long post!)

Just so you know, that might not be allowed in some markets. In the UK, you have to include any mandatory fees into your headline price. Meaning, if you're charging an extra €5 that needs to be incorparated into your first night price. Probably the same rule in France.

I also hate hostels that charge you for linen, but you can't bring your own?! To be honest though, even if you do allow them to bring their own, how many will?

It's like Ryanair saying "It's free to pay us, but you have to use some obscure creditcard, that is really difficult to get a hold of, and there is a usage fee for that card as well, which is charged by the card issuer".

That is what it is like with this linen fee. :)

When I was in London, I used to say to the staff, "it would cost about £3-£4 to check someone in for one night, or change them rooms. Keep that in mind when changing rooms." But that £4 spread across a few days is nothing.

Perhaps you would be best saying that for stays for 2 nights or less there is an one off charge of €5 admin fee. I think that is fairer than a 'linen fee'.

I'm saying though, under the law you would most likely be required to display the fee in your headline price, if it is a mandatory fee. If they are not allowed to bring their own sheets, and you charge a fee for it, that is a mandatory fee. :)

In the US, what is common are the resort fees, which is just a big con as well.

I once saw an advert for an airline in the US that went "Fly to Boston for $49*". The star had the following attached: based on a return ticket, excluding taxes, and bags. :(

Why are taxes not included in the headline price? I can't unselect the taxes! If you're charging me for linen, then I want to bring my own. :) Under the law, I doubt you can have it both ways. :)

Best renaming it an admin/checkin fee, and it linked to a length of stay. If I'm staying a week, should I really have to pay the €5 for the linen? :)

Hi everyone,

I'm a hotel revenue manager with a big interest in starting / taking over my own hostel one day. I was wondering (in detail) what the common pricing tactics / rules are being used in hostels for dynamic pricing? Is everything occupancy-based or also demand based?

I understand the scepticism of some towards the practice as it can cause complaints; but is the best not to place your 'rack' rates on your reception desk? You will never sell rack unless in very, very high demand periods. All guests that pay less got a discount (in essence).

Let me know your thoughts :)