Revenue Management

Most hostels are not using revenue management as described in this article. The most common form of dynamic pricing that hostels employ is the practice of raising prices slightly for weekends and special event dates. Day-to-day price fluctuations based on occupancy (the way hotels operate) are not common outside of corporate hostels who operate more like hotels anyway.

Here is an old poll and the resulting conversation about revenue management in hostels: Your Hostel & Dynamic Pricing AKA Revenue/Yield Management

In my opinion, revenue management in hostels just leads to some of your guests feeling like they got screwed because they paid more than their bunkmate for the same room or more than they paid last night for the same bed. It’s a nightmare for anyone trying to provide good customer service or maintain a good atmosphere. It works for the budget airlines, but all of their customers hate them. There are usually too many other hostels in our markets for any of us to be able to afford to have our guests hate us.

Here is an article from the Harvard Business Review about why dynamic pricing may bite you in the butt. It’s talking about online retailers rather than hostels, but one of the points hits home:

When a retailer uses dynamic pricing, it's only a matter of time before those who realize they've paid significantly more than others for the same product start screaming "unfair." This is when the big problem erupts for a retailer ‘ the trust component of its brand is at risk.

While the practice may, in fact, be perfectly fair, your customers may still feel like they have been cheated. No amount of explaining the logic of supply and demand will change that negative feeling.