Of the many things learned since the travel economy turned inside out, chief among them is the demand for experiential travel and outdoor recreation is far more powerful than previously thought.
With the massive cultural shift towards social distancing, hotels and resorts designed to cater to a combination of corporate and leisure travel have largely fallen out of favor, and consequently, the general public has become enamored with experiential destinations that feature a safe combination of adventurous and relaxing natural pursuits.
While these unique and often remote properties have been buoyed somewhat by their increased popularity, due to the lingering challenges in the economy, it has not yet resulted in a major revenue windfall. The marketplace was hamstrung by a glut of inventory industry-wide, and the majority of operators were forced into discount strategies just to keep the lights on.
Now that the dust has settled a bit, vaccines are being administered, and travel restrictions lifting, destinations and guides are booking rapidly in 2021. So much so that many are sold out and properties and outfitters are actively taking reservations for 2022 and 2023.
With these strong market indications, operators can take stock in the fact the massive demand for experiential travel and outdoor recreation is more than a passing fad. Also, because the public perceives greater value in these experiences, there is a growing sense the market will support higher prices, and many operators are taking a page from the corporate hotel playbook, and testing dynamic pricing in their own sales strategies.
Dynamic pricing is a revenue model that ties rates to supply and demand. As demand rises, so do the prices, and likewise, prices drop when supply is high and demand low. This strategy has long been employed by operators with an a la carte pricing model, but heretofore, all-inclusive destinations have been relatively slow to adopt the concept. In fact, it is still very common for these destinations to offer per person rates that only change with peak and shoulder seasons.
If you think your operation can increase sales and profitability by employing dynamic pricing, consider going through these exercises:
Map the Highs & Lows
Dive into your data from 2019 (2020 was an anomaly – chuck it out) and map out your occupancy for the entire year and assign the rate for every night booked. Experiment with modest rate increases over high occupancy periods and lower rates in the troughs and come up with revised projections for total room revenue over the calendar year. By doing this you can forecast reasonable revenue gains that might not otherwise be realized when offering static rates out of synch with real stay patterns.
Every operation has dates of stay considered the “best time of year” and they should be priced accordingly. Identify these opportunities at your destination, (perhaps it is parade & rodeo, Christmas, or the week “all the guides are booked”). If they are already selling out 2021, be sure to raise the prices for 2022. In other words, don’t give away future revenues, and get your prime time dates priced right for the following year.
Test the Waters
Operators are smart to safeguard guest expectations by being consistent and true to their historic methods of doing business. Implementing dynamic pricing does not have to be a wholesale change and risk alienating the guests who are already familiar with your property. Consider starting small and testing these strategies with promotional packages targeted for specific accommodations over weekends and holiday periods. Many travelers who are new to experiential destinations have become conditioned to dynamic pricing and may not blink an eye in booking your destination at a higher rate. After running a series of these promotions, assess the performance, and extrapolate the model to a wider array of date ranges and project associated revenue.