Adjust Your Prices Smartly: The Key to Balancing Revenue and Occupancy
Dynamic Pricing has become an essential tool for managers of tourist properties. This strategy allows for setting competitive prices based on market data and historical behavior, with the goal of maximizing both occupancy and revenue. Avantio offers an algorithm that simplifies this process by identifying competitors, analyzing trends, and applying automatic adjustments.
Key Definitions
Dynamic Pricing: a system that automatically adjusts the rates of your properties based on market data, demand, and seasonality.
Base rate: the initial price calculated by the system, from which dynamic recommendations are generated.
ADR (Average Daily Rate): average daily rate.
How Does Avantio Calculate Dynamic Pricing?
Avantio's pricing algorithm analyzes between 50 and 200 competitors of a given property. With this information, it defines the base rate for the year and then applies four key factors to determine the final price:
Seasonality.
Demand.
Booking window.
Day of the week.
Based on data from the last three years, the system adjusts the base rate up or down to establish the final daily price.
What is the Base Rate and Why is it Important?
The base rate is the cornerstone of the pricing strategy. It represents the starting point on which dynamic adjustments related to seasonality, market fluctuations, and demand are applied.
A well-defined base rate ensures that:
The pricing strategy aligns with the business objectives, whether to maximize revenue or prioritize occupancy.
Control is maintained while taking advantage of a data-driven automated tool.
How Does Avantio Calculate the Base Rate?
The algorithm defines the base rate from a combination of historical data, market trends, and competitive comparisons.
Main Data Sources
Market and Competitors
Comparable properties: the system identifies between 50 and 200 similar accommodations (size, location, amenities) and analyzes their prices.
Competitors' occupancy and prices: it records how they adjust their rates according to the season to determine the real daily position and value of each property.
Property History
Previous booking data: Analyzes the ADR and occupancy in similar seasons over the last three years.
From this information, the system obtains an average of the mid-season, eliminating extreme values (very high or very low), to calculate a representative base value for the property.
Types of Base Rate Strategy
There are three preset strategies, in addition to the option to set a custom rate:
High Occupancy (Conservative Approach)
Designed to maximize the number of bookings. Ideal for new properties, highly competitive markets, or mass-market accommodations (not luxury).
Balanced (Optimized for Revenue and Occupancy)
Seeks a balance between the average daily rate and the booking pace. Recommended for most managers who want a profitable and stable approach.
High Daily Rate (Aggressive Approach)
Focuses on maximizing revenue per night, prioritizing high rates over occupancy. Works well in premium properties, high-demand areas, or with significant seasonality.
Custom Rate
Allows setting a specific price based on the manager's own strategy. Offers greater control, apart from the system's recommendations.
Avantio's Dynamic Pricing offers a data-driven methodology that allows property managers to set competitive rates, maximize revenue, and maintain strategic control.
Properly defining the base rate and choosing the right approach are key to making the most of this tool.
Frequently Asked Questions
Why does my base rate differ from similar properties in the market?
Why does my base rate differ from similar properties in the market?
In the case of newly listed accommodations on platforms like Airbnb, the system takes time to identify their real value, so it initially relies on market comparisons. It is recommended to manually adjust the base rate at first and allow the system to progressively learn the optimal prices.
Can I try multiple base rate strategies?
Can I try multiple base rate strategies?
Yes, different strategies can be applied at no additional cost.
Can I see the list of competitors the system considers?
Can I see the list of competitors the system considers?
No, it is currently not possible. However, the system selects competitors by considering key factors such as location, size, capacity, main features, and average prices.
Is it mandatory to set minimum and maximum rates?
Is it mandatory to set minimum and maximum rates?
No, their configuration is optional.
Can a base rate strategy be set by season?
Can a base rate strategy be set by season?
No, the algorithm already takes seasonality into account when calculating final prices.