The Rate Debate: Selecting Dynamic Vs. Fixed Hotel Pricing for Your Travel Program

There are certain questions to which the correct answer is almost always “both”. Wine or beer? Telecaster or Les Paul? Fixed or dynamic hotel rates?

With the hotel sourcing season well underway, many corporate travel and procurement teams are likely trying to figure out which hotel pricing model makes the most sense for their programs.

On the one hand, fixed hotel rates offer price stability and predictability for corporate travel budgets, but negotiations can be time-consuming. On the other, dynamic rates are easier to negotiate and they adjust based on market conditions, potentially offering cost savings, but they introduce price fluctuations, making budgeting more uncertain.

Our experts from CWT Solutions Group explain how both types of rates have their place in a travel program, and the strategies that buyers can use to get the most bang for their buck.

Which Rate Is Best? A Question of Volume

Hotels continue to nudge corporate buyers towards dynamic rates. One of the primary concerns for buyers, however, is whether dynamic rates offer the best value compared to static, negotiated rates.

Richard Johnson, Vice President at CWT Solutions Group believes that while dynamic pricing can offer savings, it is essential for buyers to balance it with the consistency and benefits of negotiated rates, especially in high-volume markets.

In markets with fewer room nights, Johnson sees dynamic pricing as a complementary tool to static rates and chainwide discounts. “The most effective approach may involve a hybrid model, using both dynamic pricing strategies and traditional negotiated rates,” he suggests.

According to Michelle Kocina, Senior Consultant at CWT Solutions Group, dynamic pricing is especially beneficial in a travel program’s second-tier markets (cities with fewer than 250 room nights), where it can fill gaps left by static rates and chainwide discounts. “In these markets, dynamic pricing often provides additional room types and inventory availability during high-demand dates,” she says.

Accepting Dynamic Rates in Non-Preferred Markets: A Strategic Decision

Should buyers consider dynamic rates in destinations where they don’t have preferred properties? Angie Techmanski, Senior Consultant at CWT Solutions Group, believes it could be a smart move. “Yes, buyers should consider dynamic rates in such destinations,” she says, “but the decision should be based on the discount offered compared to chainwide discounts and whether there’s enough volume to support consolidation to a preferred property.

In second-tier markets, dynamic pricing can offer advantages like additional inventory during high-demand periods. However, Techmanski warns that if a buyer’s room nights in these properties increase over time, it may become harder for them to switch and negotiate more favorable static rates. “It’s a balancing act as the program evolves,” she notes.

Pushing Back on Discounts off BAR: When It’s Worth It

When it comes to discounts off the BAR (Best Available Rate), Techmanski advises buyers to push back if the discounts don’t align with their program. “Buyers should definitely challenge BAR discounts, particularly in high-volume markets,” she says.

Techmanski emphasizes the need for buyers to understand the validity of the BAR in play, which can depend on several factors: whether it’s a local BAR or something else, the hotel’s production levels, the presence of other preferred hotels in the market, and the volatility of market pricing. “If the discount offered isn’t significantly better than the chainwide rate, it may not be worthwhile,” she adds. “In smaller markets with 60 to 100 room nights, dynamic pricing might be acceptable. In more volatile markets, it’s wise to request discounts that exceed the typical chainwide percentages – we would recommend aiming for 15-20% or higher.”

Brand-Wide Discounts: Flexibility or Compromise?

When it comes to brand-wide discounts, Kocina notes that they can complement negotiated rates at high-volume properties, “Brand-wide discounts offer flexibility within a hotel program,” she says. “Ideally, hotel chains should have the capability to load both static and chainwide rates, allowing the chainwide discount to apply when the published rate falls below the negotiated rate. Additionally, if the brand-wide discount includes last room availability, it can be advantageous to have both options available at preferred hotels.”

However, Kocina cautions that brand-wide discounts may not always include the same amenities as negotiated rates, “Buyers should weigh the benefits of flexibility against the potential loss of inclusions like breakfast or Wi-Fi,” she says.

The Importance of Driving Booking Compliance

Beth Harrison, Senior Manager at CWT Solutions Group, highlights the importance of buyers showing their ability to move share to preferred properties, “It’s essential for buyers to demonstrate that they can shift share,” Harrison says. “Clients who actively promote and enforce booking compliance to their partner hotels are more successful in minimizing price increases.”

According to Harrison, hotels are more willing to negotiate favorable rates—whether fixed or dynamic—when they see that a client can deliver significant volume. “Using tools like OBT messaging, direct email campaigns, and securing executive management support can make a real difference in driving compliance,” she explains. “This also makes it easier to negotiate in high-demand markets.”

Making Sure the Price Is Right: Data Is Key

With varying approaches to dynamic pricing in the marketplace, buyers cannot always be certain that dynamic rates outperform static rates. “Buyers can’t always be sure on their own,” says Kocina, “but partnering with a sourcing consultant allows them to leverage benchmark data and insights to make informed decisions.”

Kocina emphasizes that regular optimization reports that utilize both benchmark data and BAR data can help ensure that dynamic pricing remains competitive.

Similarly, Harrison stresses the importance of ongoing data-driven monitoring to ensure buyers are getting the best model for their corporate hotel program, “Buyers should rely on regular optimization reports, either quarterly or monthly, to track performance,” she advises.

In today’s pricing environment, where dynamic pricing can offer less price protection than static rates, Harrison believes that consistent evaluation and adjustments are crucial. “Leveraging expert insights and continuous monitoring is key to keeping the program competitive,” she says.

Wondering what’s in store for hotel rates in 2025? Check out the latest edition of CWT and GBTA’s Global Business Travel Forecast. Use our Forecast Calculator to understand how these projected price changes could impact your travel budget.

Siddharth Singh, Manager, Global Communications at CWT. Connect with Siddharth on LinkedIn.