What’s the Best Pricing Strategy?

If you’re a hotelier, you’ve likely asked yourself this question on more than one occasion: “What’s better, a dynamic or static pricing strategy?” 

In this article, we’ll explore the pros and cons of each strategy and help you gain a more nuanced understanding of the two strategies and how hoteliers use each method, depending on the situation. Having a better grasp of the different pricing strategies at your disposal can streamline your hotel’s decision-making, empowering your hotel to be more competitive and ultimately more profitable.

2 common pricing strategies

First, let’s start by defining the two strategies, and discussing what makes them different. Keep in mind as you read the definitions, that the two strategies aren’t necessarily diametrically opposed. Hoteliers can sometimes utilize a combination of the two strategies, but each has its own set of benefits and drawbacks. Let’s start with the older, more basic pricing method: static pricing.

Static pricing:

Static pricing is a method of determining a pricing structure up-front, and leaving that pricing strategy in place for an extended period of time. 

For example, a small independent hotel may implement a two-tiered seasonal pricing strategy:

Sounds easy, doesn’t it? Remember that there are pros and cons to implementing any pricing strategy. Let’s discuss what makes this a beneficial strategy, and also what makes a static pricing strategy inherently risky.

Pros: 

Ease – It’s time efficient and not particularly difficult to come up with a static pricing strategy compared to a more dynamic strategy. A hotelier with relatively little experience can likely do some very basic market research in an afternoon, and have a very rough estimate of how he should price for certain times of the year. Setting prices in the PMS or channel manager might also be a breeze, especially if those systems allow for bulk updates.

Transparency – Hoteliers and travelers may also appreciate the transparency of a static pricing strategy. For shoppers, there is little risk that the rate will change, so they can feel more secure in waiting to book. Hoteliers may feel more secure in that all guests are paying the same rate, and don’t have to worry about guests haggling or expecting a lower rate. The rate “is what it is”, giving hoteliers and travelers peace of mind.

Cons:

Missed opportunities/revenue: As with most things that come easy, there are many catches and pitfalls with a static pricing structure. First and foremost is the huge risk of lost revenue due to unaddressed changes in market conditions. If demand surges or declines due to an unforeseen reason, hoteliers can easily find that their static rate strategy is either overpriced (leading to lost bookings) or underpriced, leading them to sell their inventory too quickly at low rates.

Weaker competitive position: Not having competitive prices affects a hotel’s visibility and ranking on booking platforms. Utilizing a static structure allows a hotel’s direct competitors to secure more bookings, collect more reviews and subsequently strengthen their market position further, while the hotel with less competitive pricing lags behind.

For the vast majority of hotels, a simple static rate structure like the one described above, is likely too inflexible and risky to implement. A static pricing model works best only for those hotels with high predictability in demand patterns, costs and occupancy levels. As you may know, this is a rarity in the hospitality industry.

Dynamic Pricing

Dynamic pricing is a strategy where price points are updated often (sometimes daily, or even more frequently) based on a multitude of real-time factors, such as competitor pricing, pickup, and other market intelligence and data analytics. Usually, dynamic pricing strategies are achieved with the help of automated algorithms that analyze these various market intelligence data points, and push an optimal price directly to the property’s PMS, or send rate recommendations to the hotelier for approval.

Pros:

Fewer missed opportunities: Because a dynamic pricing system is always ingesting market intelligence data, any fluctuations in market conditions will update the system’s internal forecast and will either be actioned (by pushing a new higher price or lower price), or brought to the attention of the hotelier. This means that even on days when a hotelier isn’t working, a dynamic pricing tool is constantly monitoring changes in competitor pricing trends, influxes of pickup, and even things like market search volume to formulate optimized pricing decisions.

Automation and productivity boosts: It may sound counter-intuitive that a more complex pricing strategy would lead to automation and increased productivity. However, when hoteliers implement an automated dynamic pricing strategy, it can often lead to a snowball effect, where an automated dynamic pricing strategy boosts hotel performance, in turn leading to more profitable and streamlined operations. Hoteliers that spend less time fretting over pricing decisions can spend their time creating more meaningful guest experiences, something that is crucial for independent hoteliers to succeed.

Cons:

Cost: It can be more expensive to invest in the tools that allow for dynamic pricing. In 2025, the costs of a dynamic pricing solution are by no means prohibitive, but there are still some costs associated with the implementation of such a tool. Often, the cost comes in the form of a monthly fee which may be as low as $75/mo to a few hundred dollars a month depending on the solution.

Learning curve: A dynamic pricing strategy will require a hotelier to understand and weigh additional factors when determining their pricing strategy. For example, a hotelier that previously didn’t consider competitor pricing, market trends, and traveler booking patterns will need to familiarize themselves with these new metrics. Even when this process is entirely automated with a pricing tool, it’s good to have at least some understanding of the reasoning behind it.

How to establish a dynamic pricing strategy

As mentioned above, establishing a dynamic pricing strategy requires some up-front investment, but when implemented, can be hugely rewarding to your hotel’s bottom line.

First, hoteliers should identify an automated pricing solution that works with their existing tech stack. Most providers will provide a list of compatible integrations which you as a hotelier can review to see if your property management system (PMS) and channel manager are a fit.

When looking for a dynamic pricing solution, you should also consider the various factors that are most important for your market. We’ve listed some already, but consider how impacted your property is likely to be by external factors like: fluctuations in competitor pricing, seasonality, changes in demand year-to-year. A quality solution will describe exactly what market changes are driving the system’s pricing recommendations.

Drive revenue with a data-driven pricing tool

When you’ve decided to move to a dynamic pricing strategy and found a tool that works for your hotel, consider the ongoing processes that you can implement to make sure that you are getting the most for your investment. 

Consider establishing a weekly or bi-weekly meeting with your hotel staff or other stakeholders to review the dynamic pricing changes that have occurred since the last meeting, and review any upcoming dates with pickup and pricing changes. This can also be the starting point of establishing revenue management practices at your hotel, which is a big milestone for any hotelier.

A dynamic pricing tool such as Pricing Manager by Lighthouse is the perfect tool for independent hoteliers who are looking to take that first step toward more modern, data-driven dynamic pricing strategies, and move away from static pricing strategies.

About Lighthouse

Lighthouse (formerly OTA Insight) is the leading commercial platform for the travel & hospitality industry. We transform complexity into confidence by providing actionable market insights, business intelligence, and pricing tools that maximize revenue growth. We continually innovate to deliver the best platform for hospitality professionals to price more effectively, measure performance more efficiently, and understand the market in new ways.

Trusted by over 65,000 hotels in 185 countries, Lighthouse is the only solution that provides real-time hotel and short-term rental data in a single platform. We strive to deliver the best possible experience with unmatched customer service. We consider our clients as true partners – their success is our success.

This article originally appeared on Lighthouse.