Once you've set up Dynamic Pricing, Hospitable will automatically set your base rate and adjust it based on several data points. These adjustments can price dates higher or lower than your base rate, but within your set minimum and maximum rates.
Dynamic Pricing Formula
Base price + price adjustments (can be positive or negative) = nightly rate
What Are Price Adjustments?
Price adjustments are modifications to your base price that account for various market conditions. They include:
Local demand
Booking window
Seasonality
Weekday rate
Gap nights
Restrictions
These adjustments work independently of each other and can either increase or decrease your nightly rate. For example, if December is typically low season (negative seasonality adjustment) but New Year's Eve shows high demand (positive demand adjustment), these opposing factors will be calculated separately, potentially resulting in higher prices despite the low season.
Price Adjustment Components
1. Local Demand
Demand adjustments respond to booking patterns and interest in your area:
What it measures: Upticks in bookings or increases in rates for specific dates in your market
When it increases prices: During holidays, local events, or times of high booking activity
When it decreases prices: During periods when fewer people are booking in your area
Demand adjustments are particularly valuable because they respond to both predictable events (like major holidays) and unpredictable market shifts that might not be captured by seasonality alone.
2. Booking Window
Booking window adjustments reflect how far in advance a guest is booking:
What it measures: The time between when a booking is made and the check-in date
When it increases prices: Any dates more than six months in advance get progressively higher premiums into the future
When it decreases prices: Within one month lead time we progressively discount prices as the booking window closes
3. Seasonality
Seasonality adjustments account for typical high and low periods throughout the year:
What it measures: Historical patterns of demand in your market throughout the calendar year
How it works: Increases prices during traditionally busy periods and decreases them during slow seasons
4. Weekday Rate
Weekday adjustments reflect typical booking patterns throughout the week:
What it measures: Difference in demand between weekdays (Sunday-Thursday) and weekends (Friday-Saturday)
How it typically works: Weekends are usually priced higher than weekdays (this is market-dependent)
5. Gap nights
Gap night adjustments focus on filling short gaps in your calendar:
What it measures: Short periods of availability between existing bookings
How it typically works: Applies slight discounts to these harder-to-book periods (such as a 1-3 night gap between two reservations, for example); it does not adjust your minimum stay requirements
Why it matters: Helps maximize occupancy by filling calendar gaps that might otherwise remain vacant.
6. Restrictions
If you see Restrictions as an attribution in your price calculation, that means our recommended price is hitting your pricing boundaries:
How it works: Automatically adjusts recommended prices to stay within your defined minimum and maximum price range
Why it matters: Protects your pricing boundaries to ensure our recommended price never drops below your break-even point (minimum price) or above your chosen price limit (maximum price)
Important caveat: Because discounts, promotions, and markup rates are applied on top of Hospitable's recommended price, your price can still drop below or increase above your minimum and maximum prices
How Often Do Prices Change?
Prices are updated daily, although additional updates may occur when you change your property settings or attributes.
Why is My Price Too High or Too Low?
Unusual price fluctuations can be a result of various factors, including:
A major local event driving demand
The combined effect of all adjustments (demand might be high despite being in low season)
Your property's recent performance (changes in occupancy or booking patterns)
Something unique about your property is challenging for the algorithm to identify. In this instance, you may choose to set a custom Base Price.
Additionally, property discounts, promotions, rule-sets, and markup rates will modify the price your guests see on your booking platforms.
It's important to remember that markets are constantly in flux, and Dynamic Pricing will reflect those changes.
Tips for Maximizing Your Dynamic Pricing Strategy
Monitor performance: Instead of "setting it and forgetting it," periodically review your settings and make changes as needed
Be patient: Dynamic Pricing works best when evaluated over longer periods
Make strategic adjustments: If you are consistently seeing lower occupancy than desired, consider adjusting your base price or switching to a more conservative pricing strategy
Remember that while Dynamic Pricing handles the daily fluctuations, your knowledge of your property and market remains invaluable in setting the right pricing strategy.
Learn how to manage your Dynamic Pricing here.