What is the meaning / definition of Demand-Based Pricing in the hospitality industry?

In the hospitality industry, prices for services do not have to be permanently set. They can be adjusted, depending upon how many rooms, meals, etc. are needed by customers at any a particular time. This is what Demand-Based Pricing is all about – the price of something changes depending upon how much demand there is for it at a given time.

So, you can see that Demand-Based Pricing offers a lot of flexibility to hotels and other types of businesses in the hospitality industry, which can only be a good thing!

Let’s look at a specific example now…

A hotel in Wimbledon (London, UK) wants to make as much money as possible during the world-famous Wimbledon Lawn Tennis Championships. They know that demand for rooms and other services will be very high during that time in summer. So, they plan to increase their prices then, in parallel to demand escalation.

The economic ‘law’ of supply and demand is straightforward and universal. When managing revenue, making a pricing strategy Demand-Based is essential – a hotel can alter its room rates at different times of the year, instead of always being frustratingly stuck at one pricing level.

When demand is high, prices usually increase.
When demand is low, prices usually decrease.

Simple!

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Synonyms