Revenue Management Glossary

Elastic Demands 

Definition

Elastic Demand refers to a situation where a change in the price of a product or service leads to a significant change in consumer purchasing behavior. In the context of hotels, this means that a slight price increase or decrease can result in a noticeable impact on the number of bookings, as guests are highly sensitive to pricing changes.

How to use it

Revenue managers observe Elastic Demand when: The hotel offers products or services that are highly price-sensitive, small adjustments to room rates or ancillary services lead to large shifts in demand, competitors' pricing strategies have a strong impact on your hotel's bookings or pricing strategies need to be dynamic, as customers are responsive to fluctuations.

Formula

Elasticity can be calculated using the Price Elasticity of Demand (PED) formula: Price Elasticity of Demand (PED) = (% Change in Quantity Demanded) / (% Change in Price)

Related Terms

Inelastic Demand, Dynamic Pricing, Rate Sensitivity, Price Optimization, Revenue Management Strategy
“Elastic demand highlights the delicate balance between pricing and demand—understanding it allows hoteliers to fine-tune rates and maximize revenue without losing guests.”

Tim Boersma

Tim Boersma
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