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July 21, 2023

ZHAW study on the effect of dynamic pricing

A study by ZHAW School of Management and Law confirms the positive impact for hotels using RoomPriceGenie’s Automated Pricing Solution

ZHAW Study on the effect of dynamic pricing, showing their main building

A study by ZHAW School of Management and Law confirms the positive impact for hotels using RoomPriceGenie’s Automated Pricing Solution

ZHAW School of Management and Law, based in Winterthur, Switzerland, conducted a study of 37 hotels that implemented dynamic pricing in 2021 and 2022, evaluating the effectiveness and impact of the RoomPriceGenie revenue management system. The study analyzed data from many types and sizes of hotels, including independent and chain hotels, from different geographical locations and within various market segments.

The study, conducted by Prof. Dr. Steffen Müller, Dr. Nina Heim and Vera Lenggenhager, evaluated the effects of the introduction of dynamic pricing based on three perspectives:

  • What is the impact on crucial financial indicators like RevPAR, ADR and occupancy?
  • What happens to guest satisfaction after hotels start implementing RoomPriceGenie?
  • What are the internal effects on competencies after starting with dynamic pricing?

The research team published their full research paper, and these are the highlights.

1. Effects on hotel revenue

The hotels participating in the study experienced significant increases in RevPAR, ADR and room occupancy after implementing RoomPriceGenie.

  • RevPAR (revenue per available room) increased by more than 18 CHF to 107 CHF on average
  • ADR (average daily rate) reached a mean of 173 CHF, about 7 CHF more than before the introduction of RoomPriceGenie
  • Room occupancy increased significantly after implementing RoomPriceGenie – from 47% to 59%

A note must be made that these results are based on a before-after-measurement that cannot exclude other factors that might affect the results.

ZHAW study on the effect of dynamic pricing graph showing results

2. Effects on guest satisfaction

This part of the study intended to compare how guests felt about the pricing and perceived value of the hotel’s offers, both before and after implementing RoomPriceGenie.

No significant change in overall satisfaction, perceived price fairness and intention to recommend have been measured after the introduction of the software. There was a slight but statistically insignificant decrease in NPS (from 61% to 58%). The share of customers that think that prices were dynamic increased only slightly from 75% to 78% after the introduction of RoomPriceGenie.

3. Effects on the hoteliers participating in the study

Hotel performance measures were designed to capture each hotel’s internal competencies and experiences related to marketing, communications and pricing activities before and after implementing RoomPriceGenie.

As evident from the chart above, the changes after implementing RoomPriceGenie were positive and significant, as the hoteliers perceived considerable improvements in revenue and time efficiency and felt the property had an enhanced competitive advantage using the software. Overall, the hoteliers felt:

  • They could attract more guests and earn higher RevPAR on each booking, earning them more revenue overall
  • They could better defend their marginsIt gave them better capacity utilization
  • It gave them more pricing power compared to the competition
  • They also felt that they were more in control of their pricing, more effective in their pricing strategies and more easily able to respond to the changes in the market and adjust their rate accordingly

Some of the feedback hoteliers shared with the researchers:

  • “No more fear of flexible pricing and a good response from guests.”
  • “Dynamic pricing allows us to sell our rooms at the optimal price.”

Conclusion

In conclusion, the study found that hotels using RoomPriceGenie’s solution experienced a significant increase in revenue compared to the traditional revenue management practices they had previously used. RoomPriceGenie eliminated manual data analysis, saving time and resources, and automated pricing, giving hoteliers more time to focus on providing the best possible experience for guests. Because RoomPriceGenie continuously monitors market demand and adjusts the prices accordingly, the hotels felt better positioned to respond to changes in demand and competitor pricing, resulting in improved occupancy rates, ADR, RevPAR and increased market share.

“As the hospitality industry becomes increasingly competitive, embracing innovative automated pricing solutions will be an operational imperative for hotels of all types and sizes in achieving long-term financial success”, says Ari Andricopoulos, CEO of RoomPriceGenie, who helped the team at ZHAW School of Management and Law with the research.

Prof. Dr. Steffen Müller adds: “It is encouraging to see that the participating hotels were able to improve their pricing competencies and that guest satisfaction does not decrease after introducing dynamic pricing. As we can see from the results, most guests expect dynamic prices anyway in this industry.”

You can find all conclusions here in the research abstract.

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