Best Pricing Strategies for Hospitality Operators
The Hidden Science of Pricing: Why Moving Early Wins the Game
From what I’ve seen—both in my own properties and those of other hosts and micro-resort operators—pricing is one of the biggest reasons rentals sit empty.
The good news?
It’s also one of the easiest things to fix—and you can turn it around in a day. It’s a huge lever.
If you’re not using a dynamic pricing tool yet, I highly recommend getting one. It’s a must-have.
If you’re already using tools like PriceLabs or Wheelhouse—great. That’s the first step.
If you’ve taken the time to analyze your competition and set up pricing—even better. Give me five.
If you’ve tested different strategies, identified what works, and keep experimenting—I’m proud of you.
If you consistently monitor your pricing, or even have a revenue manager adjusting it regularly—well, you could close this email.
Then again… maybe not. You might still find a few golden nuggets.
Now let’s talk pricing.
It’s both an art and a science.
And for me, that balance is personal.
Before I built my hospitality business, I spent years in data analytics—leading teams, building forecasting models, and studying patterns in spreadsheets that told powerful stories. I learned how to anticipate outcomes, test assumptions, and act on data.
When I moved into vacation rentals and boutique hospitality, I brought those tools with me.
Revenue management isn’t about reacting when your calendar is empty.
It’s about seeing it coming—and moving first.
Two Tools Most Hosts Overlook: Compression & Decompression
Let’s talk about the foundation of dynamic pricing.
Compression pricing means raising prices when demand surges—think peak season, festivals, holiday weekends.
Decompression pricing is about lowering your rates early in soft-demand periods, before the race to the bottom begins.
The catch? Both only work if you time them right.
Most hosts raise prices too late and drop them in a panic.
The best revenue managers read the signals ahead of time—and act before everyone else.
The Math That Drives Strategy
Let me walk you through a few core concepts.
1. Elasticity of Demand
If dropping your rate by 10% results in 30–40% more bookings, you’ve tapped into elastic demand. That move didn’t cost you—it earned you more revenue.
This is especially powerful mid-week or in shoulder seasons. Track elasticity manually or with tools like PriceLabs and Wheelhouse.
2. Pacing vs. Forecasting
You can’t manage what you don’t measure.
Compare how many nights you’ve booked for an upcoming month to the same point in previous years.
Example:
If you’re usually 60% booked for October by September 10, but this year you’re only at 25%—
That’s a signal to apply decompression now.
If you're ahead of pace? That’s your window to test compression and push rates higher.
3. Expected Value (EV)
It’s not about what you could make—it’s about what you’re likely to make.
Here’s a real-world comparison:
The lower price brings in more money. That’s decompression done right.
Think in probabilities—not just price tags.
The Adaptive 3-Phase Pricing Strategy
Every property and market has its own rhythm. Your strategy should follow your booking behavior—not a fixed calendar.
Instead of setting pricing phases by date, set them by your average lead time(the number of days in advance guests typically book).
Here’s how to apply it:
Phase 1: Early Window
(2–3× your average lead time)
Apply a modest price drop (5–15%)
Capture early demand and flexible planners
Run elasticity tests
Adjust minimum stays to avoid gaps
If your lead time is 15 days → Phase 1 = 30–45 days out
Phase 2: Core Booking Window
(Your average lead time ±10 days)
Hold your base rate
Monitor pacing and comps
Increase rates for high-demand weekends
Use dynamic minimum stay rules
If your lead time is 14 days → Phase 2 = 4–24 days out
Phase 3: Last-Minute Window
(< Your average lead time)
Apply compression for weekends and events
Offer gap-night discounts
Relax minimum stays
Fill orphan nights
If your lead time is 14 → Phase 3 = 0–13 days out
Bonus Tip: How to Calculate Your Lead Time
Yes, tools like PriceLabs can give you insights into overall market trends, but to truly understand your booking lead time—you need to look at your own property’s performance and calculate it directly.
Look at your last 3 months of bookings.
For each one:
Lead Time = Check-in Date − Booking Date
Average them out—that’s your custom lead time and the key to your dynamic pricing window. Note: different seasons often have different booking lead time.
Final Thought: Price Like a Strategist
The goal isn’t to be the cheapest. Or the most expensive.
It’s to be smarter.
Compression and decompression pricing—when guided by pacing, probability, and elasticity—give you the edge to price proactively, not reactively.
So next time your calendar is quiet, don’t panic.
Run your numbers. Recalculate. And move before the market does.
That’s the science.
The art? Knowing when to trust your gut, too.
