Analysing the Impact of Dynamic Open Pricing on Hotel Revenue Management

Abstract

The introduction of big data technology into hotel revenue management (RM) systems has paved a new way to fix prices in the hospitality industry called Open pricing' (OP). This study analyses the evolution of dynamic pricing in hotels and examines the concept of open pricing. This pricing system is based on managing a large amount of data (big data) and consists primarily of sophisticated real-time dynamic pricing with no rate ranges and fences and depends on the customer's WTP. This study investigates whether the implementation of open pricing improves independent hotels' performance. Three case studies were conducted using an analysis of variance test to compare three years of data on three independent hotels after they started applying open pricing. The selected hotels' performance trends over time were also compared, via a t-test, with data about the competitors collected from STR. This study provides empirical evidence that open pricing improves the occupancy rate, average daily rate and revenue per available room justifying its use in the RM systems of independent hotels. It helps advance our understanding of the concept of open pricing and it is one of the few empirical studies to analyse the latter's impact on hotel performance.