Another question I get regularly is “Why does TourConnect’s contracting tool focus on static rates, and not dynamic rates?”
Dynamic rates are all the rage, and have been for nearly 10 years now; however, static rates remain resilient and don’t seem to be going away entirely any time soon. TourConnect fundamentally believes that a healthy revenue management strategy includes both dynamic and static rates. Let’s dive into this a little further…
Dynamic rates are driven directly out of a hotel or tour operator’s live inventory and gives companies greater control over their pricing based on the market at any given moment. Pricing can be adjusted on the fly - meaning if 2 rooms are left, the price could be $100, but if 1 room is left, the price jumps to $125.
Static rates are locked for a set period of time, say 1 year. There can be seasons during that year - so maybe high season is $125, shoulder season is $100, and low season is $75. When these static rates are provided to B2B partners/agents they are bound by these rates, regardless of what the demand is at the particular time of booking.
Dynamic rates are a very efficient way to distribution tourism products; however, there are a few challenges:
Dynamic rates require connectivity between systems
- For tours and attractions, this is a challenge because the booking systems are trying to catch up with the technology available (so there are a ton of different systems out there that don’t have connectivity to distribution)
- Many small-medium sized traditional wholesalers do not have booking systems that can handle dynamic rates (so when companies don’t issue static rates, they miss out on these companies selling their products)
Many companies still drive sales using brochures and group series that rely on bookings made far in advance
- Companies using these methods need to lock in their margins, to ensure that bookings are profitable for all parties
Dynamic rates can drive margins down, as hotels can simply continually adjust prices lower and lower to beat out competition. By contrast, static rates lock in margins - and while there are times this can mean these margins are lower than what dynamic rates would have produced - a revenue manager can at least count on the margins over the course of a contract, and plan accordingly.
Overall, there are a lot of channel managers and booking systems throwing tons of investment at dynamic pricing…and we recognize how important this is to our industry. That said, static rates have their place in our industry, and static rates can be one of many effective revenue management tools available to our industry. TourConnect is happy to be the company leading the innovation in static rate distribution so that it can be used for years to come to help all of our businesses be more profitable.