A pricing tool for your B&B: do you need dynamic pricing software, or are good price rules enough?

Short answer: a pricing tool (also called dynamic pricing or revenue management software) calculates a new price per room every day, based on demand, events and the prices of comparable properties. If you run a B&B with fewer than about ten rooms, you get most of that effect from good price rules in your PMS: seasons, a weekend rate, public holiday surcharges and a discount for longer stays. A separate tool mainly pays off when your market swings sharply and unpredictably, or when you run several properties and have no time to adjust prices yourself.

Below: what such a tool actually does, what you can already do without one, and how to decide.

What does a pricing tool do?

A pricing tool looks at data you would struggle to track every day:

• Your own occupancy: how many nights are booked, and how fast are dates filling up?
• The market around you: what do comparable properties nearby charge, and how many are still available?
• Events and seasons: festivals, trade fairs, school holidays, public holidays.
• Booking pace: a date that fills up unusually early gets a higher price; a date that stays empty drops.

Based on that, the tool sets a price per room every day and sends it to your PMS or channel manager. Well-known names are PriceLabs, Beyond and Wheelhouse. They work on a subscription whose price depends on the number of listings or on your revenue. Check their own sites for current rates.

Important: a pricing tool does not replace your channel manager. It calculates prices, but those prices still have to reach Booking.com, Airbnb and your own website through one system. Connect a tool directly to one channel and not the others, and you end up with different prices per channel, which your PMS may overwrite at the next sync.

What you can already do without a tool

Most demand swings in a B&B are predictable. You know when summer is, when the school holidays fall, and that Friday and Saturday sell better than Tuesday. You don't need an algorithm for that, you need a PMS that lets you set those rules once and then applies them itself.

In BedFlow PMS you set this up under Management → Rates:

• Base and weekend rate per room, and if needed a separate price per weekday.
• Seasons: e.g. +15% from 1 July to 31 August, every year, or once for an event in your town.
• Public holidays: BedFlow PMS works out the national holidays itself, including Easter and Whitsun, with an optional surcharge on the evening before.
• Length-of-stay discounts: e.g. 10% off from seven nights.
• Channel markup: a higher price on Booking.com or Airbnb to cover commission, so your direct rate stays the best deal.
• A price for a single day: right-click in the room overview, for that one conference you just heard about.

On the Restrictions tab you can also set a minimum stay on busy days, so a single Saturday doesn't break up your weekend. All prices go to your connected channels automatically. How to set the base price itself is covered in how much to charge per night for a B&B room and in our pricing strategy with seasons and length-of-stay discounts.

When does a separate pricing tool pay off?

A tool earns its keep when it finds prices you wouldn't have set yourself. That mostly happens in these situations:

1. Your market swings sharply and unpredictably. In a city with many trade fairs, conferences or concerts, demand can double on a few days. A tool that follows booking pace in your area spots that before you do.
2. You have many units. With twenty holiday homes in different towns, adjusting each one by hand every day is no longer realistic.
3. You don't want to spend time on prices. Some hosts would rather not look at their calendar every week. A tool takes that over, provided you set sensible minimum and maximum prices.

The other way round, a tool makes less sense if you have three rooms in a rural area with a clear season, if your guests are mostly regulars, or if you're already full almost every night. In that last case your base price is too low, and raising it fixes that faster than a subscription.

What to watch if you do take a tool

• Set a floor and a ceiling price. An algorithm that halves your price in a quiet week sometimes attracts guests you'd rather not have, and it won't always cover your fixed costs.
• Check that the tool sees your real bookings. Without your occupancy it only works from the market, and then it's no smarter than a season rule.
• Let one system send prices to the channels. The tool calculates, your PMS or channel manager distributes. Two systems that both push prices to Booking.com overwrite each other.
• Review the first months. Compare your average nightly rate and your occupancy with the same period last year. How to measure that is in occupancy rate, ADR and RevPAR for your B&B.

BedFlow PMS is working on a PriceLabs connection. Until it's released, you steer your prices with the rules above. What the connection will do is described in the documentation.

Conclusion

A pricing tool is not a must for a small B&B. Start with good rules: a fair base price, seasons, a weekend rate, public holidays and a length-of-stay discount. After a few months, measure your occupancy and your average rate. If there are clearly days where you were too cheap or too expensive, and your market really does swing, that's the moment to consider a tool.

Want to see what those price rules look like in practice? See the pricing or try BedFlow PMS free for 30 days at bedflow.eu.