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MultiBrief: Is dynamic pricing good for restaurants and hotels? | MultiBriefs

Does dynamic pricing really work?
Referring back to the case of Bob Bob Ricard, a follow-up NPR report suggests that dynamic pricing works well for the restaurant. Ever since the restaurant implemented the new strategy, store traffic during the “normal” quietest times has nearly doubled.

While the average check for two guests in the restaurant usually costs about $139 without a discount, consumers coming in during off-peak hours do not seem to spend less. It turned out they ordered more special items when they get the “off-peak-hour” discounts.

In the lodging industry, however, the effects of dynamic pricing might not be as straightforward as those in the restaurant industry.

According to a Cornell Hospitality Report, hotels with a price-cut strategy for higher occupancy (shifting to a lower price category) experienced a greater loss in RevPAR (revenue per available room) than those shifting to a higher price category. Meanwhile, the authors also suggested hotels should maintain a relatively stable price positioning strategy (not shifting upward or down).

Likewise, another empirical study reported in International Journal of Hospitality Management suggested that dynamic price movements might only be able to enhance a hotel’s RevPAR performance in the short term. Dynamic pricing, depending on the types of price movements, would have negative impacts on a hotel’s RevPAR performance in the long term.

It seems the dynamic pricing strategy adopted by Bob Bob Ricard is different from the ones used by hotels, however. Plus, running a restaurant is different from operating a hotel. It will be interesting to see whether dynamic pricing works well for restaurants in the long term — and whether other restaurants will follow Bob Bob Ricard’s footprint in dynamic pricing.

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MultiBrief: Is dynamic pricing good for restaurants and hotels?.