There is the classic rule in the free market economy: supply and demand define the price. After the hospitality and mobility sector (fuel prices, flights, trains, transfers…), the topic of dynamic pricing in the tourism industry has now also reached the European camping industry: Here, one and the same pitch is now also sold at different prices – in real-time pricing or surge pricing – depending on market demand, preference or time.
Of course, different prices have always existed: be it at different times of the season, for a certain group of guests (e.g. senior guests or ADAC members), but also for products that should receive a special sales push. Booking platforms and new software tools now make it possible to design a time fix as flexible as possible thanks to clever artificial intelligence and algorithms. They generate a price adjustment in real time and even include parameters such as the weather forecast, fuel prices or the current capacity utilisation of competitors.
How do you find the right, current price – how can you increase the margin, generate demand and control sales intelligently, maximising profits? With time and business analytical effort, this can be achieved in the traditional way – by observing the market, demand and competitors and corresponding manual, re-active and pro-active offer design. An alternative is offered by innovative, modern booking tools that use artificial intelligence (AI) to define prices and always keep an eye on the maximum profit.
When setting base prices, a campsite manager cannot take into account the weather, fuel prices or any number of variables that may cause demand to fluctuate.
However, setting up dynamic pricing can help to take advantage of opportunities that arise despite the fluctuations. A 100 per cent campsite occupancy rate is not necessarily the best you want to achieve. After all, sold out can also mean that the price offered was too low. The greatest profit can be made with the price a guest is willing to pay for an offer. Conclusion: If you manage to sell out your place at the last minute, you have succeeded in using dynamic pricing correctly.
Risks of dynamic pricing
Dynamic pricing unsettles guests who are used to fixed prices. It gives them the feeling of being manipulated. This can have a negative impact on the image.
LeadingCamping Hvidbjerg Strand Feriepark in Blåvand, Denmark, relies entirely on artificial intelligence and state-of-the-art software for pricing. They use a tool from a Danish IT service provider that takes care of the entire administration of campsites, offers booking systems and provides front and back office solutions. Most of the Scandinavian campsites have been recorded in the provider’s database, so that it is possible to analyse exactly how booking behaviour is currently developing. Algorithms permanently compare the occupancy of hundreds of campsites, categories, and recognise how many internet users are on the booking engines and set the current price based on this. This saves a lot of time, but the campsite operators at Hvidbjerg Strand actively have no influence on the pricing.
Static pricing: Campsite A: 100 pitches.
Price calculation: 30 euros/basic price per pitch, long weekend (4 nights)
Revenue: 12,000 euros
Dynamic pricing: campsite B: 100 pitches
Price calculation: After reaching 50 percent occupancy for the 4-night weekend at the basic price, the price is increased by 10 percent for each additional 10 percent occupancy, so that finally only 95 percent occupancy is reached.
Revenue = 13,092.20 euros
Although campsite B was not fully booked, it took in more than 9 percent more.
The remaining places can additionally be sold for last minute campers at a higher price.
Over a season, significant additional income can be recorded in this way.
Over a season, dynamic pricing can generate significant additional revenue.