Optimize Your Property’s Pricing Strategies with Artificial Intelligence

Everywhere you look, everyone is talking about AI. From what I’ve seen, when data-driven decision making and human control are built into the rate optimization process, machine-learning models can give you a competitive edge and help grow your revenue. 

Everywhere you look, everyone is talking about artificial intelligence (AI). Is it just for big companies, or is it a powerful way to grow your independent lodging business? Having spent 19 years owning and operating an inn/B&B and using AI-based rate optimization software for the past three years, I have seen a $300,000 increase in room revenue that I would not have realized without this software. Our inn’s average daily rate (ADR) increased from $285 to a minimum of $350/night. 

I’m confident that many inn owners and managers can realize these same advantages for their unique properties, too. 

According to Hotel Tech Report, “Hoteliers who understand how to leverage AI tools to become more efficient and effective will become more valuable than ever. Those who don't educate themselves may find themselves in a more challenging situation.” In other words, exploring the tools available to you and designed for independent lodging is worth the time. 

AI-based rate optimization software increased our inn’s room revenue by $300,000 in the three years since I started using it. 

From what I’ve seen, when data-driven decision making and human control are built into the rate optimization process, machine-learning models can give you a competitive edge and help grow your revenue. 

The AI pricing value proposition looks a little like this: 

Your market knowledge and innkeeping expertise 

+ AI pricing optimization based on reservation data, booking pace and trends, and future demand

= A competitive advantage that can help you make the most money 

There are a few reasons why I think AI helps inns and B&Bs by leveraging your expertise and allowing you to find better pricing strategies. Let’s take a closer look at a few key benefits.

1. AI is always learning and continually improving rates to drive revenue

When you’re an experienced innkeeper, you tend to lean on what you’ve done in the past and your gut instincts more than data. And for good reason. When you run a successful property that’s one-of-a-kind, you know how much of that comes from your past experiences and making decisions at crucial times. It’s hard to compare with competitors because, frankly, there aren’t many places like yours.

However, it’s possible to rely too much on instincts or gut reactions. 

You might see a competitor change rates during slower times and think, “Should I do that, too?” Or a competitor might sell rooms at higher rates than your inn but doesn’t offer equal value in their personalized guest experience or package offerings. This can cause you to wonder if you’re leaving money on the table. 

AI’s predictive decision-making models make price recommendations based on “what if” occupancy or demand scenarios and then adjust based on the response it sees in customer behavior to those rate changes. It happens in a continuous loop where feedback and reservation data are automatically factored in.

Even if you have rules-based yield management pricing in place, you might rely on the same rules to modify rates for months — or years. As an inn owner, I wasn’t studying every reservation for insights and adjusting my rates accordingly. Who has the time? (Pretty much only AI tools do.) 

AI can adjust rates in real time for sudden or seasonal demand changes, market industry changes, or forecasted demand that very well could impact your bookings and revenue. And perhaps more importantly, AI can look back to analyze how a given rate performed against what was expected. You’ll be able to see if a rate change made an impact on bookings.

Because these tools are continually learning, they can recommend new optimal rates and strategies on your behalf — even while you sleep. You might feel it’s hard to shut your brain off with all you have going on as an inn owner. However, with AI optimizing rates 24/7/365, you can know that one of the most important areas of your business is monitored automatically for maximum benefit.

2. AI crunches the numbers for you (and never needs a coffee break)

If we wanted to work as hard as AI pricing optimization platforms, we’d collect manual and anecdotal data from changes in demand, past reservation pricing, comp sets, and more. That takes a lot of time, and there’s no guarantee it would improve our business or revenue. 

AI absorbs and analyzes all this data in a way that a human never could. This kind of software crunches the numbers for us 24/7 so we can focus on other priorities. 

If we’re not data-driven and analytically precise, we risk losing out on bookings or leaving money on the table. AI software can gather all this data, make sense of it, and recommend pricing changes. 

Since so many of us spend time staying up-to-date on market changes and demand fluctuations, that feature alone is a huge timesaver. 

3. Your expertise is amplified, not replaced 

The most important quality when vetting AI solutions, in my opinion, is asking how much a platform can incorporate your expertise and experience into the model itself. 

Software such as TakeUp can build on top of the owner's experience while also giving them the ability to understand why a rate was chosen in the first place. For example, you can set rate floors or ceilings so the system operates within parameters based on your experience. If you can get bookings at the higher end, it can give you the confidence to increase your ceiling. This also gives owners added comfort and context as the system partners with you to find and unlock new rate opportunities.

For some AI pricing solutions, you, as the owner or manager, set the bounds that the software operates within based on your own experience, past bookings, future bookings, and forecasted demand. You might be pushed out of your comfort zone a bit, but prices will never dip above or below the boundaries you set (in the example below, the bounds are set at $225 and $295). That’s important for peace of mind and your business’s top-line revenue. 

With your pricing floors and ceilings in place and your ability to override any changes, your expertise becomes the software’s boundaries. But some tools even take your real-life expertise a step further.

When considering AI rate optimization options, look for a solution that also includes a human component. Some options have dedicated revenue management experts who support each property. These professionals oversee proposed rate changes and keep close contact the whole time you’re using the platform. It’s not just the software making recommendations; A real person who understands your property and revenue goals can weigh in on any pricing adjustments before they’re enacted. 

You can share feedback and ideas, have in-depth discussions on pricing strategies, and always have the ongoing support you need. This removes the “black box” feeling of not knowing what AI is doing. Someone can always speak to a rate increase and discuss options based on your unique property. 

Giving AI pricing a try

The truth is, we are busier than ever with marketing activities, property upkeep, staff management, guest relations, and the financial management of our inns. By utilizing AI to automate rate changes, innkeepers can spend more time improving their inn’s operations and guest experience so guests keep coming back.

With an AI-powered dynamic pricing tool working overtime within the boundaries I set to drive growth, I feel more confident about my rate-setting strategies. I’ve seen how letting go of gut reactions can drive greater revenue. And I don’t mind getting a little more sleep at night.

Ready to see AI rate optimization in action? Schedule a discovery meeting with TakeUp and see how machine learning can impact your revenue. Contact us to get started.

About the author

Jim Leitch has owned the Inn on Lake Granbury with his wife for 19 years. A background in corporate business development, marketing, and sales has helped him build his 15-room inn into a top lodging destination with a robust conference and event center. Like many innkeepers, Jim leverages technology and data-driven strategies to drive higher revenues and optimize his operations so that he can focus on delivering an exceptional guest experience. He’s currently an advisor at TakeUp, an AI rate optimization tool built exclusively for inns and B&Bs. 

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