Static Pricing vs Variable Pricing vs Dynamic Pricing for Tour Operators
Pricing for tours and attractions can be broken down into three common models: Static, variable, and dynamic. Until recently, operators had to choose between the simplicity of static pricing and the added effort and cost required to eke out a marginal boost in revenue through variable pricing.
Now, dynamic pricing offers a model that remains simple and easy to implement while offering even more flexibility and optimization than variable pricing.
To kick off our series on revenue management for operators, let’s start by defining these pricing models and looking at the pros and cons of each.
What is Static Pricing?
Tour operators and attractions have long relied on static pricing, setting prices based on a fixed rate that rarely changes.
The advantage of static pricing
The main advantage of this pricing model is simplicity. The price is what it is, and this makes the math of running a business nice and simple.
Static pricing works well with offline marketing, such as flyers.
Problems with Static Pricing
Static pricing, the traditional pricing model used by most tour operators and attractions, has several limitations. The same simplicity that makes it a tempting strategy, especially for small, low-tech, or cash-only businesses, comes with some built-in disadvantages.
Static pricing fails to capture the true value of a product or service, leading to missed revenue opportunities. A static price can’t take into account fluctuations in demand and other factors that could drive an uptick in revenue for operators.
You can’t account for fluctuations in demand with static pricing. This results in overpriced or underpriced offers.
There’s no competitive advantage to static pricing. It’s easy for competitors to simply undercut your prices.
What is Variable Pricing?
Variable pricing allows you to take into account more factors than static pricing but is still less comprehensive and adaptable than dynamic pricing.
This is probably the most common pricing strategy among operators and attractions, but it’s not the best option—as we’ll see when we look at dynamic pricing.
Advantages of variable pricing
Variable pricing can be a good way to drive revenue during known periods of higher demand, such as holiday weekends and seasonal peaks. It also allows you to incentivize demand during slow periods with special offers or off-season pricing.
Disadvantages of variable pricing
Variable pricing can lead to missed opportunities as the varying price points tend to be broad. At the end of the day, it’s basically static pricing with multiple price points. A company manually adjusting prices for seasonal demand could be leaving money on the table for all sorts of reasons.
It’s possible to account for more pricing factors within a variable pricing model, but doing so can be a lot of work.
For example, we worked with one client who, before coming to Ventrata, was paying a member of their marketing team to manually adjust ticket prices to charge a premium for sunset.
The client was investing time and money for this marginal increase in revenue. An improvement over static pricing, but still not the best way to do things.
What is Dynamic Pricing?
Dynamic pricing allows operators to adjust prices in real-time, accounting for any number of variables, from time-based demand down to the hour, to tour capacity and even the weather.
Ventrata takes into account various rules when implementing dynamic pricing. These rules can include:
Time-based rules: These rules consider the time of day, week, or year to adjust prices. For example, prices may be higher during peak season or on weekends.
Sales-based rules: These rules adjust prices based on the number of tickets sold. If sales are high, prices may increase, and if sales are low, prices may decrease.
Capacity-based rules: These rules adjust prices based on the capacity of the venue or attraction. For example, if a venue is close to selling out, prices may increase.
Forecasting rules: These rules use predictive analytics to adjust prices based on anticipated demand. For example, if a popular event is coming up, prices may be increased in anticipation of high demand.
Challenges of Dynamic Pricing
While dynamic pricing offers many benefits, it also comes with its own set of challenges.
One of the biggest challenges is determining the optimal pricing strategy. Sophisticated pricing tech can help you optimize pricing, but it can’t tell you what to optimize for.
Until recently, a major hurdle for businesses interested in dynamic pricing was platform integration. Offers could be inconsistent between booking sites and an attraction’s own website and this created fresh complications
This was really the last piece of the puzzle keeping dynamic pricing from becoming the obvious go-to solution. And was something we set out to solve with Ventrata.
Benefits of Dynamic Pricing
The main value of dynamic pricing is in driving revenue. It allows businesses to capture the true value of their products or services, getting the most out of their margins. And it provides a competitive advantage by allowing even the smallest businesses to respond quickly to market changes and stay ahead of the competition.
For customers, it ensures fairness by adjusting prices based on demand and availability. Third, it provides a competitive advantage by allowing businesses to respond quickly to market changes and stay ahead of the competition.
Dynamic pricing, the “set it and forget it” solution
Static pricing has been the traditional model used by tour operators and attractions for years, but its simplicity comes at the expense of profit and growth. Variable pricing offers more flexibility for operators willing to put the time in, but its versatility is limited, and more variables mean more complexity and effort.
Dynamic pricing offers new opportunities for revenue optimization and customer satisfaction. It offers even more flexibility and customization in a simple, “set it and forget it, algorithm-based platform that scales and adapts to grow with your business.
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