Siim Karu - Chief Revenue Officer at a&o - has been consistently running tests on the impact Pace Pricing has had on their revenue generation since they switched to Pace in January 2020. In case you missed it - he discovered that, even during a full Covid lockdown in Germany during a traditionally low period of demand, Pace was still able to boost their revenue by 7 percent.
But with another Covid recovery upon us this summer, Siim also revealed how Pace performed in the summer of 2020, when the travel and hospitality market snapped back after the first Covid wave. It might give you a pretty good idea of how the rest of the year could look for your business…
“Because of Pace, we saw a 27.4% RGI increase in August 2020 versus 2019.”
Dynamic pricing vs static pricing
Pace Pricing has delivered substantial revenue upside for us regardless of how low or high occupancy has been. Their automated dynamic pricing platform keeps delivering across a range of scenarios, even during all the challenges of the Covid pandemic.
Before 2020 we were running an old fashioned static pricing revenue model, which required fixing the prices of all categories for a predetermined period of time either based on category or season and with no proactive price changes. In short, it was the opposite strategy to what Pace provides. Our primary reason for switching to dynamic pricing was to achieve the maximum possible RevPAR on any night, with no specific focus on ADR or occupancy growth unless we needed to restrict it manually for strategic purposes.
How to boost revenue for post-Covid recovery
We looked at how Pace performed during the Covid recovery in the summer of 2020 - the month of August in particular. We studied the actual revenue generated using Pace in the 30-day booking window from the fully independent traveler (FIT) segment at our Hamburg City property and, using the actual August 2020 pick up pattern, compared that against a theoretical scenario that our old grid pricing RM approach would have delivered. To be clear, the grid pricing structure was replicating our previous model, which was never able to automatically adjust to demand. Below you can see examples of our old grid pricing model and the new Pace driven dynamic pricing.
Pace Pricing delivered an estimated 22 percent revenue uplift post-Covid vs what our old traditional grid pricing would have done. There was stronger revenue penetration, especially in the 15-day booking window where occupancy remained well below 60 percent - a scenario our old rudimentary grid pricing was not able to adjust around at all.
“Pace Pricing delivered an estimated 22% revenue uplift post-Covid.”
So, particularly in times of relatively low occupancy, Pace substantially impacts revenue with it’s ability to adjust to demand in real time. On average, Pace generated cumulative revenue upside throughout all lead days despite individual dates not always showing a premium. You can see that clearly in the chart below.
We also looked at our actual revenue generation from that post-Covid recovery month of August 2020 and compared it to the previous (normal) year 2019. Our pickup was 5 percent higher in August 2020 compared to August 2019, showcasing once again how Pace Pricing keeps outperforming even during the challenges of Covid (see charts below).
Furthermore, we also saw a 27.4 percent RGI increase in August 2020 versus 2019. So to cut a long story short - and despite all the challenges of Covid and historically low occupancy - Pace has really outperformed.