What Is Dynamic Pricing?
Dynamic pricing is a pricing strategy that raises prices when demand is high and lowers them when demand is low, to maximize revenue, manage demand and lift sales in quiet periods. It suits hotels because the number of rooms is fixed, while demand rises and falls with the seasons and local events (Dynamic pricing: Maximizing revenue in the hotel industry (EHL Insights)).
Last updated: October 2026
How dynamic pricing works
Many businesses run their dynamic pricing on AI predictive analysis. The software reads historical and real-time data, works out a price for current market conditions, and lets prices change several times a day (Dynamic pricing: Maximizing revenue in the hotel industry (EHL Insights)).
Hotel pricing has moved from allocating inventory toward price optimization, using methods that account for the price elasticity of demand and competitors' prices (The wheel of dynamic pricing (International Journal of Hospitality Management, 2022)). Each room type can carry its own price, because demand differs between them. Family rooms or rooms with a view may sell at a premium in holiday periods, while single rooms may be in more demand during the working week (Dynamic pricing: Maximizing revenue in the hotel industry (EHL Insights)).
Cheaper rates need protecting, or guests who would pay more simply book them. Hotels set rate fences for this. Physical fences use room type or room location; non-physical fences use terms such as advance purchase or a non-refundable booking (The wheel of dynamic pricing (International Journal of Hospitality Management, 2022)).
With some tools, the software suggests and the hotel decides. One hotel pricing product recommends prices for individual hotel rooms. To deviate from those prices, a hotel user needed "override permissions" in the software, but the product did not require hotels to implement its recommendations (Gibson v. Cendyn Group, LLC (U.S. Court of Appeals, Ninth Circuit, 15 Aug 2025)).
Why dynamic pricing matters for hotel distribution
In the U.S., a large share of hotel bookings now arrives in the last week before the stay. In June 2025, 40% of U.S. hotel bookings were made within seven days of arrival. Globally, bookings made within seven days rose to 21% of all reservations, from 18% in 2019 (The Rise of Last-Minute Bookings (Skift, Aug 2025)).
Each new price then has to reach every channel the property sells on. A channel manager connected to the revenue management system can push each new rate to every distribution channel as it changes (Hotel dynamic pricing: Complete guide with examples).
Rates from two sources can also collide. On Vrbo, a host's base rate can be one price for every night or vary by day of the week, and when rate automation is on, it overrides rate updates made in the Calendar (Manage your rates and discounts (Vrbo Help)).
Shared pricing software has reached the courts as well. In August 2025 the Ninth Circuit affirmed the dismissal of an antitrust complaint over hotel pricing software used on the Las Vegas Strip, the first U.S. appeals court to rule on the question (Ninth Circuit Clarifies Antitrust Implications of Algorithmic Pricing (Arnold & Porter)). The plaintiffs alleged that the vendor claimed its price recommendations were accepted 90% of the time. That figure is the plaintiffs' allegation, and the court made no finding on it (Gibson v. Cendyn Group, LLC (U.S. Court of Appeals, Ninth Circuit, 15 Aug 2025)).
Dynamic pricing compared with other pricing approaches
| Approach | How the price is set |
|---|---|
| Dynamic pricing | Moves with demand, from historical and real-time data; can change several times a day |
| Static pricing | A fixed rate card: a standard weekday rate, a higher weekend rate and increases in peak season |
| Best available rate (BAR) | A preset number of rate levels for the year ahead, each used as demand changes |
| Floating BAR | Different BAR levels on different nights of the same stay |
| Personalized (one-to-one) pricing | The price is adjusted at the level of the individual customer |
| Revenue management | The wider discipline; dynamic pricing sits at its core |
Static and dynamic rates: Hotel dynamic pricing: Complete guide with examples. BAR, floating BAR, personalized pricing and revenue management: The wheel of dynamic pricing (International Journal of Hospitality Management, 2022).
Frequently asked questions
What is one benefit of dynamic pricing?
What is a dynamic pricing strategy?
What is an example of dynamic pricing?
What is a potential negative effect of dynamic pricing?
What is dynamic pricing in hotels?
Related terms
See all termsWhere Jetstream fits
A price change only earns money once guests can book it, on every channel where the property sells. Jetstream builds an AI channel manager that connects a property's systems to the channels where guests book, and keeps rooms, rates and availability accurate on each one, managed from one place.