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January 24, 2024
Haley Dalian
Dive in as we demystify dynamic pricing, so you can properly leverage it to boost revenue and profitability.
Dynamic pricing is still a hot topic in the outdoor hospitality industry, yet much less mysterious than you may think. Hotels, airlines, and other hospitality sectors have capitalized on demand-based and time-specific pricing for over a decade, including major companies like Orbitz and Uber.
The outdoor hospitality industry used to lag behind these pioneer sectors, but now dynamic pricing is much more commonplace for campground operators and campers alike. But are all instances of dynamic pricing the same? What can and can’t dynamic pricing accomplish? Is this a practice you should steer clear of or use strategically to grow your business?
We have the answers to these questions and more. Read on as we define, demystify, and debunk common myths about dynamic pricing.
Dynamic pricing is the strategy of adjusting the selling price of something based on demand, preferences, and time. Merriam-Webster defines “dynamically” as being “marked by usually continuous and productive activity or change,” which is exactly the impetus behind this pricing scheme. Odds are, you are already taking advantage of a simple or manual version of this strategy without realizing it.
Imagine a sunny day in the park and a nearby umbrella vendor. The vendor might charge $5 per umbrella under these circumstances, where demand in the moment is low and supply is plenty. Now imagine a storm cloud rolls through and the sky begins to pour rain. The vendor will opportunistically and dynamically change their rates to $20 per umbrella, since demand and appetite for the product have shifted with the external conditions. This simple scenario illustrates the potential dynamism of any given transaction and market.
For park operators, the central goal of dynamic pricing is to maximize the amount you should charge for any given site on any given day based on the current supply and demand. Notice we did not say could charge—just like the umbrella vendor who didn’t choose to sell their umbrellas for $100 a piece, your pricing decisions and rules should also fall within reason to avoid backfiring.
Myth: I’ve never used dynamic pricing before at my campground.
Do you offer different rates for holidays, during your high and low seasons, or over weekends versus weekdays? If so, you’re already employing a form of dynamic pricing.
With Campspot’s dynamic pricing engine, you can take your strategy to the next level by adjusting pricing based on your real-time occupancy and how far in advance guests are booking. This ensures that you’re getting the most value out of each and every site you offer.
Truth: Many operators already use some form of dynamic pricing without realizing it.
Myth: Using dynamic pricing will hurt my business more than help it because it will alienate or anger my customer base.
As we mentioned above, dynamic pricing has been a common practice in certain industries for years, but today, dynamic pricing is creeping more and more into everyday life.
At the end of 2023, a chain-restaurateur in the United Kingdom announced it would charge more for beer during evenings and weekends. During the New England Patriots’ Super Bowl run in 2019, the team implemented dynamic pricing for single-game tickets to capitalize on their success and fandom—also known as funflation. There’s even instances of product prices on Amazon fluctuating by the minute and talk of brick and mortar businesses displaying electronic shelf markers to adjust their rates at whim.
This range of examples may cause you to feel much less guilty for considering or using dynamic pricing at your property, but the real reason is less about morality and more about utility.
Economically speaking, utility is “the total satisfaction or benefit derived from consuming a good or service.” The RVer who is seeking a meaningful experience on the road or the family planning their first camping trip with the kids will likely focus less on a $20 site-night difference if their wants and needs are being met. Fun activities, clean bathhouses, and top-notch customer service equal maximum utility. Conversely, if the rates and customer experience you provide ultimately misalign with your campers’ expected utility, this leads to customer dissatisfaction and potentially negative reviews.
Through dynamic pricing, you can’t account for everyone’s individual preferences, but you can think in terms of groups, customer segments, and trends. This is why charging different rates seasonally or over holidays is an accepted practice. Vacationers know they aren’t the only people seeking to travel at a busy time. Their acceptability for certain rates is often higher because the satisfaction they will derive from being able to relax somewhere new on Labor Day Weekend is also higher.
There are benefits to consumers becoming more accustomed to dynamic pricing in nearly every industry, but balance is key. As restaurant and store owners will likely find if they go too far, there is a tipping point where dynamic pricing can be viewed as price gouging. Keep utility and your core principals in mind when serving campers to help strike the right balance.
Truth: Customers are used to dynamic pricing in many facets of life. As long as you are meeting your customers’ utility, there’s a place for dynamic pricing in your business strategy.
Read Next: 6 Environmental Education Programs to Host at Your Campground
Myth: Dynamic pricing is always an increase in what I’m charging.
Naturally, your overall goals as a campground operator are to drive revenue and valuable experiences for your campers. If it’s your off-season and an upcoming weekend is looking sparse, you can proceed in one of two ways.
The status quo would be to charge your normal off-season rate and expect that you won’t fill the remaining sites given the timing. With dynamic pricing, however, you could instead decrease your nightly rate last minute to encourage a few extra bookings that you wouldn’t have secured otherwise.
As the old adage goes, a camper in your cabin is better than two driving past your property! Though it may initially seem counterintuitive, be prepared for your rates to fluctuate up or down given supply and demand in order to generate the most revenue possible.
Importantly, dynamic pricing is not a “set it and forget it” practice. You should be regularly monitoring your dynamic pricing alongside your customers’ experience, in the same way you should regularly calibrate your revenue management strategy. The benefit of implementing dynamic pricing automatically through a software provider like Campspot is that you set the rules ahead of time and you don’t have to manually time the market.
Because Campspot’s business rules engine mimics the logic of a real reservationist, its algorithm can make discretionary decisions in order to seize revenue-driving opportunities for your park, including harnessing the power of dynamic pricing at the right rate and the right time. These rules can be based on factors such as occupancy rates and time-to-arrival. Just like the example above, this means the pricing rules can automatically relax as the arrival date approaches.
The rules can also be adjusted by site type. High demand for lodging wouldn’t impact lower demand for your tent sites, for example.
Finally, just as a reservationist would know to do, Campspot’s dynamic pricing engine knows to make rule exceptions in order to close gaps in your reservation grid and prioritize revenue. Hence, a strategically set and timed lower nightly rate would do the trick in this case.
Truth: Dynamic pricing is simply an attempt to match your rate with the demand coming from your customers—whether increasing or decreasing.
Myth: Dynamic pricing means I’m trying to nickel and dime my customers.
Even if dynamic pricing were less normalized in society, it doesn’t have to represent an extreme deviation from base pricing nor does it have to be an increase, as we discussed. When setting your base rates, you can’t account for the weather, gas prices, or any number of infinite variables that may fluctuate demand. However, enabling dynamic pricing can help you capitalize on infinite opportunities as they arise, despite externalities—all while maintaining reasonable booking options for your guests.
Consider the scenario of a campground that sells out its holiday weekend occupancy two months in advance, while charging $60 per night for water/electric sites. In this example, that campground is missing out on two months of people looking for availability at their property who would have potentially paid $80 a night or more given their demand. Therefore, the people who would have placed a higher value on the experience of staying at this park are missing the opportunity, while the park also loses out on a significant amount of revenue.
Remember, if your rates and rules are executed reasonably, recalibrated as needed, and you meet or exceed your guests’ expectations in the end, then there will be no issues.
Truth: It’s impossible to perfectly predict demand ahead of time, and dynamic pricing helps buffer this uncertainty while capturing extra revenue.
Myth: I make the most money possible by ensuring my campground is booked at 100% occupancy.
Optimal occupancy can be a tricky concept. You may think selling out your entire property is always the best answer revenue-wise, but dynamic pricing illustrates why this isn’t the case. Let’s examine two identical parks with 50 sites each and each charging a nightly base rate of $100.
In this case, the campground using dynamic pricing has made $1,500 more, despite not selling out. They also still have the opportunity to fill their remaining spaces for last-minute campers at a premium price. Repeat this example over the course of an entire camping season and you can see a dramatic increase in revenue.
The caveat here is if your property sells out right up until the last second of the day, then you executed dynamic pricing and optimal occupancy perfectly. Relying on dynamic pricing within your campground reservation system will get you the closest to this sweet spot by automatically optimizing and refining your rates as time to arrival elapses.
Truth: Selling out may mean you weren’t charging enough. You will actually make the most money by identifying the amount someone is willing to pay for what you offer.
Read Next: What Campgrounds Can—and Can’t—Learn From the Hotel Industry
Myth: Dynamic pricing is a one-time on/off switch that I don’t have control over.
Not all dynamic pricing features are the same, but we can assure you that none have the intelligence or flexibility of Campspot’s.
We have already reviewed some of the ways Campspot’s rules engine will mimic the actions and rationale of an actual reservationist to avoid leaving revenue on the table. Rather than operating as a binary up-down rate or high-low occupancy, the fluid and intelligent foundation of Campspot’s dynamic pricing feature eliminates the guesswork and manual effort.
As a software administrator, you also have complete control over customizing your business rules and testing rate variations at your leisure. This includes enabling or disabling dynamic pricing.
We have a feeling once you try it, though, you won’t want to shut it off. One Campspot Software user accidentally enabled dynamic pricing and only realized so after making significantly more revenue in a matter of months. Furthermore, in an interview with award-winning Okefenokee Pastimes Cabins and Campgrounds, their owner said this:
“With dynamic pricing, we’re averaging just over $17 per reservation in additional revenue because of our occupancy.”
Truth: Campspot’s dynamic pricing feature is a flexible opportunity that allows you to approach it in whichever way you choose, whenever you choose.
Campspot makes it easy to test and explore the many bottom-line benefits of dynamic pricing at your own pace with minimal training, time, and effort. You’ll enjoy passive, added revenue while continuing to satisfy your campers’ preferences and expectations.
Whether it’s limiting your dynamic pricing to certain weekends or examining your occupancy trends to provide recommendations, our team is happy to help you craft the best strategy for your business. To see our dynamic pricing feature in action, contact our team for a complimentary demo.
So long as demand exists (up or down), the practice of dynamic pricing will continue, you’ll be there to provide your unique brand of camping, and we’ll be here to provide the powerful online tools that make it possible!
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Haley Dalian is a lifelong Michigander who takes advantage of recreation throughout the state’s changing seasons—from snow skiing to scuba diving in the Great Lakes. A former Campspot marketing manager, Haley holds a B.A. degree in public policy from Michigan State University and an M.S. degree in sustainability from the University of Michigan. She is passionate about environmental stewardship, exploring the outdoors, and has never met a potato she didn’t like.
This post was originally published in January 2020 and has been updated with the latest and greatest information for accuracy and comprehensiveness.
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