Pricing is more than just a number – it is a tool that shapes how your guests perceive your accommodation and influences their decision to book. By understanding the psychology behind pricing, you can set the right rates that lead to more bookings, higher revenue, and inevitably a more profitable business.  

The Guest’s Perspective: How Much Should It Cost?  

When guest’s book accommodation, they rarely know how much it “should” cost. They might grasp the difference between high and low seasons, but with so many variables – location, amenities, competition – there is no fixed guide for what a fair price is. This is where psychology comes into play.  

Pricing psychology fills the gap, giving you the flexibility to set prices that appeal to your guests while increasing your revenue. More than anything, guests want to feel like they are getting the best: price, quality, or value. Your pricing strategy can send those signals, making your guests feel successful when they book, and helping you achieve your goal of more bookings at higher rates.  

The Dynamic Nature of “Best” Pricing 

The ideal price is not fixed; it shifts with demand, availability, and market conditions. Successful businesses adjust their prices to reflect these changes. For example, hotels often raise their rates as occupancy increases or when a big event in the area is coming up. Contrarily, they lower rates when demand drops.  

Let’s explore how guests perceive best pricing – because that is what gets them to click the ‘book now’ button.  

1.Best Price: Standing Out in a Crowded Market 

Guests can easily compare prices across Google, OTAs, and directly on the accommodation’s site. To attract bookings, your direct rate should be positioned as the most attractive option. OTAs are experts at luring in guests with offers, but you can outsmart them by adding surcharges to OTA rates, ensuring your direct price remains the most appealing choice.  

2. Best Quality: More Than a Number 

Quality is often hard to quantify but is key in a guest’s decision-making, reviews are a strong indicator of perceived quality. Google has become the go-to for reviews, surpassing even TripAdvisor as an influence. Improve your perceived quality by actively managing your review scores, increasing recent feedback, and highlighting your high-quality photos. Awards also bolster the perception of quality, setting your property apart in a crowded market.  

3. Best Value: The Winning Combination 

Value is subjective to the individual guest and fluctuates based on what is available on the market. When options are limited, any available hotel can become the “best value”. Value combines price and quality; guests book when they feel they’re getting the best value for their budget. While dynamic pricing has long been used by big chains, smaller accommodations are now adopting these strategies, seeing impressive results. 

Overcoming the “Fair Value” Myth in Small Accommodation 

Many independent property owners hold on to the idea of “fair value” – a set price they believe is right for all guests, always. This mindset often limits profitability. Unlike big chains, smaller, family-run businesses are more likely to fear raising prices, worried they will lose guests. However, “fair value” is a myth – guests do not know what the “correct” price is; they are simply looking for the best value.  

Take the example of McQuade Hotels, a small hotel group in Glasgow, that boosted their Average Daily Rate (ADR) by 43% in just four months using pricing technology. Despite higher rates, their review scores also improved, demonstrating that guests were still satisfied with the value offered.  

Psychology of Pricing: Lessons from Other Industries 

Dynamic pricing isn’t exclusive to hotels – just look at how airlines price their tickets. Flight fares fluctuate constantly based on demand, time of booking, and travel dates. Customers accept that prices vary – cheaper months in advance, more expensive last-minute, and higher during peak times. The same applies to accommodation: adjust your rates to match demand, or risk losing revenue.  

Embracing Technology: The Key to Successful Pricing 

Smaller accommodations often lack the time and resources to manually adjust prices. But affordable technology now exists to help even the smallest B&Bs optimise their rates. Pricing tools analyse demand, availability, and market trends multiple times a day, suggesting ideal prices that fit within your comfort zone.  

Setting a “pricing band” – a minimum and maximum range you are comfortable with – can help you maintain control. While the idea of “fair value” might be outdated, you can still ensure prices remain within a range that feels reasonable to both you and your guests.  

Conclusion: Utilise the Power of Dynamic Pricing 

Your business can achieve higher profitability by systematically adjusting prices to match demand. While manually adjusting prices yourself is possible, technology does it better, faster, and with more precision. By embracing these tools, you can take the guesswork out of pricing, increase your revenue, and focus on what you do best – delivering exceptional guest experiences.