I fired dynamic pricing today

[Collin Hays]

Yes, fired Pricelabs. And I feel relieved for it.

I studied the whole "dynamic pricing" phenomenon for months before deciding to proceed with Pricelabs.  I had a few phone calls with Pricelabs, and their basic premise was pretty convincing:  "We are going to help you book your rental for as much as we can, as often as we can."  Several months in, what they were really saying is "We are going to help you squeeze every dollar out of your guests when you have the opportunity."  I have some problems with that.

Soon after we began, I got a call from "Suzy", who has stayed at one of my cabins with her husband for the last 4 summers.  "Collin, why are your rates twice what they were last summer?"  Good question, Suzy.

Then an email:  "I think something's not right.  I am trying to book a cabin, and one night it's $179, and the next night it is $329."   Yes, something's not right.

Then another email:  We just booked a cabin for $359, and noticed that every other day of that month that we can find, it's $209."  Yes, that's a problem.

As this thing has gone on, I realize that "AI" cannot be taught business ethics.  It is only about numbers and data, and that's not a good thing. What would we think if, on New Year's Eve, Outback Steakhouse tripled their menu prices, just because they could get away with it that night?  What if, upon an imminent snowstorm, Home Depot began charging $200 for a snow shovel, just because they could?  If we hope to be in business over the long term, we have to establish "fair and reasonableness."  We cannot breach our guests' trust by playing games with them.  It is immoral, unethical, and will likely hurt our business long term.  

Over New Year's, my family stayed at the Hotel Del Coronado for 5 days, for around $600 per night. That is around $100 more than a January night.  (Fantastic place by the way!)  Could they have fetched double that on New Year's?  Probably.  Why didn't they?  Probably to protect their trust of their customers, and hope that we keep coming back, year after year.

So today, I went back to my old business model:  A fair price for my properties.  Four distinct rate seasons.  That's it.  I'll sleep better tonight. If I have a homeowner client that wants to play games, I'll gladly help transition them to another manager.

[Garrett Kroll]

Capping the nightly rates to reasonable amounts with the pricing software allows us to balance both of these needs.