EDITOR’S NOTE: This is Part One of a two-part series on Dynamic Pricing in the Camping Industry. Part Two will be included in tomorrow’s Sunday, June 27 edition of the RVtravel.com Newsletter.
How much are you willing to pay to camp?
Dynamic pricing is quickly sweeping through the camping industry as more park owners struggle to find the perfect formula to deal with record high occupancy while maximizing profits, and yet still end up with happy (or at least happy enough) campers.
If you’ve ever shopped with Amazon.com, ridden in an Uber, or booked an airline ticket, you’ve already experienced the receiving end of the dynamic pricing model. It’s the modern means of compiling everything you know about a potential customer and – using artificial intelligence and complex algorithms – using that data to squeeze the highest possible rate based on your available product inventory.
Dynamic Pricing 101
Dynamic pricing goes by several different names, including demand pricing, surge pricing, and time-based pricing. In its most simple form, it’s an automated price reaction to changes in competition, supply and demand, and other market forces. For the RV consumer, it’s important to understand dynamic pricing, why it’s growing, and why it’s likely here to stay.
In the example of the Uber ride share service, dynamic (surge) pricing is used to quickly raise the cost of a ride when demand surges after a large event or at large airports. The rise in rates lures more Uber drivers, which in turn cuts down the wait time for riders willing to pay the additional cost.
It gets much more complex in other industries. When you fly with a commercial airline, it’s likely the fellow next to you paid a vastly different amount for his ticket than what’s showing on your e-ticket stub. That’s because airlines pull in data about the demand for available seats along with all the info they have on an individual’s flying history in order to offer up a rate that the flyer will likely accept. Business flyers, for instance, pay less attention to the cost than vacation flyers and are therefore ripe for paying higher prices.
Shopping behemoth Amazon goes even further. They know your complete shopping history, where you live, your likely income status, usual shopping times, product return history and, well, more than you can ever imagine. All that data gets automatically dumped into an extremely complex algorithm that again serves up a price it thinks you will tolerate.
At its core, dynamic pricing is a blazing-fast automated pricing response to real-time demand. In camping, the more people who want the same campsite, the higher the price.
Camping is behind the curve on Dynamic Pricing
Campgrounds have been using a very basic form of dynamic pricing for decades. Any campground that has differing rates for holidays, shoulder seasons or weekends is, in fact, practicing a rudimentary form of dynamic pricing.
What’s new to the camping industry is the ability to automate the process using extremely complex algorithms that factor in things such as your camping history, you RV’s specs, your age, number of people camping, your pets, and even your ZIP code (to help estimate your likely income). Next comes everything the algorithm knows about the campground’s current site supply as well as the likely future demand for a particular site type at the time of the requested reservation.
The dynamic pricing algorithm is even able to access the campground booking chart, playing a lightning-fast game of Tetris as it adjusts camper reservations and available sites to maximize occupancy as well as potential revenue. This all happens in the nanosecond after you request your reservation, and the price you see quoted is the end result.
Campspot is one of the leaders in providing dynamic pricing reservation tools and operating systems to campgrounds. In its online marketing materials, Campspot says that dynamic pricing simply “ensures that you (the campground owner) are getting the most value out of each and every site you offer.”
THE CAMPSPOT STORY is a good example of the explosive growth in campground interest in dynamic pricing. The parent company (Northgate Resorts) didn’t create Campspot until 2015. It’s grown to now include a network of 1,300 campgrounds. The company has 80 employees in three offices in the U.S. and serves campground owners in 49 states and all Canadian provinces.
Campspot is also used by marinas, breweries, racetracks, event venues and glamping resorts. But it’s the reservation management of more than 100,000 total campsites in the U.S. and Canada that is its main selling point.
“Dynamic pricing is the norm in many tangential industries to ours, such as airline and hotels,” said Campspot Marketing Manager Haley Dalian. “Outdoor hospitality has been slower to adapt.”
“When we bought our RV resort, we added Campspot,” said Mike Tuma, owner of the Lakewood RV Resort in North Carolina on Campspot’s marketing website. “Sure enough, in June, July, August and September, revenue was up 50%, just like that.”
More “Dynamics” on the way at KOA
Kampgrounds of America Inc. is also on the verge of adding some level of automatic dynamic pricing to its 520 North American campgrounds, according to Senior Vice President of Information Services Andy Metroka.
“We are still in the process of defining the business rules for dynamic pricing at KOA,” Metroka said. “It’s been on the radar for a while, but it isn’t as simple as it is in the hotel industry. There are a lot of variables, and we don’t know what it will look like yet for KOA.”
KOA owners have been able to manage their rate plans based on occupancy for several years, but it’s been a manual process up to now.
“Our vision is to look at site demand and either handle the rates automatically or prompt the owner when site availability is going down and demand is still going up,” Metroka said. “And there’s also the factor of how close you are to the arrival date. We want to drive rates with data instead of by the seat of the pants. We can really do data-driven pricing now.”
When KOA does add dynamic pricing, it will be offered to all 520 of its parks. Add that to Campspot’s 1,300 potential locations that could use dynamic pricing (about 250 Campspot parks currently are) and you’ll have more than 1,800 campgrounds that could use dynamic pricing via just those two major vendors alone.
Before you write off Dynamic Pricing as just another example of corporate greed in America, consider that supply and demand has always dictated what you pay for any product. Dynamic pricing just makes it happen extremely fast using tools that owners have never had before.
Campground owners, like any other business, have every right to make a fair profit driven by what the market will allow. They in all likelihood will take a large portion of their profits and put it back into their campgrounds, investing in the advanced WiFi, patio sites, new roads and all of the other amenities campers want.
Dynamic Pricing does precisely what it’s intended to do – maximize a campground’s profits and occupancy by adjusting prices quickly in response to supply, demand and buyer-cost tolerance. Dynamic pricing will be the new normal in camping as long as there are campers willing to pay the “going rate.”
In Part 2, we’ll take an in-depth look at what’s going on behind the curtain when a campground uses Dynamic Pricing, and what you can do to ensure you get the best rate possible when it’s time to book. Read Part Two now.