For and against: Hospitality experts debate dynamic pricing

Should operators pass on the increased cost of operating out of hours and in periods of high demand? It’s a question that has hit national headlines over the summer when Oasis released its 2025 tour and has since become an hospitality talking point when O’Neill’s put up prices after 10pm in some of its pubs.

 

It’s an issue that has long been discussed in the restaurant sector in particular. Many hotels already operate dynamic pricing models, with prices rising based on demand, but beyond offering incentives such as pre-theatre menus, it’s a model that pubs and restaurants have until now been unwilling to experiment with.

 

Last week, The Caterer conducted a LinkedIn poll asking hospitality operators whether they were for or against dynamic pricing. Out of 151 participants, 35% were in favour and 65% against the sometimes controversial practice of varying the price of a product depending on market conditions.

 

O’Neill’s in London’s Soho came under (what seemed like) unanimous fire for its decision to increase the price of a pint by £2 after 10pm, which would raise the cost of some draught beers to £9.40.

 

The Caterer understands O’Neill’s, which is a Mitchells & Butlers pub, implemented the surcharge to maintain public order. A spokesperson for the pub company also said the temporary price hikes reflected the “need to offset additional costs such as at times when door security is required”.

 

However, the policy attracted further criticism from pub-goers, media outlets and even Westminster Council, which stated: “The council has not advised any business to increase prices to stay in line with other local venues.”

 

Of course, this is not the first time that dynamic pricing has caused a stir among consumers. The furore over the Oasis reunion concert tickets sale earlier this year resulted in consumer watchdog Which? asking the band and Ticketmaster to refund fans hit by surge pricing. And last year, reports of Stonegate Pub Company raising prices at some of its bars during busy periods sparked debate on social media.

 

To debate the issue The Caterer has asked two hospitality experts to give us their take on what went down at O’Neill’s, Oasis and what the industry can learn from dynamic pricing. Their contrasting views suggest there is still much to be discussed on the topic.

 

For dynamic pricing: ‘I’m not sure why O’Neill’s made the decision, but I can certainly understand it’

 

Robert Holland, hospitality consultant and managing director UK & Ireland, HotelPartner Revenue Management

 

 

“I’m very sympathetic to people that operate out of hours. It’s not a time when you can put staff on public transport late at night after they finish work. The venues require doormen after 10pm at night, and the reality is the alternatives are going to be far more expensive anyway for the consumer. Rather than paying £15 for a bottled beer at an upmarket bar that is open until 12am, [a £9.40 pint at O’Neill’s] is still a cheaper alternative.

 

“Hotels have always looked to happy hour to promote lower priced drinks earlier in the evening, so why is it different? Would we object to the price of a pint going up across the board to £9.50 and maybe discounting it earlier in the day? Do we charge an entrance fee for people coming in after 10pm at night to cover the additional costs in a different way?

 

“They always say the second person to any market often excels greater than the first. Maybe operators could learn from [O’Neill’s] mistakes. Maybe only put up your price by £1.50 instead of £2. That’s what revenue management is about: if you find your competitor selling at £30 higher because of an event, you can sell at £20 more, because then you become the nice kid rather than the bad kid.

 

“I would encourage other operators that have been considering [dynamic pricing] to do the same now on the back of the coat-tails of someone like O’Neill’s. Other pub operators and bar operators are experiencing the same increases in cost. How are we going to accommodate with the National Insurance Contribution (NICs) increases and the increase in minimum wage next year?

 

“If we look at Oasis, they were supposed to be the band for the people, and I think a lot of the bad press came because they were supposed to be doing the concert as a gift. Pubs are supposed to be a place where the general public can go for a drink. They are not fancy bars, they are not expensive restaurants, they are pubs, and we see a pub as very much there for the populous. I think that’s where there’s been pushback. No one would balk at a bar increasing its prices or a bar charging an entrance fee, but a pub like O’Neill’s increasing their prices – people frown upon it.

 

“I’m not sure why O’Neill’s made the decision, but I can certainly understand it. And prices are only going to go up next year. The public have to accept in our industry – particularly in hospitality where payroll costs are high – we have to find a way of increasing our revenues, and that revenue comes from increasing prices.”