The base-price model has dominated STR dynamic pricing for so long that many assume it’s the only way to do it. It isn’t — there are many ways to price dynamically; base price is simply the option our industry settled on. A base-price model avoids the forecast and optimization steps that more sophisticated models use; it doesn’t even need to know the price, only how much to move a user-set base up or down based on competitors.
Why so many comps
These models try to average a broad market price and use that average to nudge the base price. A big dataset — 500 to 1,000 listings — eliminates the noise of day-to-day fluctuation and produces a smooth forward-pricing curve, which is exactly what the model needs since your price is just a function of that average. Shrink the comp set and you may pick up local trends, but the model becomes too responsive and erratic. To stay consistent and predictable, it needs a lot of comps.
Why they were built this way
Like early airline models, every base-price model runs the same basic, relatively simple process — the differences are mostly marketing and interface (you could build one in Excel). Two reasons it dominates: building a real optimization model is genuinely hard, so if customers will accept this, you save enormous R&D; and base-price models scale almost anywhere because they need no historical data, no revenue processing, and no currency conversion.
The disincentive for innovation
For a decade, the STR market offered two options: the base-price model or manual updates. As with airlines, when every major provider shares one model, innovation stalls inside it and it becomes “the way things are done.” The technology is easy to replicate, so many vendors and PMSs ship their own version — all the same model.
The third option
There’s now a third option — the Quibble optimization model — which does away with the base price and its restrictions entirely. Because it uses a different process to control price, it solves the comp-set problem too: the total comp set is just 10 to 15 listings.