Definition
Shadow pricing is an analytical technique where alternative pricing scenarios are simulated without being applied live, in order to assess their potential impact on demand or revenue.
It allows hotels to “test” pricing decisions without directly affecting the market.
Why it matters
Shadow pricing helps to:
- Evaluate strategies before implementation.
- Reduce risk in pricing decisions.
- Understand demand price sensitivity.
- Validate revenue hypotheses internally.
It enables forward-thinking without real-world exposure.
Practical example
A hotel analyses what would have happened if it had increased prices by 10% during high-demand dates.
Even though it didn’t apply those rates, it can estimate the potential impact on revenue and occupancy.
