3 Ways to Improve Your Vacation Rental’s Pricing
The Importance of Pricing
For short-term rental owners, pricing your property can be one of the toughest parts of setting yourself up for success. While many owners may opt for the simplest strategy, like setting one price and forgetting it, this can mean losing out on a ton of revenue and bookings. If your average nightly rate is too low, for instance, you might not even be able to cover your operating expenses and make a profit. While if your price is too high, you won’t be getting the bookings that you’d hoped for and will lose out on the revenue you expected to make.
There’s a ton of different factors that go into determining the optimal price for your rental, and today, we’ll break down what a dynamic pricing strategy entails, as well as three tips to improve your pricing and boost your occupancy.
What is Dynamic Pricing?
Dynamic pricing has risen in popularity as of late, and not just in the short-term rental world–it is seen everywhere from the airline industry to ride-sharing services like Uber and Lyft. This type of pricing refers to the practice of varying your rates due to the changing factors that affect demand in the market, rather than just selling your service or goods for a static and unchanging price. Dynamic pricing has taken off in the short-term rental world, and there’s plenty of evidence suggesting that pricing your property dynamically can boost your profits as well as your bookings.
3 Ways to Improve Your Short-Term Rental Pricing
#1: An Inside Look at the Competition in Your Market
One of the easiest ways to improve your pricing strategy is to regularly perform market research in order to keep an eye on the competition in your rental’s area. Search for comparable properties (those alike in size, location, and amenities to your property) on popular distribution channels and take a look at the prices on their booking calendar for the next few weeks to determine an average nightly rate.
But don’t just stop there–search for a few months out to see how seasonality and time of year affects rates. You might already have an idea of when low and high seasons occur in your market, but seeing how other property owners respond to these changing variables can give you a good idea of how to do so for your rental as well.
#2: Use Length of Stay Discounts to Sweeten the Deal
Airbnb comes with a tool that can work in your favor when you’re figuring out your dynamic pricing strategy: length of stay (or LOS) discounts. When guests decide to stay at a rental for a longer period of time, they’ll typically expect to pay less per night than someone only booking a 1-2 day stay, and the Length of Stay Discounts can be introduced to sweeten the deal even more.
If you’re unsure about what level of discount to give for weekly or monthly stays, take a look at how your competition stacks up–usually you’ll find a discount of around 10-15% off for weeklong stays, while monthly stays are typically discounted around 20%, though this will vary depending upon what market you’re in.
#3: Pay Attention to Supply and Demand in the Short-Term Rental Market
A large part of determining effective pricing strategies is taking into account supply and demand across the vacation rental market as a whole. To stay up-to-date on the latest statistics and figures that will affect the industry in the near future, we highly recommend following sites like AirDNA and KeyData, which publish regular updates and reports on the state of the market. Sites like these also provide a wider-lens view of the state of the travel industry, which can help you predict how business will grow or shrink over time and adjust your rates accordingly.
For example, if you find that the market is currently on an upswing, it will be easier for you to charge a higher premium for your vacation rental while still keeping occupancy at its maximum. Or, if you’re seeing huge changes from the year before and are wondering why you’ve experienced a slowdown, studying supply and demand can give you an inside glimpse into how the market is currently doing and how that affects your occupancy.
Pricing Still Got You Down? Take a Look at LocalVR
There’s no doubt about it: pricing can be one of the most complex parts of becoming a short-term rental owner. But once you have a handle on dynamic pricing and strategies to implement it into your own business, you’ll find yourself with higher occupancy and increased revenues than you would’ve seen with a static and unchanging price per night.
Hosting your vacation rental and dealing with issues like pricing doesn’t have to be a full-time job, however. Here at LocalVR, we’ve created one of the most effective tools on the market for pricing your rental–our proprietary Local Pricing™ algorithm, which considers a variety of market factors to help us price your home at the best rate possible, every day of the season. To learn more about our property management services that include this expert revenue management, check out our Program page for more information.