One characteristic of successful vacation rentals is that they are aware of the emerging market and rental properties, so they understand how to get ahead of their competition. However, being aware doesn’t mean implementing a bunch of new tools. Instead, it’s about understanding and knowing what’s out there and how it works.
Successful vacation rental businesses do this so that in a time of growth or crunch, it’s almost like they are mechanics lifting the hood of the business and they know which levers they need to pull.
Dynamic Pricing: What is It?
Dynamic pricing is a great example of a new developing category of services and tools that are designed to help managers and owners improve their business’ bookings. Dynamic pricing is science that has been used in the hotel industry for many years, and it utilizes technology to adjust nightly prices based on demand and supply.
How to Increase Your Profit Using Dynamic Pricing
Re-evaluate the rate per night of your vacation rentals regularly
When you’re first starting, most vacation rental hosts start an investigation mission to gain an understanding of how much similar properties are charging per night. They do this so they know if they are charging the right amount, nothing too high or too low compared to their competitors. Those who own more than on property tend to break their properties into groups (using the number of bedrooms, proximity, and capacity) for better relevance.
Most vacation rental property owners/managers know about other rental properties near them that hold similar value. However, a true competitive set is completely different because it’s based on all of the properties that show up near yours in a search result on the internet and other major listing channels. Using this information, you can make a more educated decision about how much to charge each night.
The only problem with this is that it can take up so much of your time. Because of this, and the perceived diminished return for the amount of time spent, most managers and owners re-evaluate once a year. However, if you don’t re-evaluate in a decent amount of time, you risk falling off from the map, which can mean being way over or way under the market average and being less competitive.
You want to stay competitive; a dynamic pricing tool can help. This tool can help you automate the research that you would need to do and make competition sets a normal part of your daily business decisions.
Re-evaluating your prices, whether or not you decide to use a dynamic pricing tool, is smart. Keep in mind that you can’t sell the next week’s vacancies at the price that you sell vacant nights months out. This happens because you tend to have a much larger potential audience for future vacancies and will be having more people shopping for your rental sites. The potential audience that your vacation rental receives plays a large part in helping you figure out what price to sell your rental.
Know that vacation rental prices fluctuate more than you realize
You might be surprised by how often prices change, especially if you aren’t watching your competitors’ rates regularly. If you don’t believe this, you can check on a handful of properties every couple of days over the next few months. You’ll be surprised to see how much change there is. This fluctuation can be caused by the change of season, school holidays, and even special events.
What are you supposed to do with these fluctuation trends? A statistician would probably analyze the patterns of the price changes and make conclusions about demand. An example of this would include that the prices of rentals seem to become higher around to 25th two months out – it’s probably because of the Beer and Wine Festival attracting visitors from around the area.
However, the majority of us aren’t statisticians; most of us don’t have the passion for graphs and charts.
On average, a vacation traveler looks at about 25 properties before they book. Therefore, if you monitor the region’s rates, you can become an expert on true vacation values. Pricing is a huge part of being successful, and rentals that are priced accurately have a huge competitive advantage.
If you find that travelers tend to have vacation preferences for events, weekends, or seasons, it’s a smart decision to set different prices to capitalize on these different demand levels.
A dynamic pricing tool will give you the ability to run these searches, act on fact-based information, and monitor trends.
Tweak your minimum stay requirements
Just about every vacation rental manager or owner has made an exception to the minimum stay when they really want a booking. If you were to have to sit down at your computer all day and make decisions based on the kind of booking you needed, you’d probably become more creative with your minimum stay requirements.
However, not everyone has the time to sit at their computer and make these decisions. That’s where dynamic pricing comes in. A dynamic pricing tool can automate your minimum stay requirements based on an “if/then” rule or logic that you lay up out front.
Should You Use Dynamic Pricing?
Dynamic pricing is a wonderful option that can bring your business more profitable. There are several ways that dynamic pricing works, including re-evaluating the nightly price of your vacation rental because it can automate your research process and save you time and energy. It can even help you keep up with competitive pricing so that you’re always at the right market price for the property that you’re offering guests. Finally, it’s great for automating your minimum stay requirements, so you’re not constantly making decisions.
Dynamic pricing allows you to free up some of your time so that you can work harder at expanding your vacation rental properties and being successful. If you find that you’re constantly spending too much time on any of these three areas, you might want to consider dynamic pricing to help automate some of these processes and help you become more successful.