Today, the vacation rental marketplace has become an extremely competitive environment that only grows more popular by the day. There was a time when finding a rental for the holidays was a simple task; all you had to do was either find a travel agent to give you suggestions or Google the three or four B&Bs in your area. Today, however, there is a lot more that goes into this process.
There is a myriad of highly publicized platforms such as Airbnb and HomeAway that use wildly complicated software to bring your potential users a world of other options as far as vacation rentals are concerned. All these new places are jostling for the same business and only the best win out.
Granted, there are listings on these platforms that fall under “luxurious” stays, and there are others that fall under “budget” stays. However, the typical traveler now wants to find something that can marry the two worlds. Something luxurious and professionally managed while still being affordable.
This is all to say that you can’t expect to simply price your vacation rental according to how luxurious you think it is, you need to consider the fact that you have competitors who are just at good at marketing and even though they might have inferior properties, they could end up getting your business because they somehow managed to marry the two worlds for their users.
It’s All About Pricing and Competition for Holiday Rentals
What are you to do as a person who wants to rent the perfect vacation rental property without getting lost in the swamp of competition? The answer, even though simple enough, takes a great deal of research and quite a bit of trial and error. You need to find a way to compete and stand out. And that all comes down to your marketing and pricing tactics.
It’s true that vacation rental prices fluctuate (common holidays tend to attract higher prices than your typical run of the mill day of the year). But just how much advantage should you take during these holidays? Are you better off maintaining a constant price to increase your occupancy rate throughout the year? What can you do about your competitors?
Tips on How to Price Your Holiday Rental Property Accordingly
Here are some tips that will not only help with your pricing issues but will also solve your visibility problem:
1. Determine All Your Expenses
No matter how competitively priced you want to be, you are not going to be in business much longer if all you make are losses. To determine just how much you can realistically charge without taking a loss you will have to tabulate all your associated expenses. And that means all of them:
- Mortgages (if any)
- Utility bills
- Emergency repairs
- Cleaning costs
You also need to include any other charges that may be imposed on you by the homeowner’s association and your local region as well. You should also think about large, albeit intermittent expenses such as the periodic replacement of major home appliances, home remodeling and all that.
Once you have the total figure, the simplest way to go about it is to spread the entire cost across 12 months and see how much you will need to be making per month to actually make a profit.
2. Find Out How Much Your Neighbors are Charging
You will still need to remain competitive in your area, and that often means finding out how much your neighbors or similar houses in the region are charging and then trying to undercut those prices. What you need to take into consideration is the fact that each and every house has something special that justifies the price.
For example, houses with better interior decor and newer appliances will often charge just a little bit more for those amenities than houses that are run down. Your neighbor with a beachfront house is going to make several hundred dollars more than you per week because of that very fact. When comparing prices with your neighbors, do so with the houses that are as comparable to yours as possible.
3. What Should You Do About Peak Seasons?
The truth about peak seasons is that they can be a real cash cow if you work them properly. Yes, market forces often dictate that you increase your prices because there are very good chances that your property will be occupied anyway thanks to the high demand and low supply at that time.
However, peak seasons are just that, seasons and some only last for a couple of months. Are you now to depend on those two months to break even?
One of the best ways to play around with your pricing as far as seasons are concerned is to look at it this way: you can make a great deal of cash for two months and afford to make less on other months without necessarily finding yourself in a feast and famine situation.
Consider the months before and right after the peak seasons. A good way to get the word out there about your property is to highly discount the prices on either side of the peak season. This way, you get a high occupancy rate and great reviews which will increase your property’s visibility.
Therefore, when peak season comes, your property will have gone up in rank, and more people will find it more easily even after peak season. As such, you will stand a chance of having a steady supply of renters throughout the year.
4. Take the Vacancy Rate into Account
It’s nearly impossible to achieve 100% occupancy when dealing with holiday rentals. You need to accept the fact that your rentals will remain vacant for about 25% of the year and you need to plan for that accordingly.
5. Make Use of Dynamic Pricing Tools
One way to simplify your life is to use dynamic pricing tools such as PriceLabs and Outswitch to automatically determine the pricing for you according to the demand on the platforms you use. You would, however, still need to manage these prices depending on how well they are working for your occupancy rate.
It takes some experimentation but with the right kind of marketing, you should be able to reasonably price your vacation rental properties and make a financial killing during the holidays and a reasonable return throughout the year.