Over-pricing a rental is one of the most popular ways you lose out on revenue. One of the biggest mistakes vacation rental owners can make is setting their rental prices based on their own wallet or their emotions. Unfortunately, your own financial situation and personal feelings toward a property aren’t the best ways to determine pricing for your rental. To help you get on the right track, here are some great vacation rental pricing strategy tips.
Check Out the Competition
The first and most important step in outlining your vacation rental pricing strategy is to scope out the competition. Are there other rentals in your area? What are their nightly rates? Remember to compare apples to apples, though. Find a home that is similar in size and amenities as your own, and use that as a starting point for your pricing.
If your home has been upgraded and has updated amenities, up the price a bit. Use major vacation home travel sites like Airbnb to find 7-10 homes in your area that are similar to yours. See what they charge per night for particular dates. You can’t check their calendars to see if they’re booked or vacant during peak times but you can put in dates to check availability of a property. This will give you an idea if people are paying those prices consistently. We know you love your vacation rental and want top dollar for it, but if you don’t stay competitive with your pricing, you could find yourself with less bookings than desired.
Be Aware of Seasons and Special Events
People expect to pay higher prices during peak times like Christmas and Spring Break. During these times, your nightly rate should be at its highest. As these busy seasons approach, it can be tempting to lower rates to fill the dates. Don’t do it. The procrastinators who wait until the very last minute to book at Christmas will pay the higher price. Be patient and don’t lower your rates until the very last minute if you need to. These busy seasons are where many owners make a significant portion of their income, so don’t cut yourself short by offering lower rates when people are willing to pay a higher one!
This flexibility with rates goes for the slower seasons as well. Don’t be so stingy that you refuse to drop your rates during slower seasons. While you don’t want to give your rental away, you also don’t want multiple vacancies. Provide special offers for slower seasons or throw in a freebie or small gift as an incentive for people to book. Again, keep an eye on the competition. You won’t be the top choice if renters can find a similar home for a lower price.
You should also keep an eye on specific events in your area that bring in big crowds. Festivals, concerts, conventions and other significant events can increase the demand for rental accommodations. These are great opportunities to stand firm on higher rates!
Have Specific Goals in Mind
Different vacation rental owners have different goals and expectations for their investment and vacation rental pricing strategy. Some owners will only take full price bookings, aren’t interested in reducing their rates, and would rather have their home sit empty than get less than what they think it’s worth. This works for some who aren’t relying on the income, but it also results in a lot of blank space on their rental calendar. But vacancies aren’t always a bad thing. If your rates are profitable, it could make up for the money lost during the vacancies.
So here’s the point: Your pricing strategy should really start with a definition of your goals. If the goal is a steady income, being flexible in your rates might be a better option. If you’re okay with a slightly inconsistent income, offering discounts depending on the season and situation might make more sense. How you price your home and how flexible you are in your nightly rates depends on your individual goals.
It all comes down to how much you want to make, how much work you want to do, and how often you want to stay in your rental yourself. Keep all of this in mind when determining your nightly rental rates and how flexible you’ll be in your pricing.
Know Your History
If you’ve been doing this for a while, you’ll have a pretty clear idea of when your rental is booked and when it tends to be slower. Knowing this will also help you price your rental in a way that is fair and competitive. If you’re new to the vacation rental business a quick google search for “(location) vacation rental data for (year)” can give you a good starting point.
Take some time to see how many bookings you had at this time last year. Use your past to help set up a vacation rental that actually makes you money. Take a look at recurring trends and use that to set a pricing starting point. When did you have the most bookings? When did you make the most money? When did you struggle the most? Knowing when these points are coming will help you adjust and set prices that will be both competitive for the guest and profitable for you.
Stand in Your Truth
If you know you’ve got an incredible rental in a desirable neighborhood with top of the line amenities and great reviews, your price should reflect this. But knowing your worth and basing your rates on how much you love the house is very different, so it’s important to be objective. If your home is more standard, your prices should reflect this as well. Potential guests are looking at hundreds of rentals and will compare yours to the rest. If yours stands out as the biggest and the best, they’ll be willing to pay higher nightly rates for the experience. Be honest in what your home can offer compared to others in the area to help you set a price that is reasonable and realistic.
Don’t spend a ton of time obsessing about whether to charge $149 a night or $155. Don’t get stuck in “analysis paralysis,” taking too much time trying to find the perfect number. Instead, do the research and pick a starting point. You can always raise or lower the rate based on the response that you get. Pricing your rental based on the local competition and what your home has to offer will always prove more successful than basing your rates off of your personal budget or your feelings.
Tools that Crunch The Numbers So You Don’t Have To
If you are looking for a more robust solution for data you can use a software tool like PriceLabs, Beyond Pricing or AirDNA where you can analyze market data to help determine the market rate in your area. If numbers are not your thing, the Bookfull Revenue Management team can do all the spreadsheet calculating and give you a solid strategy for pricing your rental. Subscribe to our weekly newsletter so that you get all our best tips on revenue management and the vacation rental industry.