As vaccines roll out across the country and leaders predict a return to normalcy—at least when it comes to 4th of July barbecues—our industry is buzzing. Demand for vacation rentals is projected to break records in the summer of 2021.
A recent Airbnb survey indicates that 54% of Americans plan to travel this summer, and vacation rentals are expected to be a hot ticket thanks to their inherent privacy. The New York Times reports that hotels are still experiencing a 20% year-over-year decrease in occupancy, while reservations at large vacation rental properties are up more than 300%. Booking site HomeToGo also recorded a 27% increase in vacation rental bookings.
Many of our own clients are experiencing this phenomenon right now, and we dove deep into the topic during our recent Art of Pricing webinar—where Meghan Sneed of 360 Blue confirmed their portfolio is performing at 20-30% above the norm.
So with demand soaring, what can property managers do to make the most of summer 2021? Let’s dive in.
What a spike in demand means for vacation rental booking trends
Ultimately, more demand means you can charge higher prices. Travelers have been waiting for months to reconnect with loved ones or enjoy a worry-free, post-vaccine vacation (yes, the word “vaxication” is a thing now), and for those who have been fortunate enough to remain employed throughout 2020, they’re willing to splurge. Vrbo’s 2021 travel trend report notes that 33% of travelers are willing to spend more than they traditionally would, and 54% say they’re more likely to take a bucket list trip.
We’re giving you permission: this is not the time to be shy with your rates, even if you feel uncomfortable charging a premium for properties that haven’t traditionally been considered luxurious or highly desirable.
As our Senior Revenue Manager Valerie Claggett says, “We’re talking about vacations, which are discretionary spending. We’re not talking about jacking up the price of gas during a crisis. There’s so much competition and pent-up demand in all of these markets, and people are willing to spend to get what they want. That is not taking advantage of them, it’s knowing the value of your asset. This is one of those cases where you have to say, ‘This is the best action for my business and my asset,’ and allow people who are willing to spend on discretionary spending to decide what’s best for them.”
Of course, this demand does vary based on market and property type. Drive-to markets continue to see increased demand, while homes are performing better than condos. VRMIntel recently shared a report from KeyData that showed when looking for occupancy pacing for 2021 compared to 2019, houses are booking better while condos are booking worse. This is likely due to the privacy factor we mentioned earlier—cautious guests may still want to avoid shared hallways, lobbies, or amenities.
Booking windows also appear to be lengthening, according to VRMIntel, after a long period of last-minute bookings during the height of covid concerns and travel restrictions. So don’t delay on increasing rates for late summer and even into October.
Our webinar panelists agreed that shoulder seasons are likely to see increased demand thanks to work-from-home habits and the rise of “flexcations”. “You’ve been introduced to new clientele who are within driving distance of your markets,” says Valerie. “I think we’re going to see stronger shoulder seasons, and if that’s a possibility in your market, start high.”
How to capture the most value for your homeowners
How do you know how high to push your rates? The key is looking at relevant data, and paying attention to your market and your individual properties.
In addition to your own booking data, you can use resources like KeyData, Vrbo Market Maker, Airbnb Smart Pricing, Transparent, or AirDNA. Our webinar host and Director of Business Development Talia Lockard does caution, “You do have to be careful with sourced data versus scraped data, which is what many booking channel platforms provide. Scraped data won’t give the cleanest information, whereas sourced data direct from a PMS takes out things like owner holds or maintenance holds.”
And while you want to pay attention to your overall market history, most of our panelists agreed that 2020 should probably be skipped altogether. Meaghan and her team look at their 2019 performance compared to 2021 to understand surges in demand, and she cautions managers to use their best judgment when managing rates.
“There are so many tools out there, it can almost be like analysis paralysis,” she says. “You know your competitors and your market better than anybody. Keep your finger on the pulse of your business.”
Ultimately, revenue managers set prices compared to the market. Meaghan’s team monitors their competition closely. “No matter what we do, there are competitors pricing higher. So we can look at their occupancy and understand if they’re pricing themselves out of the market. You’ll know if you’re priced too high. It will become obvious if you have 10 inquiries one day, and one inquiry the next. It does take a constant understanding of the inquiries you’re receiving.”
Beyond your market, pay attention to the properties themselves. “Be granular and thoughtful about what property you’re looking at when you’re pricing,” advises Valerie. “If you have a property with a private pool, or that’s oceanfront, and there’s an inherent scarcity for similar properties, be more aggressive.”
And if all of your homes are starting to book up, Valerie advises, then start raising prices on your condos. She also recommends that new properties you bring on during this unusual period of increased demand should be priced high compared to other properties in your inventory that are already booked. “Start high. You can always come down, but you don’t have room to go up once it’s been booked.”
Invest in the revenue management talent or tools to succeed
In an ideal world, you’ll have at least one dedicated revenue manager, relevant market data, and dynamic pricing software. But for smaller companies, Meaghan advises having one person accountable for paying attention to and adjusting rates, whether that’s a pricing specialist or a reservations manager. “It’s not rocket science, but it requires time,” she said. “And it pays off—literally.”
Ready to make the most of summer 2021? Our dynamic pricing tool, Art, helps your team set the right rate for every night with relevant data, smart suggestions, and easy customizations. Request a personal demo from Talia to learn more.