Vacation rental revenue management and market sensitivity

Manage Market Sensitivity With a Dynamic Pricing Tool

At Rented we’ve spoken at length about the various ways that market demand impacts vacation rental revenue. The market drives how you set your rates—and how you make adjustments to your rates as consumer behavior changes. 

But some vacation rentals are more sensitive to changes in the market than others. And keeping up with those shifts in the market can be a drain on resources. Using a vacation rental revenue management tool can take some of the guesswork and heavy lifting out of monitoring even the most minute changes in market demand. Here’s how. 

Types of Market Sensitivity

First, let’s define what we mean by market sensitivity. It’s a pretty broad term encompassing several different types of market fluctuations that may impact your vacation rental revenue. A few of the most common forms of market sensitivity include: 

Seasonality 

The seasonal surges in your particular location are the most obvious factor in determining appropriate rates and setting occupancy goals. Markets with very little seasonality, like beachfront properties and markets with mild climates year-round, don’t need as much rates adjustment as, say, a rental in a ski town.  

Days of the Week 

Depending on your location and the time of year, your vacation properties may be in higher or lower demand throughout the week. Seasonality may factor in here, as well as consumer demand. A condo on the Gulf Coast may be in huge demand over the weekend (because people like to visit the beach on the weekends)  but slow down during the middle of the week. But a similar condo in downtown Seattle or Houston may make the most money in the middle of the week when people are traveling for work and be quieter during the weekends. 

While these kinds of rate adjustments can become fairly routine, random events or changes in the weather can change consumer demand on a dime, so it pays to be flexible. 

Size of the Vacation Rental

Traditionally, the larger the home, the longer the booking window. Guests will often book a six-bedroom luxury home a year in advance. But smaller rentals are more likely to book in a shorter window—three weeks to a week out. 

Adjusting these rates requires an awareness of the competition and understanding the ups and downs of the market. As the booking window closes, it may be necessary to compete for bookings from smaller groups, and price closer to homes in a similar booking window, such as a two- or three-bedroom home. 

Here’s How a Dynamic Pricing Tool Can Help

A revenue management tool can make adjusting your vacation rental rates easy and accurate depending on how the market changes and can be beneficial in making up revenue during the times when you’re less likely to make money otherwise. 

Seasonality 

The seasonal surges in your particular location are the most obvious factor in determining appropriate rates and setting occupancy goals. Markets with very little seasonality, like beachfront properties and markets with mild climates year-round, don’t need as much rates adjustment as, say, a rental in a ski town.  

Days of the Week 

Depending on your location and the time of year, your vacation properties may be in higher or lower demand throughout the week. Seasonality may factor in here, as well as consumer demand. A condo on the Gulf Coast may be in huge demand over the weekend (because people like to visit the beach on the weekends)  but slow down during the middle of the week. But a similar condo in downtown Seattle or Houston may make the most money in the middle of the week when people are traveling for work and be quieter during the weekends. 

While these kinds of rate adjustments can become fairly routine, random events or changes in the weather can change consumer demand on a dime, so it pays to be flexible. 

Size of the Vacation Rental

Traditionally, the larger the home, the longer the booking window. Guests will often book a six-bedroom luxury home a year in advance. But smaller rentals are more likely to book in a shorter window—three weeks to a week out. 

Adjusting these rates requires an awareness of the competition and understanding the ups and downs of the market. As the booking window closes, it may be necessary to compete for bookings from smaller groups, and price closer to homes in a similar booking window, such as a two- or three-bedroom home. 

Here’s How a Dynamic Pricing Tool Can Help

A revenue management tool can make adjusting your vacation rental rates easy and accurate depending on how the market changes and can be beneficial in making up revenue during the times when you’re less likely to make money otherwise. 

Adjustments for Shoulder or Off-Season

Depending on the seasonality of your market, a dynamic pricing tool can help adjust your rates so that you’re still pulling in revenue, even during the quietest times of the year. 

Consider a ski market, for example. A ski-in/ski-out rental can go for a pretty penny at the height of winter, and 80–90% occupancy can be easy to achieve. But that same property may be less appealing in the summertime due to its location, and you might only get 50% occupancy. 

If your rates stay the same as they are in the middle of ski season, you’ll never book in the summer. A dynamic pricing tool can make those season adjustments for you, helping you gain a little more occupancy and earn a higher revenue year-over-year. 

Flexibility for Sudden Consumer Demand and Holidays 

Like seasonality, you may find that you can earn most of your revenue during your peak days, like Thursday through Sunday, without too much issue. A dynamic pricing tool can help adjust your rates during your slow days (in this example, Monday through Wednesday) so you’re still hitting your occupancy goals. And if there’s an irregular event, like a big concert or a well-attended conference or festival, your dynamic pricing tool can make those changes, too, even across multiple properties. 

Another exception to the rule for peak days of the week is, of course, holidays. Depending on when they fall on the calendar, consumer demand may switch around, making your slow days really popular and your most popular days a little slower. A pricing tool makes it easier to remain flexible, keep your listing in the top searches, and capture last-minute bookings. 

Keeps Your Rates Competitive and Occupancy High

Dynamic pricing tools like Rented’s Automated Rate Tool (known as Art) look at several different market factors to make rate recommendations, including the size of the home and the amenities. 

Rented also employs the expertise of revenue management experts to QA every single property, providing a human perspective on factors that algorithms may miss, like recent renovations, the aesthetic of the property, and the marketing materials provided for the listing. Art can help establish where your rates fall within the landscape, and whether you’re priced too high for certain times of the year or compared to properties similar to yours.  This ensures that you’re asking a reasonable enough price for your property to appeal to a broad audience. 

Ready to see what a vacation rental revenue management tool can do for you? Get a free trial of Art now.