Vacation rental revenue management is still a new(ish) concept for most of the VRM industry, and there’s often confusion about what it is, how to use it, and where it fits in with other best practices. You have questions—we have answers. Let’s go through some of the most frequently asked questions about vacation rental revenue management. Here are the Top 7 Vacation Rental Revenue Management Questions… Answered!
What Exactly IS Vacation Rental Revenue Management?
Revenue management is standard across the entire hospitality industry, from airlines to hotels. The most basic definition is a strategy borne from data to predict consumer behavior to optimize product availability and price for maximum revenue growth.
Vacation rentals, compared to hotels, can be a challenge because of the market (typically seasonal), the length of stays (two nights up to a week but less than 30 days), and the uniqueness of each property. This requires a certain understanding of the consumer and flexibility to go with the changing market. With that in mind, we define vacation rental revenue management like this:
Using data to ensure that a vacation rental property is listed for the right price, in the right place, in the right way, and at the right time for the right customer to maximize revenue.
Why Is Revenue Management Such a Big Deal All of a Sudden?
Vacation rental revenue management is growing in popularity across the industry due to more accurate data, greater availability of pricing and revenue management software and technology, and a share decline in costs for those tools and services. In the past, only the largest vacation rental management companies could invest in the software and digital infrastructure needed to use revenue management tools.
But with so many more pricing tools and services to choose from, vacation rental revenue management is becoming more mainstream.
But Why Can’t I Use Last Year’s Revenue Strategy?
Vacation rentals are a unique hospitality phenomenon. Unlike a hotel, which offers x amount of rooms with y amount of variation, vacation rental properties range the gambit. A single vacation rental property manager may have 100 properties that are totally different from one another. This means 100 unique systems with their own pricing requirements and market sensitivities.
When you layer in the nuances of a changing market and consumer behavior, it becomes clear that sticking with last year’s strategy may not bring you success today.
Effective vacation rental revenue management requires a dynamic pricing strategy, as well as a grasp of industry trends and best practices, in order to stay competitive.
How Do I Build a Vacation Rental Revenue Management Strategy?
A good starting point is understanding what data is relevant to you and crunching some numbers to establish your high and low prices and determine a dynamic pricing strategy. After that, you can start researching the kind of vacation rental revenue pricing tool you need.
Building your own vacation rental revenue management strategy takes some work. Your revenue management strategy needs regular upkeep and human eyes to make sure that you’re making all the adjustments possible to get eyes on your listings. This is a good time to decide if this is a task you are able and willing to take on yourself, or if you’ll need to outsource it to someone else.
Doesn’t My Vacation Rental Software Handle Changes Automatically?
While dynamic pricing tools have grown and improved, most software—particularly the legacy property management software available to most vacation rental property managers—can’t handle the nuances of true dynamic pricing. They weren’t built to process so much data, see pricing comparisons, or understand the reasons behind pricing shifts. And your PMS excels at the key functionality, but not necessarily in this area.
That being said, even the most cutting-edge vacation rental revenue software can’t always account for every pricing nuance. For example, revenue management software can price a three-bedroom, two-bathroom property based on other properties of a similar footprint, but it can’t see that one property was renovated recently, or that one listing has much better photos than the other. That’s when real-life revenue management experts can step in and make minute adjustments.
Can’t a Data Analyst Handle My Revenue Management Strategy?
We love data analysts, but vacation rental revenue management is about more than just data. It pays to have someone who knows the VRM landscape and understands current trends in the market and in the industry. Picking the right person (or service) for the job can help shape a truly effective revenue strategy.
What’s the Benefit of Using a Revenue Management Service?
First and foremost, it’s always helpful to have an expert on your side. Vacation rental revenue management services live and breathe revenue, and they know all the tricks for getting the most accurate pricing data.
Developing revenue management strategies is not a side gig. It’s a full-time job. Handing it off to a revenue management team that knows the in’s and out’s of the VRM industry and revenue optimization can give you back precious hours in your day so you can focus on other areas that can drive demand for your properties like renovations, updated furnishings, better listing photos, and an enhanced marketing strategy. These efforts work in tandem with revenue management to increase the value of your properties overall.
At Rented we want to see your vacation property management company succeed, and we have the tools and the know-how to maximize your revenue and keep your occupancy high. Are you ready to start revenue management now, you can sign up for our Automated Rate Tool for free here.