January 7, 2022
Dynamic Pricing for Vacation Rental Managers
A new year means another opportunity to set ambitious revenue goals for your vacation rental management business. And for many, that means diving deeper into dynamic pricing and vacation rental revenue management.
Data shows that vacation rental managers who use dynamic pricing tend to see a higher revenue increase than those who don’t. Our friends at Hostfully, for example, found in their 2021 Vacation Rental Industry Survey and Report that property managers in the mid to large-portfolio range who used a dynamic pricing tool were twice as likely to report a significant revenue gain as those who didn’t.
What is Dynamic Pricing for Vacation Rental Managers?
For the vacation rental industry, dynamic pricing represents an understanding of two ideas that can make or break a vacation rental revenue strategy.
Dynamic pricing accounts for changes in the market.
Firstly, as is the case across the hospitality landscape, demand has an ongoing fluidity, can run dry, or grow exponentially. There’s the expected increase and decrease depending on the market’s peak season and slow season. But there are also the little up-ticks in demand based on holiday travel or a local event. But we also see unexpected turns in demand that can give even seasoned vacation rental managers whiplash.
Dynamic pricing uses data to adjust rates based on hundreds of factors, large and small, to keep your prices competitive and your properties booked.
The pricing model alternatives can be to set flat rates, use a couple of seasons, or multiple seasons throughout the year. As you can see here, the ADR for dynamically priced listing, this one in the FL Panhandle, is significantly higher using dynamic pricing.
Dynamic pricing accounts for the uniqueness of each vacation rental
Dynamic pricing also plays a role in a factor unique to the vacation rental industry: the specialness of each individual listing. Unlike traditional short-term rentals like hotels or motels, vacation rentals are their own little system with their own unique market sensitivities. A property manager with a 50-unit portfolio usually doesn’t have 50 cookie-cutter, carbon copy units. They have 50 highly individualized properties that vary in size, amenities, and local access. That means blanket price assumptions or adjustments are ineffective, and can even be detrimental, to an overall revenue strategy.
A dynamic pricing tool can take these slight differences into account, adjusting rates for each individual unit to fit into your revenue strategy so you’re still getting the most out of every booking.
What is Revenue Management for Vacation Rental Managers?
Dynamic pricing is a flexible, agile strategy that adjusts rates for changes in demand. Vacation rental revenue management uses that strategy to maximize your return by putting properties in front of the right guests, in the right place, for the right price, at the right time.
Revenue management combines the science of data with the art of human experience. An algorithm can scrape for data to offer a historical perspective on your own business, seasonal trends, or an overall impression of the industry. But only a human being has the ability to apply personal experience to a property’s rates, adjusting for things like the size of the master bedroom, whether a key amenity is closed for seasonal maintenance, or whether there’s construction that makes getting to the property more difficult.
Revenue management companies (like Rented) can help guide your 2022 revenue strategy!
It pays to have the experts on your side. Rented’s team of vacation rental revenue management experts can help establish high and low ranges for your dynamic pricing and make custom adjustments based on micro-market changes. With the help of our Automated Rate Tool, Art, Rented can automate your revenue management strategy so you can focus on other ways to engage with guests, enhance your vacation rentals, and increase your revenue. Check out the demo of Art today!