April 4, 2022
Using Data in Vacation Rental Revenue Management
Part 4: Using Data in Revenue Management
Welcome to Part Four of the Ultimate Guide to Revenue Management. You can download the full guide here.
The modern hospitality industry runs on data, especially for dynamic pricing. The volume and accuracy of the data can determine the agility of your revenue management strategy. And through several available methodologies, data of all types from many sources is available in abundance.
Types of Vacation Rental Data
There are two major types of data relevant to revenue management: Scraped Data and Actual or Authoritative Data:
- Third-party source data. There are various different technologies that extract data from a secondary relevant source such as Airbnb, Vrbo, Expedia, and Booking.com (or similar property management sites)
- Authoritative data comes from you. This is all of the data that you have stored in your own property management system.
- Lagging data is your performance indicators. It’s “measurable, and changes only after trends or patterns are established.”
- Leading data is your prediction indicators. You can use this kind of data to make future decisions.
When to Use Each Type of Data
Each of these types of data has a different use. Zeroing in on each data set’s use is part of the process of building an effective vacation rental revenue strategy.
Third-party data comes in handy when you don’t have direct access to certain data, like identifying changes in supply within your market. It can also help you build a foundation for your own dynamic pricing strategy based on the entire industry, not just your own experience.
Authoritative data is likely the easiest data set for you to access, and the most accurate since you and your team have direct control over it. It can offer a historical perspective on your own business—the seasonal shifts, the consumer demand, and so on.
Lagging data offers insight into your business’ seasonal trends. It can’t predict the trends, but it can offer historical context for certain dynamic pricing decisions. Leading data, on the other hand, can help you make reasonable assumptions about the future, like the relationship between inquiries and bookings on your listing site.
The Limits of Data
In addition, data sharing has become quite controversial. In an earlier era of online booking, online travel agents (OTAs) operated more like a marketplace, or a method of aggregating vacation properties. Because of this, there was a free flow of information between these vacation rental homeowners and/or property owners and the OTAs, allowing the former to brand themselves, receive guest data, and market directly to those guests in the future.
But when Airbnb hit the scene, the rules changed. Airbnb (and later Vrbo/Homeaway) started masking their guest data when they shared data with others. The main reason, of course, is revenue. When guests book directly with a property manager, the property manager doesn’t have to pay commission to the OTA. No one wants to give up information that might allow a competitor to target their guests and cost them a revenue stream.
The Difference Between Data & Analytics
Another key difference when working with data for vacation revenue management is distinguishing between data and analytics.
Let’s use our 50-room hotel as an example. The number of rooms booked this month or the average number of nights guests stay is data. Analytics is taking those numbers and deriving actionable insights from them. If you notice that you are consistently booked out every year on the same weekend, then you can increase prices since there is a high enough demand.
Both data and analytics have revolutionized revenue management strategies over the years. By providing property managers with insights into both their business and their guests, data and analytics serve as a proven foundation from which to base your dynamic pricing decisions. These decisions can be as big as predicting average lead times and peak dates for properties, or they can be used for more nuanced, guest-related actions.
You Are Your Best Source of Data
So where do you get good, actionable data for your dynamic pricing strategy? Start with what you already have! Data from your property management system is the best source—you’re probably using it to make operational decisions right now.
When you dig into your own data, you learn all sorts of interesting tidbits that can be useful for vacation rental revenue management. Useful data can include:
- The number of check-ins on a given day
- The number of guests staying per property
- The number of check-outs on a given day
Depending on how long you’ve been in business, your reservations data can show you the differences in reservations over various lengths of time, from year-over-year to week-over-week. These data points can start to shape your dynamic pricing strategies.
Putting Vacation Rental Data to Work
A data driven approach to revenue management takes into account the many factors that will ensure the best pricing for your vacation rental, analyzing your competition as well as real- time demand, occupancy, and performance.
Data can be purchased, acquired, or owned. But no matter the source, it is critical to your revenue management strategy. Demand data, because we have seen such variation in historical data, is the cutting edge direction for dynamic pricing.
This article is the introduction to Rented’s Ultimate Guide to Revenue Management for Vacation Rentals – 2022 Edition. You can download the full guide here.