August 24, 2022
Why We Love Dynamic Pricing in the Vacation Rental Industry
Once upon a time, vacation rental owners and managers set fixed prices for their properties and called it a day. Maybe they adjusted prices based on the season or recent updates to the property. But more often, rates changed very little.
Thanks to increased competition and access to more data about guest preferences and market shifts, pricing strategies in the short-term rental industry are more refined than ever. Today’s vacation rental property manager understands that to book more nights, properties need to be more visible to a broader audience all year round. And that’s where dynamic pricing comes in.
What is Dynamic Pricing?
Dynamic pricing is an algorithm that uses data about various factors to make informed adjustments to vacation rental rates. To offer the best prices at all times, property managers use dynamic pricing tools to update their prices based on things like seasonality, the competition, and even projected demand in the future. By ensuring 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, you can proactively encourage more bookings and maximize your revenue.
Dynamic pricing requires:
- Flexibility. The more willing you are to go with changes in demand, the better.
- A focus on occupancy. Dynamic pricing works under the following motto: Unbooked nights don’t pay.
- Current data. While dynamic pricing uses past data to inform decisions about the present moment, it has the most significant impact when it calculates adjustments based on the most up-to-date data possible.
Here are a few reasons dynamic pricing is so popular in the vacation rental industry.
Dynamic Pricing Works for Any Property
You can’t price vacation rentals like you price hotels. Hotel rooms and suites are identical, with only a few variations. Not so with vacation rentals, which can be as common as a condo or quirky as a house shaped like a shoe. Even a property manager with 50 properties within 50 miles of each other will see a vast difference in demand between each property. Dynamic pricing considers those differences, adjusting rates accordingly, so each property appeals to the broadest audience possible.
It Gives You an Edge on OTA Sites
Third-party booking sites like Airbnb and Vrbo have unique ways of “ranking” vacation rentals on their platforms. Aside from attractive photos, an informative description, and easy booking, flexible prices also help make your property more desirable because it fits into more people’s search parameters. Generally speaking, listings that attract a lot of clicks, show up on people’s “wish lists” and close the most bookings show up higher in their searches.
It Increases Occupancy Year-round
Every vacation rental has its busy season and its slow season. Dynamic pricing takes advantage of past and present data to inform your prices during shoulder season, keeping your properties competitive. You’re more likely to attract spontaneous travelers by lowering prices as booking windows close, strategically offering discounts (e.g., book a third or seventh night free), and removing restrictive rules like minimum and maximum stays.
Use Dynamic Pricing Data to Attract (and Keep) Vacation Rental Homeowners.
Looking to increase your vacation rental inventory (or improve homeowner retention)? You can use dynamic pricing to show your homeowners exactly how their investment property is performing. You can look at their rental and compare this year’s performance with last year, or expand it to include a competitor’s property. You can even design demand metrics, a projection of what their property could earn based on the current market climate.
Dynamic pricing is a powerful tool that can boost your revenue. Rented’s Automated Rates Tool (or Art for short) offers user’s a bunch of features that make price adjustments easy, including a batch edit tool for multiple changes at once. Speak with one of our experts to see how Rented can help you tap into the power of dynamic pricing now.