You’ve Got Questions.
We’ve Got Answers.
With such industry wide confusion as to Revenue Management’s definition, purpose, and place in combination with pricing tools and strategies, we wanted to answer some of the most commonly asked questions.
What Exactly Is Revenue Management?
For the vacation rental industry, revenue management means proactively maximizing your revenue by ensuring a property is listed for the right price, in the right place, in the right way, at the right time, and for the right customer.
It involves not only understanding these aspects about your guests, but having a revenue strategy as well. Revenue management also requires remaining flexible and responding to changes as they arise.
Cliff Johnson, Rented’s Chief Commercial Officer, explains it as, “making sure each property has the right price, at the right time and then getting that listing in front of the right guests on the right channel and under the right terms.”
Couldn't I Just Continue To Use What Worked Last Year?
Sticking with what worked last year doesn’t mean that you’ll find success this year. You always want to remain dynamic in your pricing optimization. In addition, you want to make sure you’re combining your knowledge with the ever evolving strategies and the best available tools on the market. That’s how you can stay on the cutting edge and ahead of the competition.
Doesn't My Pricing Software Handle Changes On Its Own?
While dynamic pricing tools have grown and improved over time, most software – and especially legacy software – still can’t handle the nuances of true dynamic pricing. Not only can they not necessarily see pricing comparisons, but they also can’t understand the reasons behind pricing shifts or demand changes. Software, no matter how good it can be, cannot replace actual humans in pricing dynamically.
Why Is Revenue Management Suddenly Such A Big Deal?
It’s a combination of access to increasingly more accurate data, greater availability of pricing and revenue management software and technology, and a sharp decline in costs. Previously, only large companies could invest in the software and digital infrastructure needed to use revenue management tools.
When it comes to revenue management, Property Management Systems have exploded in the vacation rental market. From only two choices in 1988 to over 20 major competitors today, there’s a pricing tool to meet nearly everyone’s preference. But pricing tools are only part of the equation. With their growth in the market alongside the abundance of data that they can provide, it has increased the need to be able to both understand this data and turn it into a full revenue management strategy.
How Am I Supposed To Take All Of This Information And Create A Revenue Management Strategy?
This is one of the biggest benefits to having a revenue management service at your disposal. As a Property Manager, if you were to do this on your own, you’d need to not only know what data you should be using, which data sets you need to pull, and how best to interpret it, but you’d also have to understand how to collaborate with your team to use that data effectively. As mentioned, pricing tools can’t handle this level of work. Artificial Intelligence simply isn’t advanced enough and existing algorithms can’t tell you more “human” pricing factors.
Imagine you were looking to price a 4 bedroom vacation rental. Currently, automated pricing tool algorithms aren’t able to compare images, furnishings, quality of amenities, etc. in order to differentiate between the other 4 bedrooms in the market and filter the data to those which are comparable to yours. It’d be similar to a tool incorporating both the St. Regis and Motel 6’s data simply because the rooms are the same size.
Additionally, software can’t calculate for local external factors such as construction taking place up the street from a unit or a closed community pool at another unit’s complex. All of which, can have a huge impact on supply, demand, and occupancy.
Why Would I Use A Revenue Management Service Instead Of Just Getting A Data Analyst?
Because as important as the data is, revenue management for the vacation rental industry is about far more than just the data.
A person who has handled revenue management within the vacation rental industry before is going to have a far better grasp on how to set and implement markers for success. They’ll not only be able to translate that data and information into actionable outcomes, but they understand the markets they are working in and how the industry functions as a whole.
What Benefit Do I Receive By Hiring A Revenue Management Service?
First and foremost, more accurate pricing is going to bring in more revenue. That alone is worth having a revenue management service. In addition, developing strategies and handling ongoing revenue management can be time and labor-intensive. Handing off those duties to a revenue management team will give you back hours each and every day. With this time savings, you’ll have the ability to focus on your business as a whole.
This means turning your attention to other areas that can help drive demand for your properties, such as updated furnishings, better photography, engaging marketing materials, and more, leading to even greater increases to your overall revenue.