Pricing your vacation rentals correctly is the key to getting the most out of your investment, whether as a vacation rental property manager handling tens to hundreds of properties or a vacation rental homeowner looking to make a little money back on your personal holiday home.
But vacation rental pricing isn’t only about nightly rates and fees, and it can get complicated very quickly—especially with a market as temperamental as the travel industry. And while it isn’t a perfect science, it’s worth pushing through.
But First: Why is Vacation Rental Pricing So Darn Complicated
There has been a vacation rental boom as more and more property owners began welcoming guests into their second or third homes and sites like Airbnb and Vrbo took off. Add to that the number of vacation rental listing sites that exist and changes in guest behaviors and preferences when it comes to booking. Pricing isn’t nearly as simple as a nightly rate and a cleaning fee.
And from a high-level perspective, the travel industry is one of the most sensitive industries and most heavily impacted by incremental and unpredictable changes and factors—things like weather, location, major economic or political events, and societal trends. One year is never the same as the next, and your rates have to reflect that.
If you keep a few essential things top of mind, setting your vacation rental rates doesn’t have to be overwhelming. Here are the most common hurdles vacation rental property managers and homeowners encounter when setting their rates—and how to get past them.
Challenge 1: Assessing Your Property’s Value
Pricing vacation rentals is so challenging because vacation rentals are unique—that’s why people love them so much! So it’s logical that a six-bedroom mansion with a pool within walking distance of the beach will not have the same rate as a minimalist studio apartment in an urban center.
Another thing to consider is your occupancy goals. Keep in mind that vacation rental properties, due to their very nature, don’t often hit the kinds of occupancy that a hotel will. And occupancy will be hugely variable depending on your location and the seasonality of your area.
Solution: Research Your Competition
Take a look at a few vacation rental listings that are as similar to yours as possible—the same number of bedrooms and bathrooms and a similar location is the bare minimum—and take a look at their calendars. How often are they booked? When are they the busiest? And what do their prices look like during those busy times? How about the slower seasons? Mid-week? Jot down some numbers and calculate an average to establish a basis for comparison.
Challenge 2: Appealing to Guests Without Leaving Money Behind
Now that you understand your competition a bit better, consider how you can stand out to a guest. You want your nightly rates to strike the right balance between feeling reasonable to a guest and making your investment worth your time.
The Solution: Choose Your Pricing Strategy
According to our friends at Lodgify, there are two main pricing strategies for vacation rentals: Always price lower than the competition, or offer a more premium experience.
We’re all consumers, and we know that if we have to pick between two of the same products, we’re always going to go for the deal. You can do this with your vacation rental by keeping your rates just a little lower than your competitors, even during peak times. This works well if there are several properties in your area with similar layouts and amenities and you need a way to stick out.
Okay, but let’s say your vacation rentals are a little more unusual, or require slightly more upkeep, or are more expensive in general. Then consider offering your guests a higher price for a premium experience. That might mean free breakfast and treats, 24-hour check-in and a later check-out, pet-friendly accommodations, or free tours of the surrounding area. Vacationers are more likely to spend more on an experience that feels unique and special, so get creative.
Challenge 3: Setting Reasonable Fees to Cover Overhead
Your vacation rental rates can include certain costs, like the mortgage and utilities. But expenses like cleaning services, credit card fees, and OTA listing fees should be calculated separately.
The Solution: Don’t Go Overboard
In a recent Art of Pricing with Rented recent webinar about setting vacation rental fees, Kevin Lincicome, our Director of Revenue, spoke about how fees that feel out of proportion to the property’s value can turn guests off. Consider bundling all of your fees into one (with an itemized list available if a guest asks for it). If you’re a vacation rental property manager, try to take the burden of fees off of the owner by sharing them with the guest as much as possible.
Challenge 4: The Seasons Change Vacation Rental Pricing
Like everything else in the travel industry, vacation rental pricing is largely dependent on when people try and why. Your beachfront properties will have different rates than townhomes in Aspen, which will have different rates than condos in Vegas or New York. Changing your rates to match peak and low seasons means that you’re always getting your money’s worth.
The Solution: Establish Your High and Low Seasons, With a Reasonable Vacancy Rate
Take a look at your competition and see when their rates increased or decreased. Are they especially high during an annual festival? How do they change over the course of a week? What about during winter during the holidays, or over spring break?
Challenge 5: Handling Vacation Rental Pricing on Your Own
Pricing vacation rentals is tricky and can take near-constant upkeep to make dynamic vacation rental pricing work for you. Even vacation rental property managers with hired staff can struggle to find the time and resources to juggle multiple OTA requirements, research and analyze the competition, and adjust rates to minuscule market changes. And when it comes to different OTA integrations with their platform—well, you get the picture.
The Solution: Work With a Vacation Rental Revenue Manager, Like Art from Rented.com
Having a vacation rental revenue manager can help property managers optimize their pricing through analytics of micro-market changes, getting the right price in front of the right guest at the right time. With the help of Art, Rented’s Automated Rate Tool, Rented’s team of revenue experts can help make custom adjustments to your vacation rental rates based on consumer behavior. Plus, it changes your rates across ALL of your booking channels, saving you the time and headache of dealing with individual OTA integrations on your own.
Curious to see how Rented can help you successfully price your vacation rentals? Get a free 30-day trial now.