Setting the prices of a vacation rental correctly is important to have a good occupation, with maximum profitability.
First, we have to calculate the annual costs, to keep the property in the vacation rental market. Some will be fixed and others variable, depending on the occupation, such as the commissions of the listing sites, the cleaning costs or the supplies.
These expenses have to be distributed among the weeks in which the property can be rented, which will not always be the whole year. In this way, we will know the minimum income that we will need to generate with our rent.
Taking into account the prices of the competitors, when setting rates, is necessary, because inevitably, our offer will be compared with others in our environment. However, each house is unique which makes comparison difficult. Still, these are the most important aspects to keep in mind:
The dimensions of the house and the number of people it can accommodate.
The number of bedrooms and bathrooms
The location, even being in the same city, can make a big difference. Whether it's being in an emblematic neighbourhood, near an attraction or in the coastal areas, having sea views.
The facilities and services of the house, paying special attention to those most reqeusgted in our area, and their quality.
Finally, we must also take into account, who is our vacation rental aimed at, whether they are families with children, athletes, adults, etc.
The demand is not always the same throughout the year and therefore prices have to vary according to this demand. A good starting point is to establish at least one base price, for each of these seasons:
Low season; when the demand is lower.
High season; when the demand is higher.
In some places, this segmentation of demand also occurs on weekends, in relation to weekdays.
Prices have to be adjusted, depending on how demand evolves, starting from the base prices, established for each season. For this reason, it is important to have good statistics that allow us to see the evolution of demand in previous years. As well as the average advance, between the arrival date and the reservation date. In this way, we will have indicators that will tell us if it is necessary to act and when, given some days without occupation.
Apart from the segmentation by seasons, which may include a few months, within each season, prices must be adjusted upwards, when there are events that increase demand, or weeks, which our occupancy history shows with a higher demand.
Prices can also be adjusted upwards, when we have a very high occupancy, with a long time in advance and, if the properties of our competition, also have a good occupancy.
Adjusting prices down, to get occupancy at any price, can be counterproductive and attract a sporadic type of client, outside our target market. Although when occupancy fails, adjusting prices for the season down is certainly a good way to attract reservations.
These are some strategies to segment prices down:
When introducing a new property on the market, setting low prices will help to get the first reservations and customer reviews.
Another interesting strategy is to establish early booking offers. With this, we will be able to achieve a good long-term occupancy, benefiting the most forward-looking customers with a discount. This type of discount will always be better than not launching last minute offers.
Prices per person are another way to segment prices downward. For seasons with little demand, a low price can be offered if the house is occupied with two people and a supplement can be applied for each additional person.
Offering some services as extras can help to offer a lower starting price. An example could be the use of air conditioning.
It is well known that it is easier to retain a satisfied customer than not to get a new one. Therefore, it is important to establish loyalty strategies, benefiting repeat customers. For this purpose, promotional codes are very useful, with a discount for future reservations, on our website.
Listing site commissions are one of the most important expenses of a vacation rental. Each one has its own rules and what is more important, its costs are not homogeneous. This fact opens the opportunity to define different rates, depending on the channel, especially when it comes to direct sales, from our own website, provided that the costs will be much lower.
In addition, always offering the best price to customers who book directly with us is a good way to retain them, and enhance the direct sales channel, which is undoubtedly the one that brings us the greatest benefits.