Vacation rental property managers have a great problem on their hands… There’s always more money to be made. No matter your operation, there is always a finer line to tread with your strategy and that little bit more revenue to make.
Through 2 posts we would like to talk about the ways in which market intelligence can find you this extra revenue. We will break this down into the following 4 optimisation segments:
In this first post we will explore the first segment; how data-based strategy can fuel optimised rates. Click for part 2.
A revenue manager’s aim is to sell each listing at the highest nightly rate possible for each guest, every time. In order to maximise revenue, this means leaving no money on the table whilst maintaining a level of occupancy. There are a number of considerations when optimising rates that market intelligence can inform.
1. Understanding seasonality:
Fundamentally, different dates will experience different levels of demand and are therefore capable of achieving different maximal rates.
As you can see above, the rates around February (market ~24% below average rate for the year) in Barcelona differ greatly from those in July which is already advertising at 14% above year average rate, but Fridays and Saturdays also consistently show that they have the edge on midweek.
Understanding patterns in pricing through insights into these broad trends is useful for setting rates for new stock as well as making projections and forecasts for your portfolio.
2. Consider market rates:
However aligned your prices are with your internal targets or historical rates, they are only sensible in the context of current consumer market choice.
In other words, if you price your 2 bed at 100/night based on your profit or average daily rates for previous periods, but every other 2 bed in your market is advertised 15% higher, you’re likely losing extra revenue.
Above we can see that this PM is pricing around 23% below market average, and is seeing a significant gap at the weekend where their rates aren’t raised much. This suggests that they could stand to increase by 10% and perhaps 15% at the weekend whilst maintaining the occupancy to boost their revenue. Be warned though; the alternative is crippling your occupancy by pricing above your market.
In either case it makes sense to have awareness of the current state of your market and factor this into your rates if you hope to maximise your revenue. This is where forward looking data for your market comes into play. You can even compare with specific competitors that manage comparable stock or areas.
3. Align rates with fluctuating demand:
Optimal rates will fluctuate through booking window and with different levels of supply & demand
We’ve already talked about the effect of seasonality on rates, but don’t forget, rates aren’t static either. One big challenge is that as soon as you have identified ‘the optimal rate’, it is likely outdated. There are a couple of things you can do to stay on top of this. First, be aware of demand peaks from local events. Using Barcelona Carnival as an example below, you can see the difference in pricing (100+%!) and even 3 months out, occupancy is beginning to peak.
Second, how does lead time affect demand and rate? Just as with flights, the number of people looking to buy, the amount they’re willing to pay as well as the number of products left and how desperate the vendor is to sell more will vary through time. These things all contribute to the product, in this case accommodation, varying in its optimal price point.
Below you can see the average price for the coming week in Barcelona is almost 20% lower than that of the first week in March as managers introduce last minute discounts to boost occupancy.
Even better than that, you can track the state of market and your own availability and demand (see first graph below of occupancy, and pick up in the second graph shows number of listings newly unavailable in the last 7 days).
Having visibility over current availability, demand and rates in your market means that you can always keep your rates attuned to the consumer climate, and crucially, you can make proactive, demand-sensitive rate alterations ahead of your competitors.
4. Listing specific pricing:
Each listing has different optimal price. Price points should be tailored to stock type, platform, zipcode, amenities etc – they can’t be too specific!
Unsurprisingly, your average guest is willing to pay different amounts for not just a different number of beds, but also different locations, amenities and of course quality. This means that most listings will have a different ‘maximal price’. Check out the data here that shows how a price can vary just from zipcode to zipcode.
Demand and availability for different stock types also paints a picture of where higher ADRs can be achieved and where lowering would be beneficial. For example, below left is the number of 3 beds booked on each day 16-18th January – we can see that 18th is strongest. When we ask the same question for 2 beds (below right) however, we see that the most in-demand day for 2 beds is actually 17th. This knowledge will impact how you will price these different unit types
Looking at the last 2 points, combining demand and rates together, you can see why these insights are helpful. Below we can see that 4 beds are priced over and above that of 1, 2 & 3 beds, and yet in terms of demand, they are languishing behind. For 2 beds we see a different story, and particularly for 17th, that inventory could stand to gain a little lift in rate. This is backed up when factoring in supply. The Barcelona market consists of 4298 1 beds, 4140 2 beds, 2882 3 beds and 850 4 beds. The data tells us that the pick up below equates to 6% of available 1 beds, 10% of available 2 beds, and 7% for both 3 and 4 beds being booked over the last week.
The overall message is to get more granular – look at specific property types and their price points to understand how stock can be priced. You stand to collect a lot of money that would otherwise be left on the table, and see your occupancy grow where demand is less strong.
Check the next article, part 2, for 6 more ways that market intelligence can transform your 2020 revenue!
Market intelligence is key. The decision-making power that market insights can give you is immeasurable in terms of optimising your rates. If you’re a property or revenue manager interested in ensuring that no money or occupancy are missed with market intelligence, you can book a demo call here: