Are your rates the right fit for your vacation rental? As noted in our earlier post about setting your rates, pricing your property is subjective — more of a best educated guess than an absolute calculation. It’s possible for you to miss the mark and price too high or low. If your rates are off, how can you adjust?
Is There A Problem?
The average vacation home is rented for 17.4 weeks a year. Before you get too anxious about what you may or may not be doing right, do some research and consider:
- What rates and activity are typical in your area?
- What factors led you to set your high and low season rates in the first place?
- Would someone else objectively agree that your rate is reasonable?
- Could your marketing itself use a little tweaking?
Changing your rates one way or another as soon as you can may seem the straightforward solution — but hold on! Take time to collect and assess feedback and information, then plan your next steps.
I Think My Rates Are Too High
If feedback you’ve received through inquiries has shaken your confidence, be careful you’re not taking bargain hunters too seriously.
Data from FlipKey found that the average vacationer visits four vacation rental websites and inquires on seven different properties; travelers like to shop, and they’re always looking for a better deal. Just as there’s no harm in asking for a discount, it’s not necessarily a sign that your pricing is off.
Most people are happy to pay less, so reducing your rates isn’t much of a challenge. However, increasing them if you make the wrong decision could be. If all signs seem to indicate that you’re asking too much, try one last experiment: Have a sale.
Straight discounts aren’t ideal, something that’s become increasingly clear with the Groupon phenomenon: Once someone has paid a cut-rate for a product or service, they often feel that regular price is “overpaying”.
Because of this, discounts should be used selectively:
- Draw business in low seasons,
- Honor repeat business,
- Build buzz as you’re starting out, or (as in this case)
- Test the impact of a lower rate before “officially” changing your pricing.
Track the impact on both inquiries and bookings. If you’re happy with an increase in bookings, but still believe your property is worth the higher rate, survey guests when they leave. Do they feel they received good value? What did they particularly like? How can you improve?
Feedback will help you highlight what makes your property so valuable, or identify adjustments that will help you meet higher expectations. Or you may find that the lower rate is your ideal price point..
I Think My Rates Are Too Low
It’s easy to fall into a problem with low rates: People may underestimate the value of their property or the cost of running a vacation rental, or new costs come up that don’t fit the budget.
If you can’t break even for what you’re charging, or you realize that you’ve undercut yourself, tread carefully.
If the difference between what you charge and your higher target rate is dramatic — or particularly minor — it may be best to do it and deal with it: When you raise your rates you may need to honor the lower price on occasion, like if someone has legitimately seen the lower rate advertised, but out-of-date marketing will gradually filter out.
Otherwise, step back and start by collecting information.
- Look at your competition: What a their rates and how does your home compare?
- Solicit feedback from your guests: Do they feel they received value? Why did they choose your vacation rental over others?
There are three groups of people to consider: New guests, guests who have already booked, and repeat renters. Anyone with existing bookings should be left as-is, but there are different ways for you to approach new and previous renters.
It’s hard to “market test” increased rates; your rates are already published, and raising those rates too high — or quoting a higher price than has been promoted — could leave your home empty. However, you do have a few alternatives to increase your rates to where you feel they should be.
- Raise prices incrementally. Consider scheduling smaller increases over a year or two. Or you may find that you only need to adjust your high or low season rates.
- Offset higher rates, but with a seasonal discount as you transition. As you switch to higher rates, you could offer a seasonal discount so the actual price is only slightly higher. When the next season rolls around, you remove the discount.
How do you adjust expectations for people who’ve stayed with you before? However you choose to handle your rate increase,
- Give people who have rented from you in the past lots of notice about the increase.
- Be specific about your new rates, and if relevant, share why your rates are increasing. Regular maintenance isn’t a good reason, but if the increase is needed because you’ve renovated or added a pool, let them know.
- Promote the value your property offers. For example, highlight some of the feedback you’ve received from happy guests.
- Outline any changes to the community. Maybe a new attraction is drawing more tourists to the area, making the market more active and competitive. Let people know about exciting new developments, it may encourage them to come back!
Finally, if appropriate, you could offer a special deal. For example, you could encourage people to “book by December 31 at this year’s rates” or, for repeat guests, put together a value-added “loyalty package” or offer a percentage discount on their next rental with you.
What lessons have you learned about pricing vacation rentals, and how do you manage price adjustments?