How to Optimize Short-term Rental Pricing Strategies for Mid-term Stays?

How to OPtimize your Property for Mid-Term Stays

The demand for mid-term rentals has increased swiftly over the past years. While there has always been some sort of a demand, the past few years have increased the demand exponentially. Understanding the various pricing strategies for mid-term stays is important to optimize your property to leverage this increased demand.

Guesty surveyed 400 property managers on their adaptation strategies to cope with COVID-19. 40% of them had optimized their property for mid-term stays. COVID-19 has brought in newer travel personas such as:

  • Travelers who get stuck in unexpected situations like lockdowns
  • Digital nomads and/or freelancers
  • Healthcare workers
  • Cityscrapers – traveling to rural areas for peace
  • Business travelers
  • Rental hoppers due to housing crisis
  • Retirees (aged above 60)

The housing crisis in the US has become so intensely grappling that people are forced to hotel/accommodation hop to ensure a roof above their heads. With most companies going online, workers are choosing to not just work from their homes but to tick as many destinations as possible from their travel bucket list.

It is now more important than ever that hosts are aware of the pros and cons of mid-term rentals to capitalize on the rising demand in the market to understand the various pricing strategies for mid-term stays.

Mid-Term Stays: Pros vs Cons

You started as a short-term rental property. You have witnessed the market demand and are now looking to transform it into a mid-term rental. Before making any decision, weighing its pros and cons is important to devise various pricing strategies for mid-term stays. Read below to understand the pros and cons of a mid-term rental property.

Pros of optimizing for mid-term rentals

1. Fewer operational costs

When a person rents your property for a long time, you would be exempted from continuously making your property look spotless for a new guest. You can save on your cleaning costs. An arrangement or an agreement between you and your guest can also help you understand the depth of your cleaning costs. You and your guest can agree to clean the property every other day for a minimal cost, or you can agree to a maid service for them if you are looking to provide a premium service.

2. Lower wear and tear of your property

When too many people use your property, it is bound to natural wear and tear. This can be avoided when the same person uses it for a while. They would also want to take care of the property well as they would also be spending a lot of time there.

3. Reduced revenue risk

It is well known that short-term rentals, while lucrative come with their share of risks. It is not guaranteed that you will end up with a profit at the end of the month. When a person rents your property for longer, you will receive continuous rent from them. This reduces the risk of payment or profit for that month.

Cons of optimizing for mid-term rentals

1. Legal work

When renting your apartment to a mid-term renter, you must cover all your bases and ensure that you and your guests are protected. For example, you will have to discuss the payment cycle and make sure every detail of how the payment has to be made is mentioned. This will ensure clear communication between you and your guests and protect you from any liability.

2. Market volatility

The market might keep fluctuating. Does the market in which your property is, have any demand for mid-term rentals? When do they have them? You need to know the answer to these questions. If mid-term rentals would be in demand for a while, then you should optimize your property for that period for mid-term rentals.

How to Optimize your Pricing Strategies for Mid-Term Stays

Mid-term rentals have always been around the corner. How can you ensure your property is set up for success in the mid-term rental market? Read along to understand the next steps.

1. Is your property made for mid-term rentals?

It is important to look into your property and understand if there is enough demand to create more supply. If your property is in popular business areas like Chicago, Seattle, or New York, you’re surrounded by major companies, and there will be a consistent demand for mid-term housing.

If your property is in popular tourist areas in Hawaii, Milwaukee, or even San Francisco, you might have good demand for short-term rentals. However, with the boom of digital nomads, you might also look at mid-term rentals.

A few metrics that you can track and understand about your market:

  1. Lead time is the number of days in advance bookings are made on your property.
  2. Length of stay is the number of days your guests make their bookings.
  3. Pricing of properties in your neighborhood.
  4. Seasonality of the locality

Examining your past records and comparing them with the market is important. For example, you might notice that summer and winter are peak seasons for short-term rentals. However, your property might be lagging during the fall and spring seasons. You can optimize your pricing strategies for mid-term stays during the fall and spring seasons.

You can use PriceLabs Market Dashboard’s market data to pinpoint the profitable properties for you to invest in. You can use the dashboard to judge which listings are a good investment. Market dashboards are fully automated personalized dashboards that help you track vacation rental data anywhere in the world. You can analyze the various KPIs of your potential property type to be able to make informed investment and pricing decisions to maximize profit. It also helps you have a better look at the other markets whenever you decide to expand or create your portfolio. 

2. Optimize your bookings and pricing strategies for mid-term stays

Let’s say you’ve decided to also incorporate mid-term rentals in your bookings. The next natural step is to ensure you get the right bookings and price them accordingly.

#1 Offer efficient weekly/monthly discounts

You can incentivize longer stays and charge higher rates for any dates you accept short stays by offering discounts based on guests’ booking patterns. These discounts usually show up as a discounted rate in OTAs. This way, guests get the impression that they are getting a higher-priced property for a discounted price, and who doesn’t like a good save on money!

Let’s dive into quick math!

A few assumptions:

Your occupancy: 80%

Your ADR: $100
Your revenue for the past month would be:

= 80% x 100 x 30

= $2400
Let’s say you’ve applied a 20% discount and get booked:

Your occupancy: 100%

Your ADR: $80
Your revenue for the past month would be:

= 100% x 80 x 30

= $2400

A 20% discount for a month-long booking would make you the same amount as accepting shorter bookings at your standard rate.

Added bonus: A much lighter workload and a higher guarantee of a booked calendar.

#2 Look into the future

In April 2020, it was seen that long-term stays were in demand. You would’ve been able to make money in this market if you had planned early on for this trend. In an internal survey of (no. of people), we found that 75% of property managers and vacation rental owners have their calendars open six months in advance, and some have their calendars open for three to six months in advance.

There are various customizations in PriceLabs that you can use to optimize your pricing strategies for mid-term stays:

Minimum Stay for Far-Out Bookings

When your property is being booked far in advance, the bookings might be for longer periods. Understanding this is useful to fill up your calendar far out in advance. You can specify a minimum night and how far out you want this to apply. For example, if a guest is booking your property three months in advance, they should book for a minimum of 5 days. This way, you can leave the weekend out for the weekend demand surge in your locality.

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Min Far Out Pricing

When you’re thinking too far ahead, there might be a chance for your pricing to go below your minimum price. Well, this customization makes sure that prices for dates beyond a particular date do not fall below the price you set here.

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Far-out Premium

We automatically gradually increase prices far-out to ensure that you are the first to book for far-out dates. We keep the rates high to try and get a booking at a higher rate because the demand for the next period is uncertain.

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#3 Plan for gaps in your calendars

When planning pricing strategies for mid-term rentals, you might also encounter unexpected gaps in your calendar. You need to account for these gaps and make sure that you get a booking for these while also making revenue.

There are various customizations in PriceLabs that you can use to optimize your pricing strategies for mid-term stays:

Orphan Day Prices

When there is a last-minute booking, it is highly likely to create an orphan booking. An orphan booking is an unbookable gap in your calendar. By default, we apply a 20% discount to two nights or fewer gaps. However, we do leave control in your hands as well.

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Adjacent Factor

You might want to control how you get your bookings before and after a booking. It will take some time to turn that property around for a new guest; maybe you want to factor that in. Whatever your reason, you can use this customization to implement Length of Stay restrictions after and before a booking.

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Minimum Stay for Adjacent Day before/after a Booking

Now that you’ve decided how your adjacent days look, you can select how you want to price them. While a premium can be applied to ensure that adjacent days are not attractive to guests, they might still end up booking those days.

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#4 Understand the seasonality of the market to devise pricing strategies for mid-term stays

Seasonality is the cyclical variance in demand throughout the year. This is unique to each market. For example, Miami experiences maximum footfall during winter. With historical data, you might be able to predict the cyclical variance in demand and plan in advance.

Three factors impact price recommendations:

  1. Broad trends that change drastically from one stay date to another include base price, seasonality, etc.
  2. Lead-time-based trends change the price depending on how far-out the booking date is. These can be minimum-night restrictions, last-minute restrictions, far-out premiums, etc.
  3. Daily demand trends change from one stay to another depending on the demand for a certain stay date. These fluctuations could be because of holidays, events, days of the week, etc.

We give you the baton to fine-tune the required variations at your prices according to market trends and your expertise. You can achieve this by using our dashboard’s demand factor aggressiveness feature.

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#5 Reduce price fluctuations

Each day might have a different price. With min-night restrictions in place, it is important to understand how each day of the week is treating your property. While PriceLabs already accounts for the day of the week trends, any adjustments made to this customization will be applied on top of our default settings.

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3. Understand the market in comparison to your property

One of the key advantages of a long-term booking is knowing that you have consistent income. When the bills are getting stacked on one side, it is always good to know that cash bills are also consistently stacking on one corner. A long-term rental will require much less operational time and cost than a short-term rental. You would not have to spend much time on marketing, taking care of many guests, maintenance, etc. With consistent money in your pockets, you will have more time on your hand.

You can use our Market Dashboard and Portfolio Analytics to dive deeper into your listings to properly understand their requirements. Pricelabs Portfolio Analytics is a real-time reporting system that tracks high-level metrics for your property. You can get a quick snapshot of your property’s financial health. We dive further in and provide insights on listing level performance and metrics. You can use our data to make informed decisions while setting up your pricing strategy.

PriceLabs Market Dashboard is a fully automated personalized dashboard that helps you track vacation rental data anywhere in the world. You can analyze the various KPIs of your potential property type to make informed investment and pricing decisions to maximize profit. You can also use the market dashboard to analyze the various amenities the market provides, which you also probably should!

What are some of the amenities that you can provide?

  1. Super fast wi-fi
  2. Comfortable workspace
  3. Proper kitchen appliances
  4. Stationary access

4. Maintain proper communication with your guests

After you get bookings, it is important to make sure that you have established proper ground rules with your guest. This is important to ensure that you and your guests are protected from liability. You can have them sign a legally-binding rental agreement.

What should your rental agreement include?

  1. House rules
  2. Rent details
  3. Rent due dates
  4. Security deposit details
  5. Accommodation fixtures
  6. Stay duration

Maintain an open communication channel with your guests for the best guest experience.

Mid-term rentals might not be the most lucrative option, yet it is the easiest to manage. Especially when compared to the volatility of short-term rentals. Adjusting your rates will give you the necessary boost to be competitive and increase your profits. Leveraging the technology in the market can help you listen closely to the whispers of the markets and streamline your business accordingly.

Have a mid-term rental story that would inspire others? Or questions or feedback for us, just contact us. We love hearing from you.

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