How To Set the Right Price?
Evaluate your property
Understand the market
Understand your standing in the market
Having the right pricing strategy is one of the key components to utilizing your property to its maximum potential. However, a lot of consideration and planning goes into optimizing your pricing. It is one of the biggest decisions you can make for your short-term rental.
When your guests consider a short-term rental, price is one of the biggest factors they would be comparing. It becomes important to set a competitive price in the market.
If your rates are too high, you might not fill your property as much as you’d like. On the other hand, if your prices are too low, you might be filling your property while leaving money on the table. You need to analyze the important vacation rental KPIs in-depth to make sure that you are adopting an appropriate pricing strategy. The key is to find a sweet spot wherein your prices will grab your guests’ attention.
How to set the right price?
When optimizing your pricing strategy, you need to consider three things:
- Evaluate your property
- Understand the market
- Understand your standing in the market
Evaluate your property
It is important to understand your property to adopt an appropriate pricing strategy. This can help you in understanding the exact valuation of your property. With this information, you will be able to accurately price your property according to the market value. You need to consider:
Your property’s location
Researching the impact of your property’s location on your property’s demand trends is important in crafting a near-perfect pricing strategy. Understand if your property has unique features: tourist attractions, theme parks, festivals, events, natural attractions, etc.
If various features could drive demand throughout the year, you should be able to set your prices at their maximum during peak season. The peak season might fluctuate for the major part. You then need to make sure that you change your pricing as the season changes. As air travel returned, short-term rentals in Dubai saw a surge in demand over Expo 2020 driving the occupancy rate over 90%.
Along with the seasonal changes, rules and regulations also change according to your property’s location.
Your property type and amenities
Every property provides various amenities to its guests. Your property deserves to be priced higher if you go above and beyond the basic amenities for your guests. Another major factor that influences your property’s pricing is your property type.
What kind of property do you have? A large villa or a single-bedroom apartment? As you move higher on the extravagance meter, your property moves to the higher end on the pricing. When guests agree to pay a higher price, they expect a property with good amenities so that value matches their price. Another price-influencer is the amenities that you provide on your property. If you are going above and beyond for your guests, your prices should be higher.
Your target guest
While you are deciding on the kind of amenities or the location of your property, you need to also understand the guest you want to attract to your property. It is important because if you offer luxury accommodation, you will price it to the maximum rate, affordable only to people with deep pockets. Similarly, business travelers or students might not be looking for exclusive, luxury amenities. They might be looking for efficiency in their travel.
Each group of travelers might have different expectations. You will have to tailor each guest’s experience according to their preferences.
While it is necessary to price your property to beat the competition, it is also important to make sure that your profit outweighs your expenses. Before even getting started on the pricing, calculate the expenses you might incur. Some of the expenses that you need to include are:
1. Service fees
Vacation rentals come with a number of fees that hosts should pay to maintain the property. Service fees are the fees that are paid to say a property manager to cover the costs for the management services they provide such as guest communication, booking management, maintenance, etc.
2. Cleaning expenses
A clean property is one of the basic requirements of any guest. You must charge your guests the cleaning fees to provide the most pristine accommodation.
3. Maintenance costs
Maintaining a property goes above and beyond just keeping it clean. There are various things to take care of like electricity, constant water supply, laundry, etc. You must be aware of how much you charge your guests to again provide the best services.
4. Restocking supplies
You will have to constantly also restock supplies like food supplies, toiletries, bed accessories, etc. You need to understand that while a few of these might end up being free of cost to the guest, you will have to factor in the cost somewhere to make sure you do not incur a loss.
5. Maintaining amenities
You might have various amenities to ensure that your guests have the best experience. Maintaining those amenities such as a basketball court, badminton court, swimming pool, indoor sports complex, or anything else. You will have to maintain the quality of these amenities to make sure that the guest experience is always at its peak.
Your business goals and objectives
A properly chartered business plan with clear goals and objectives can help your short-term and long-term growth. In line with your revenue goals, you need to continuously monitor and adapt your pricing strategy. If you have set an occupancy-related goal for your property, you need to make sure that your pricing can attract those many guests to your property.
While managing a short-term rental property, too many things are on your plate. It is always helpful to deep dive into your property in a quick snapshot! Our Portfolio Analytics helps in just that. It is a real-time reporting system that provides high-level metrics of your property. It provides detailed insights into trends in your portfolio that shed light on the necessary improvements in your minimum stay, length of stay (LOS) trends, and booking window trends in your pricing strategy. You can also easily review and adjust the underperforming listings. Utilize this comprehensive guide on using Portfolio Analytics to inform your pricing strategy.
Understand the market
While you have optimized your pricing strategy according to your property, You also need to understand how people in your locality are pricing their properties. Every traveler that looks at your property is also looking at other properties in your locality. To win over their bookings, you need to place yourself a notch higher than them concerning the kind of experience you provide for them. You have to carefully tailor each guest’s experience according to their expectations. Sometimes, it is easier to listen to the hosting tips and tricks of the market.
Whether you already have a property or are a complete beginner, it is important to keep conducting competitor analysis before setting or optimizing your pricing. This will enable you to be competitive among other listings similar to yours.
If your listing is new, it might be wise to price yourself slightly lower than the market. This is because you will have lesser reviews than others in the market, and people are less likely to choose your property. A reduced price might just be the incentive to push your potential guests to choose!
With PriceLabs’ dynamic pricing solutions, you can get pricing recommendations based on historical and current booking data, market supply and demand, seasonal and day-of-week trends, special events and holiday predictions, and days left to book your property. While all of these factors are automatically applied by our algorithm, you can utilize our Neighborhood data, to conduct your own research and apply your own customizations to inform your pricing strategy.
Let’s look at how our Neighborhood Data can help inform your pricing strategy.
This feature can be used to understand the various factors that affect your pricing. To access it, click on the ‘Neighborhood Data’ tab on the calendar view of the listing that you want to analyze.
Note: All prices will be in the same currency as your listing.
The location tab shows detailed information of all the listings in your neighborhood for the next 60 days. You can zoom in and hover over the dot to see more information about the listings. The color of each dot is determined by the listing’s average rate. As the shade intensifies to red, the average rate increases. For Airbnb listings, the map also shows the listing name and min stay in the hover tooltip.
Compare competitor calendar
Have you often wondered how the other listings in your neighborhood are performing? You can compare the calendars of your competitors (up to 10) with this feature.
You can select the listings that you want to compare. You can select up to 10 listings.
Your listings’ prices are shown in bold, unavailable dates are greyed out, and the listing name will take you to the listing portal.
How to select the listings:
After you have selected the listings, click on ” Get Calendar” to see your competitor’s rates –
While it is important to understand how the short-term rentals in your locality are performing, it is also important to understand how are hotels are performing. This is because your guests might be looking at short-term rentals and hotels while planning out their vacations. How can you research hotels in your locality using Neighborhood data? The hotel data shows your prices compared to the closest hotels in your area. You can analyze up to 10 in your area.
How to access the hotel data?
By clicking on a name on the legend, you can hide/show the corresponding hotel’s line on the graph.
Understand your standing in the market
You now have deep-dived into your property; you have also analyzed the market. The next step is to understand where you stand in the market. It is important to understand which percentile you fall in to make sure you price your property appropriately.
What is a percentile?
In simple terms, a percentile is a term that describes how one score compares to the other scores from the same set.
If you are just starting out in your vacation rental journey, we would recommend that you price in the 25th percentile. There are four percentiles: 25th, 50th, 75th, and 90th. As your property goes higher in valuation, the percentile that your property falls under will also go above.
Say, for example, you have a luxury condo facing the beaches in Malibu. You will most likely price yourself pretty high maybe in the 75th or the 90th percentile depending on the amenities that you provide.
With this data, you can analyze how your pricing compares with the pricing of the other listings in your competitive set.
You need to set the bedroom filter before you can view percentile information in our Neighborhood data tab. This will help organize the listings that you want to analyze and compare.
How to access the bedroom filter?
At the top right of the Neighborhood data tab, you can find the bedroom filter. Click to add or remove listings with the number of bedrooms that you’re interested in, or click ‘Select All’ to see the full group of listings we’ve assigned as your PriceLabs neighborhood.
Now that you’ve set the bedroom filter, Let’s see how to analyze your percentile.
The overview chart classifies information about various listings according to bedrooms and shows you the pricing in a range of low to high. It helps you analyze the bookings made in the past 30 days. For the 124 2-bedroom studio apartments in this area, bookings range from $9391 on the lower end to $15160 on the higher end.
At this point, you would’ve set your pricing and might also be attracting guests. Have you wondered how your occupancy will look in the future? We help you analyze your future prices and your future occupancy rate.
Before that let’s understand the current price and recommended price.
What is the current price?
It is the price that our algorithm saw for your listing on your PMS, channel, or channel manager. This is updated any time a sync or save & refresh is done. If the listing you are analyzing has been syncing for at least a day with PriceLabs, we usually showcase yesterday’s rates.
What is the recommended price?
It is the price that is currently shown in the PriceLabs’ calendar. You are likely to see a difference between yesterday’s (current) and today’s (recommended) rates because you haven’t changed your base price or customizations.
Color chart for the future charts
The future prices chart shows your current occupancy and the recommended prices along with the percentile range of daily rates for the next year. The future occupancy chart shows the average occupancy in your area for each date for the next year, along with any existing blocked dates.
When you hover over the chart, you will be able to see the actual prices and the recommended prices for that particular date along with percentile data.
While you have all this information, we understand that you might have your way of analyzing them. You can also download this data as CSV (excel format) and analyze them independently.
Fixed prices are a thing of the past thanks to short-term rental revenue management tools. Setting up a fluid pricing strategy that matches your property’s pricing to the market demand in real-time can boost your demand. Adapting your rates will allow you to be competitive and increase your profits. It is important to understand the factors to which you need to adapt your pricing.
If you have a question, story, or feedback for us, just contact us. We love hearing from you.