The demand for mid-term rentals has increased swiftly over the past years. Being able to work from anywhere is the major contributor to this. More people are seeking temporary homes to work from places they always dreamt of traveling to.
As a host of such a place, it’s important to be aware of these developments and trends in the industry to grow your revenue. You can use various pricing strategies for mid-term stays to optimize your pricing 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 the ongoing housing crisis
- Retirees (aged above 60)
The housing crisis in the US has become so intensely grappling that people are forced to hotels/accommodations 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.
Understanding how you capitalize on this increased demand can unlock the hidden growth potential in your business.
Short-Term vs. Mid-Term vs. Long-Term Rentals
The period for which you decide to rent your property would significantly impact the renters you would attract. A short-term rental property would mainly attract vacationers, while a long-term rental property would attract digital nomads or snowbirds.
Let’s try to define all three of them to gain more clarity before diving deep into mid-term rentals:
|S.No||Short-Term Rentals||Mid-Term Rentals||Long-Term Rentals|
|1||Guests usually stay for around 3-7 days.||Guests typically stay on a monthly basis.||Guests usually stay for 90+ days up to over a year.|
|2||Cashflow is fast and substantial but also inconsistent.||Cashflow is moderate, lower than STRs but higher than LTRs.||Cashflow is consistent but considerably lower.|
|3||Operational costs are high.||Operational costs are moderate.||Operational costs are moderate.|
|4||No rental agreement is required.||The rental agreement on a fundamental level might be required to ensure that the guest is aware of their rights||A person staying in a property for more than 90 days may be considered a tenant in many places. A rental agreement would then be a wise choice.|
|5||Flexibility to charge dynamically due to the varying demand in the market.||Moderate flexibility to change prices monthly according to demand.||Fixed prices for the property throughout the year as the property is being booked for the whole year.|
|6||Restrictions and regulations in the local community are high. Some localities have also banned short-term rentals. You need to be aware of local restrictions.||Not many legal restrictions or regulations surround mid-term rentals. You need to be aware of local restrictions.||There might be too many restrictions to think about when renting on a long-term basis. The person who has rented your property might also have tenant benefits. You need to be aware of local restrictions.|
|7||High wear and tear due to high turnover.||Moderate turnover. However, mid-term renters might want modifications to your property.||Less wear and tear due to less turnover; however, long-term renters might make modifications.|
|8||Fluctuating demand for short-term rentals. During the global pandemic-induced lockdown, short-term rentals had to be shut down until the world opened up.||The market is volatile yet stable. While the demand varies, people who have booked for more than a month would still need the property for that duration.||Market volatility is significantly less. Most probably, people who have booked the property for more than 4 months would not be affected by the market or global trends to a large extent.|
Mid-Term Rentals: Pros vs Cons
You might have started with a short-term rental property. You have witnessed the changes in the market and are now looking to transform it into a mid-term rental. Before making any decision, weighing its pros and cons is essential to devise various pricing strategies for mid-term stays.
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 the cleaning costs. An arrangement or an agreement between you and your guest can also help you understand the depth of your cleaning costs. Most mid-term rentals would clean after the quest has checked out or have optional mid-stay cleanings. If you and your guest want, you can agree on cleaning schedules that are different from your own schedule, or you can agree to provide a cleaning service for them.
2. Lower wear and tear of your property
High turnover from short-term rentals is bound to cause increased wear and tear to your property. This can be avoided when the same person stays there for a while.
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. There might be days in your calendar when you might not have a booking. This results in inconsistent revenue. 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.
4. Reduced restrictions and legalities.
More and more counties are imposing restrictions on short-term rentals. This is due to the crippling housing crisis. However, there are not many restrictions surrounding mid-term rentals. It is important to remember that, in most localities, if a person has stayed on your property for more than 90 days, they are considered a tenant. Draft a proper rental agreement to help you better communicate the legalities.
5. Higher income than long-term rentals
When renting your property to long-term renters, you benefit from a set monthly income. You do not have to worry about constantly filling your property up with people; you already have people in your building every month. However, with a mid-term rental, you have the benefit of opening your property up for both short-term and mid-term renters. This way, you can also profit from the seasonality and demand in your locality.
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. You should check the legalities in your locality or state regarding the mid-term rentals’ definitions.
2. Market volatility
The market might keep fluctuating. Does the market in which your property is, have any demand for mid-term rentals? When is the demand high? 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.
3. Lower income than short-term rentals
When you rent your property for short-term rentals, you will be pricing your property high or low according to the market demand. Sometimes, you might end up making money you would not have imagined. Mid-term renters, however, are looking for properties that are available to them at a reasonable price for at least a month! They might not be looking to shell out a hefty price for a 2-day stay during the peak of Christmas in your property.
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 essential 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 likely have good demand for short-term rentals. However, with the boom of digital nomads, you might also look at mid-term rentals. You can use the demand for mid-term rentals to fill your calendars during the short-term rental slow periods.
A few metrics that you can track and understand about your market:
- Lead time is the number of days in advance bookings made on your property.
- Length of stay is the number of days your guests make their bookings.
- Pricing of other similar properties in your neighborhood.
- Seasonality of the local area
Your pricing and seasonality should match your potential guests’ lead time and length of stay. Examining your past records and comparing them with the market is essential. 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 types of properties that would be profitable for you to invest in. Market dashboards are fully automated personalized dashboards that help you track vacation rental data anywhere in the world. You would also be able to analyze the market trends for short-term and mid-term rentals. 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
|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
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.
#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 you get a booking for these while also making revenue. In between two mid-term bookings, you might have a few days of a vacancy.
Your pricing strategy should consider the possibility of having these gaps and should be prepared enough to fill these gaps profitably. This could mean setting different prices for last-minute bookings, for bookings you get months in advance, for days between two mid-term bookings, etc.
With PriceLabs, you can easily control all of the above (and a lot more) using our various customizations.
#4 Reduce price fluctuations
Each day might have different demands and prices. There might be times when you observe trends that are different from default adjustments. For example, if you are in a city like New York, you might receive more demand during the week than during the weekends. It is super easy to manage this if you are a PriceLabs user. To adjust your pricing to cater to varying demands, you can add a percentage-based adjustment to apply on top of our price recommendations.
Seasonality is the cyclical variance in demand throughout the year. This is unique to each market. For example, Miami gets the most demand during the winter from snowbirds. With historical data, you might be able to predict the cyclical variance in demand and plan in advance.
PriceLabs 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. You are in a market that does not fluctuate as much as the short-term rental market. You can turn the aggressiveness to conservative to ensure you still capture the demand but not too much to ensure your pricing is optimized.
3. Understand the market in comparison to your property
One of the key advantages of a mid-term booking is knowing that you have a consistent income. When the bills are getting stacked on one side, it is always good to know that cash bills are also consistently stacked on one corner. A mid-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 your vacation rental, taking care of many guests, maintenance, etc. With consistent money in your pockets, you will have more time on your hand.
It is important to analyze and research your competitors because it will help you understand the advantage that your competitors have over you, or what you are doing better than them. When you know what you have to compete against, you can also make strategic decisions on what you can provide. This goes from pricing to the marketing campaigns you might want to carry out.
4. Research the amenities you can provide
You will be hosting guests with varied requirements – snowbirds, digital nomads, family vacationers, etc. You need to know what amenities you can host on your property to provide an excellent stay to your potential guests.
What are some of the amenities that you can provide?
- Super fast wi-fi
- Comfortable workspace
- Proper kitchen appliances
- Stationary access
5. Maintain proper communication with your guests
After you get bookings, it is essential 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?
- House rules
- Rent details
- Rent due dates
- Security deposit details
- Accommodation fixtures
- 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 would love to hear from you.