Are you a vacation rental host or property manager looking for a revenue manager? To understand what a revenue manager does, it is crucial to understand what revenue management is. A successful vacation rental business survives and thrives based on its revenue management.
What is revenue management?
Revenue management is the practice of implementing disciplined data analytics to maximize revenue. It predicts customer behavior at micro-market levels, fine-tunes product pricing, and adjusts availability to maximize revenue.
Revenue management is the practice of analyzing the vacation rental performance and market data to draw insights and set a strong pricing strategy. It includes selecting the optimum price for each booking based on various performance metrics.
Revenue management may include pricing, product selection, expense reduction, marketing, and recurring fees. However, some factors are more crucial than others when developing a pricing strategy.
Why do you need a solid revenue management strategy?
A solid revenue management strategy can increase revenue and profit by helping you identify improvement areas in your strategies by analyzing past performance, market data, and other information.
For example, you can analyze your own data to identify high and low-demand periods. Then, you can adjust your prices to gain more revenue during higher demand months and more bookings during lower demand periods.
Choosing the right revenue management strategy strengthens your business’s finances and has an edge over your competitors. Also, having a good strategy helps you make informed data-backed decisions instead of guesswork.
Now that we know about revenue management, let’s try to understand who is a revenue manager and how they can help your vacation rental business.
Who is a revenue manager, and how can they help?
A revenue manager uses performance data, competitor rates, local market information, and important vacation rental KPIs to optimize property availability and price to maximize your revenue growth. They can do this manually or with the help of a revenue management tool. Usually, revenue managers choose to combine their market experience and the data provided by revenue management software to design a pricing strategy.
A revenue management tool anticipates the demand days in advance. This means that during high seasons you do not have to stress whether the selling price should be increased or decreased to optimize the sales for each property. Instead, the tool will automatically do that for you.
When appropriately used, revenue management software can increase your revenue and boost your business significantly in the long run.
Why is a revenue manager important if a tool can adjust prices automatically?
If you are a property manager, your primary goal in working with homeowners is to grow their revenue and establish a successful business model. As a result, you need to prioritize revenue management and have a dedicated person to take care of this aspect of your business.
As a homeowner who is managing their vacation rental business on their own, a revenue manager can help them release the burden of managing one of the most important and time-consuming aspects of their business. This gives them more time to focus on other aspects of their business like marketing, hosting, maintaining guest relations, etc.
The revenue manager will take care of raising the average prices and maximizing the number of days sold to achieve the best possible result.
What to look for in a vacation rental revenue manager?
A successful vacation rental revenue manager will have the following traits:
1. Data-oriented and critical thinker.
A revenue manager reveres data and acknowledges its significance in understanding the market. They also comprehend the importance of thinking from the guest’s point of view and know how to balance the two aspects when creating a pricing strategy.
2. Someone with vacation rental industry experience.
A successful revenue manager is insightful and has an eye for occupancy demands, market trends, and the unique characteristics of individual properties that help them make an informed pricing strategy. They know how to keep up with industry trends and implement the relevant ongoing trend in their pricing strategy that will help them increase revenue.
3. He knows the market well and stays updated.
Even though a revenue management tool can give you data about the demand trends, only a revenue manager can properly utilize that information by adjusting the tool to work for your business.
The importance of data in revenue management
It is impossible to develop a good pricing strategy without studying the historical data about the property’s performance and market demand and supply trends.
The volume and accuracy of the data greatly determine the agility of your revenue management strategy. Experts in the vacation rental industry use different types of data.
- Scraped data is sourced from various technologies to get data from third-party relevant authorities such as Airbnb, Expedia, and Booking.com.For example, PriceLabs extracts data from Airbnb and Vrbo to provide accurate information about the vacation rental market in your vicinity.
- Authoritative data includes all the data you have stored in your property management system.
- Lagging data are measurable data points that can be used to analyze the listing’s performance. They change only after established trends or patterns.
- Leading data helps you make future predictions.
Start by analyzing your listing’s data
To create a strong pricing strategy, it’s important to understand how your property has been performing. Data from your property management system is the best source. You’re probably already using it to make operational decisions.
When you start analyzing your data, you learn all sorts of information that can be useful for vacation rental revenue management. Valuable data will have:
- Average check-ins in a given time period
- The average number of guests staying per property
- The average number of check-outs in a given time period
- Depending on how long you’ve been in business, your reservations data can show you the differences in reservations over various time periods, from year-over-year to week-over-week.
These data points can help your revenue manager design your pricing strategies. You will also need current market trends data using a revenue management tool.
Key vacation rental KPIs to analyze
Vacation rental revenue management also relies on different metrics and data to price effectively and competitively.
- Average Daily Rent (ADR): This is the average nightly rate for a property (or a cluster of properties), calculated by the total rental revenue divided by the total nights sold.
- Occupancy Rate: The number of occupied nights for a property or a group of properties.
- Revenue Per Available Room Night (RevPAR): This number is a more accurate way to judge the performance of a rental (or cluster of rentals) because it takes the occupancy rate into account. It also excludes nights that aren’t bookable by guests for operational reasons, like an owner hold or maintenance blocks.
Hotels track very similar KPIs for their revenue management. The big difference? In vacation rental management, gross revenue omits the amount owed to homeowners each month. It is because that amount is not a part of overall profits.
How does the revenue management tool work?
A Revenue manager software, like PriceLabs, analyzes market data days in advance to provide you with price recommendations while offering you various customizations to enable the implementation of your strategy with ease and control. This helps optimize bookings while saving time, so you never miss out on opportunities to earn more.
You can set up base, minimum and maximum prices, set different stay restrictions, study the booking trends and keep a track of your property’s performance metrics to keep upgrading it.
If you want to learn more about how we can help you manage your revenue, you can reach out to us, and our team will be there to help you out.
Tips for choosing a revenue management tool
Several revenue management tools are available in the market to suit your requirements. Here are some points to remember while choosing a tool that might come in handy:
- Know what you want from your revenue management tool. Identify the revenue goals you want to achieve with the tool. Do you want to automate your daily prices to focus on strategic tasks? Or do you want to focus on optimizing your occupancy and rates to increase your revenue? It can also be both. Having clear goals lets you prioritize the features you want in a revenue management tool.
- Check if the software provides flexible updates. You need a tool that allows you to refresh and update your prices with one easy click.
- Check if the software is consistent with its updates and adopts modern revenue management methods. You don’t need outdated software that does not provide relevant services and data.
- Their customer support services should be great. If you are new to a tool or just trying to understand an update, you can’t afford to wait for hours to get a customer care executive to respond to your queries.
Revenue management is one of the essential aspects of vacation rental management. Therefore, it is only natural to want the best revenue manager to handle this aspect of your business. This article elucidates all there is to know about revenue management and looking for a revenue manager, whether a person or a tool.