Dynamic pricing tools are a game changer when it comes to setting competitive rates for your properties. But how can they help you now, during a global crisis that has resulted in unprecedented demand lows?
As the travel industry starts to slowly recover from COVID-19, having a solid pricing strategy will be crucial to outrun the competition.
“Property managers should focus on aggressively selling any available inventory in the short term, and avoiding discounting prices too far into the future.”Ryan Saylor, Beyond Pricing
Dynamic pricing tools analyse a combination of historical and real-time market data to generate price recommendations. Their algorithms take into account a variety of data, from past performance to seasonality and local events. By making frequent, automatic changes to rates based on data insights, these tools can help property managers stay competitive at all times and increase their occupancy and revenue.
But what happens when we can’t rely on historical data to inform our decisions?
During the COVID-19 pandemic, the travel industry has been dealt an unprecedented blow. Last year’s numbers, in and of themselves, don’t do much to tell you how you should be setting our prices in this extraordinary situation.
“While historical data may not be as valuable as before, it can still play an important role when setting rates for the future,” Ryan Saylor, Revenue Manager at Beyond Pricing tells us.
According to Ryan, you can still use historical data to price a property, but it’s important to understand how the travel landscape has changed over the past few months.
“Travel consumer trends are evolving daily, and that data can be found in metrics like average booking lead time, booking pace, cancellation rates, and more that have changed so much over the past few months. Applying how these metrics have changed recently to historical data can give property managers a sense of how impacts from COVID-19 will affect future demand in their market and ultimately their pricing strategy,” he says.
The trick is knowing how to turn these data insights into actionable pricing strategies. Fortunately, dynamic pricing providers are doing their best to provide property managers with concrete advice. For example:
“Booking lead times have decreased dramatically for most markets as people are uncertain about booking too far in advance. This insight shows how property managers should focus on aggressively selling any available inventory in the short term, and avoiding discounting prices too far into the future,” Ryan says.
Besides looking at historical data to spot booking trends, you can also compare market-level data to your own portfolio’s performance to gauge how your business is keeping up with market demand. This will help you set rates during the post-pandemic recovery period.
“As people begin to travel again, most markets will begin to see demand slowly start to rise. As demand picks up, property managers will need to stay competitive against the rest of the market as every manager is eager for occupancy right now,” Ryan says.
Dynamic pricing providers are, of course, adapting their methods to the current situation.
To account for the drop in new bookings that the industry is experiencing, PriceLabs have adjusted their algorithm to price more conservatively for the next 60 days in order to generate bookings while demand is low. They’re also taking into account reservation trends – such as the shift towards a longer length of stay (7+ bookings) and last-minute bookings.
“Our algorithms look at a mix of future and past booking data to understand how to adjust rates. With COVID-19, we have also given a larger weightage to forward-looking data for the market but also each listing individually,” says Anurag Verma, Co-Founder at PriceLabs.
“Pacing information will play a vital role moving forward as COVID-19 has impacted so many markets, and YoY performance will be impacted.“Ryan Saylor, Beyond Pricing
Companies like PriceLabs and Beyond Pricing have also prepared resources for property managers to help them recover some revenue.
PriceLabs, for instance, has introduced a new setting called Coronavirus Occupancy-Based Adjustment. This new option helps property managers “better respond to the current low demand, but also be able to quickly respond to a future surge,” says Anurag. They also offer free market dashboards for anyone around the world to track the market in their area.
Beyond Pricing users can “access market data directly within the tool to view forward-looking occupancy and pricing data for their respective markets to make informed decisions for the future,” Ryan tells us. The platform’s new Portfolio Insights page lets property managers contrast their properties’ performance against historical pace data.
“Pacing information will play a vital role moving forward as COVID-19 has impacted so many markets, and YoY performance will be impacted. Using pace data within Beyond Pricing can help keep property managers ahead of the curve by staying proactive instead of reactive to market changes,” Ryan adds.
“A few things that will be especially important include being able to monitor supply and demand in your area, being able to quickly adapt or automate your pricing strategy to respond to changes, and dialling in your lenght-of-stay discounts.”Anurag Verma, PriceLabs
There was never a better time to experiment with different business strategies than now when the tried-and-true almost definitely won’t work.
This is especially true for pricing.
According to Anurag, you should focus on:
With the Pricelabs integration in Rentals United, you can set different prices for stays of different durations. Short, one or two-night bookings can use one pricing scheme, while three to four-night stays can have another. At the same time, mid-term bookings can get a larger discount.
However, having a competitive pricing strategy will not be enough. Ryan points out the importance of having a solid distribution strategy too:
“Property managers should look to how their property inventory is being distributed across different platforms, whether they are selling on third-party websites or directly through their own PMS. Updating featured photos, editing text, and figuring out ways to highlight updated pricing and promotions can help drive up conversion in times of low demand. For example, a listing with a featured photo of the kitchen may not perform as well compared to a listing with a featured photo of a bedroom or outdoor space,” he says.
If you’re not sure how you could optimise your listings, your best bet is to run a few tests.
“An easy way to find things to improve upon is by going through the entire booking process and experimenting with how guests book individual properties. How are guests finding your properties? Is the booking process seamless? Is your pricing strategy being properly communicated to the guest? Answering these questions and optimizing the booking process will help managers stay competitive as demand slowly starts to return,” Ryan concludes.
At Rentals United, we’ve been working hard on providing our community with all the distribution tools and resources they need to combat the impact of the crisis. Check out our webinar on how to incorporate mid-term bookings into your strategy and how to attract domestic travellers to your rentals.
Are you ready to build a tech-based distribution strategy? Discover our enterprise-level Channel Manager.