In the vacation rental business, coming up with smart pricing strategies is the key to successful revenue management. But how do you know where to start and what tools to use? These 3 short-term rental pricing hacks will help you optimise for occupancy and maximise profit, while also boosting your guests’ experience.
1. Short-Term Rental Pricing Hack: Length of Stay (LOS) Pricing
Like many other strategies used by vacation rental property managers, Length of Stay Pricing was originally developed by the hotel industry. It’s a flexible pricing tactic that lets you adjust your rates based on the total duration of a stay, with the goal of incentivizing the longest stay possible.
The benefits of Length of Stay Pricing
As a general rule of thumb, you should always try and optimise for longer stays. Even if you offer discounts based on Length of Stay, you’re still going to make more money and have higher occupancy rates than if you have a bunch of sporadic one-nighters.
Long stays have several advantages over short ones, including:
– Lower overhead: you save on cleaning services and other operational costs
– More good reviews: the longer guests stay, the more likely they are to leave good reviews of your property
– More extra services sold: long stays present more opportunities for upselling
Minimum and Maximum Length of Stay
Length of Stay Pricing is implemented through the use of so-called Length of Stay controls, which are essentially booking policies or rules set by you for specific time periods.
The two most important Length of Stay controls are Minimum Length of Stay and Maximum Length of Stay. The former defines the least amount of days that a traveller is allowed to book, and the latter controls how many days they can book at the most. Hotels also use a third control, Closed to Arrival, to restrict arrivals on days when they expect full occupancy from guests staying through from previous nights (meaning that they’ll turn away guests who would want to check-in on that specific day).
There are two main cases when it can be beneficial for property managers to use LOS Pricing.
1. When demand outweighs supply
LOS Pricing can help you secure bookings for longer stays during periods of peak demand followed (and preceded) by quieter days.
Imagine that your city is gearing up for an annual concert that draws thousands of people into town. It’s almost guaranteed that your vacation rental is going to get booked for the weekend. You don’t need to fight for a booking – however, you can fight for a high-value booking with the help of LOS Pricing. The idea is to set a Minimum Length of Stay that incentivises travellers to stay longer – for example, from Friday to Monday instead of just Saturday (when the concert takes place). If you set your Minimum Stay to 3 nights, you filter out travellers who want to stay just the one night and prioritise travellers who are willing to commit to a longer stay.
In this case, you can choose to give travellers a discount based on length of stay by lowering your price per night (it’s a nice touch and it could earn you a few positive reviews). However, this may not be necessary since we’re talking about a period of high demand, and your property is likely to get booked anyway.
2. When supply outweighs demand
LOS Pricing can also come in handy during periods of low demand. If you want to make sure that your vacation rental doesn’t stay empty, you can offer discounts based on Length of Stay and encourage travellers to book a longer stay for a cheaper price. The longer the stay, the lower you’ll set your nightly rate.
How to set LOS Pricing with the help of Rentals United
A smart Channel Manager tool can help you set LOS rates for your properties on different channels. In the Rentals United platform, you can connect your LOS Pricing settings to Airbnb, Booking.com, Expedia and Google. Watch the video below to find out how!
2. Short-Term Rental Pricing Hack: Controlling commissions
As an experienced property manager, you’ll know that every channel you distribute your properties on has different commission rates. Some channels add their commissions on top of the rates you set, others deduct them. How do you make sure that you’re not losing out on money that you could be making because of varying commissions?
The solution is commonly referred to as markup. By marking up or down your rates, you can control the final price and the amount you receive from each and every booking, regardless of which channel it came from.
In theory, you could do this manually for all the channels that you advertise on, but it would take a lot of time and you’d have to do all your markup calculations on paper. Spare yourself and leave it to your vacation rental software (if it has a markup option).
In the Rentals United platform, you can control commissions with an easy-to-use markup feature. We’ll show you how in the next video.
3.Short-Term Rental Pricing Hack: OTA pricing and availability management
When you’re trying to optimise for occupancy and maximise revenue, a bit of manual tinkering can go a long way. As your calendar starts to fill up, you may need to manipulate your availability and your Minimum Length of Stay by channel, so that you can get the most bookings at the highest prices.
For example, you might want to free up certain dates that are trapped between two bookings by decreasing your Minimum Length of Stay for that particular period. Or, if you see that there’s a possibility you might get a high-value booking for a specific date from one of your OTA channels, you might alter the nightly rates accordingly.
The Rentals United platform lets you make adjustments to your strategy per OTA by setting custom prices for specific days, changing your Minimum Stay and prioritising bookings. Here’s how this functionality – available for the biggest hotel booking sites – works.
More tips & hacks on short-term rental pricing? Check this article on revenue or get one of our specialists to contact you!