8.3 VRP Pricing Strategies and Other Operations Tasks

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millennials and travelers looking for properties in urban destinations. Since it arrived on the scene, this Silicon Valley darling has grown. It now features all types and sizes of properties in urban and rural locales. However, its audience still skews toward younger travelers and is the place to be for VRP in a city or trendy vacation destination. This site’s users are generally booking short stays. So, this platform can be a nice way to fi ll in gaps in your guest calendar.

If you have to choose one listing site to advertise your VRP, pick the one that makes the most sense for your vacation rental. At the end of the day, however, the best listing site for online marketing of your VRP is simply as many as you can possibly manage. The diff erence between the big fi ve in terms of cost is small, especially when you factor in all the components above. This is why I think it’s better to prioritize getting your properties in front of as many travelers as possible.

If you really want to make more money, your focus shouldn’t be on picking the platform that saves you a few hundred dollars. It should be on getting more bookings overall.

8.3 VRP Pricing Strategies and Other Operations Tasks

A lot of vacation rental owners have pricing strategies that are outdated and ineff ective, but they have no idea how much they’re losing as a result. Some charge under the market average, happy to scoop up bookings and fi ll their calendar. Some charge way too much, believing that high rates are padding the bottom line while they’re actually losing valuable bookings all along.

Let’s look closely at the impact of a few common VRP industry pricing strategies:

One Rate: The price is the same no matter the season. It’s an easy approach to vacation rental pricing as it takes just a moment to set up. That’s great if you don’t have a lot of time, but you will not maximize earnings for your VRP business. With one rate, you’re

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only going to book during peak season days. Your prices are too high during the rest of the year, so potential guests won’t pay your standard rate during the low season. They also won’t book your property for longer stays as nearby properties comparable to yours have lower rates.

Here is another issue with this approach: during periods of peak demand, your rate is below what guests are willing to pay and what other properties in your area are charging, so you’re not making nearly as much income as you could using this pricing approach. I do not recommend this to VRP owners.

Two Rates: This strategy is a bit better. You off er one price for peak season VRP nights and one for off -peak. Setting two rates increases your chances of getting bookings during high season as well as shoulder season (periods of lower demand). However, the two-rate approach still falls short of fully maximizing your VRP earnings. You could earn more with the same number of bookings if your pricing strategy had just a few more rate periods to respond to fl uctuations in demand.

Low Rate: This approach is the one in which you use pricing to undercut the rest of the VRP market in your area and book as many nights as possible. I can understand why it is tempting to off er very competitive rates from the beginning as well as additional discounts to fi ll in gaps in your VRP bookings. After all, you get something out of the deal: a high occupancy rate. This strategy makes it seem like you’re beating out the market. But when you look at annual revenue totals, you’re actually losing money with these rates because you’re charging less than what travelers are willing to pay and killing the cap rate on your property.

Again, holidays and other times of peak rental demand are when this strategy falls short.

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High Rate: The High Rate strategy uses aggressive pricing that is well above what other VRP owners in your area charge. When owners take this approach, their properties do not get booked very often. For them, it isn’t worth it to accept a reservation for any less than their high rate. This approach sees VRP owners setting their pricing based on emotional value (“My home is special!”) rather than on actual market value.

With this approach, you’ll only get a few bookings for your VRP per year—during peak holiday weekends when demand is high enough for people to pay your rate. You are making more money on a per-booking basis but you’re earning less overall.

Flexible Value-Driven Pricing: The Flexible Pricing strategy is the most sophisticated approach I see among VRP owners. It involves fi ve to 15 diff erent rates throughout the year based on competitive analysis of your specifi c market. With this approach, you update your rates continuously to match changes in demand—just like any resort or hotel.

This strategy is a strong one for the VRP owner. You’ll enjoy a high level of occupancy during peak period and you’ll book at higher rates, which also matters a good deal in terms of your overall business success. Because this approach includes multiple rate periods, you also secure bookings during shoulder season, as well as when demand is ramping up and down around peak occupancy windows.

Be aware that even with this savvy approach, sometimes your off peak rates are too low. However, this strategy is the best to maximize your rental income and is the one used by the biggest players in the VRP market.54

A fi nal word on pricing: Make sure your VRP matches the price

54. https://blog.evolvevacationrental.com/how-to-price-your-vacation-rental-pros-andcons-of-common-strategies/ Accessed June 27, 2019.

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you set. A premium price point may lead travelers to expect that your listing is more high-end than it actually is. This could lead to problematic reviews, and those will hurt your business. If you need help, most online listing services have built-in pricing guides.

Listing Details and Check-In Setting the right expectations before a trip will create a better experience for both you and your guests. You can help travelers decide if your space meets their needs by providing clear information about your property and must-know details like whether you allow pets. A detailed listing and profi le help attract the guests who are looking for a place just like yours.

Be sure to include an accurate and up-to-date address (this will be shared only after guest has booked). Check that bedroom and bathroom privacy details are accurate. Listing photos should fairly represent the condition and layout of your space. Double check that your amenities are as advertised, present and functional. For example, if you say you have a hot tub, it better be hot and working when your guests arrive.

Best Practices:

• Use a variety of high-quality photos with captions in your online listings.

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• Write a detailed description of the space. • Provide a House Guide that address situations that will matter to your guests. Clearly explain things you don’t allow, like smoking, pets, or additional visitors. • Mention areas that are off -limits, like a garage, attic, or owner’s quarters. • Be honest about unusual things that will impact someone’s stay, like nearby construction projects, road closures, or a lot of steps to access your VRP. • Provide for an easy check-in by creating a Check-in Guide for your listings and share it with your guests 24 hours before arrival, so they have everything they need. • Coordinate a check-in time in advance if you plan to meet guests in person. If you off er self check-in, add those details in the Guest Guide section of your listing’s online tools. • Explain to guests how to contact you (or your third-party management company) if they have a travel delay or lastminute questions. • Provide directions for getting to the VRP.

Supporting Guests During Their Stay It’s important that you, or your third-party rental management company, remain available throughout their stay. Your guests will rate your communication and responsiveness to issues at the end of their stay. The average of these guest ratings will appear on your listing page on the DIY site you use.

Best Practices:

• Communicate early to coordinate arrival plans with your guests. Send them a message at their check-in time to make sure everything went smoothly. • If something about your listing changes after a booking, tell your guests well in advance of their arrival so they can make alternate plans if needed.

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• Download all the online listing apps for ease of communication. • If you won’t be in the area during their stay, give your guests a local point of contact.

Reviews Rule A review may be a few simple words complimenting you, or it can be a lengthy essay of complaints. Both have the ability to infl uence a potential guest as they decide whether to book with you or not. According to TripAdvisor, 72% of travelers said they wouldn’t book a vacation rental without reviews.55 In other words, reviews are everything. They’re a key part in the traveler’s decision-making process, and nearly as important as word-of-mouth marketing. They’re great testimonials about the properties, published in a public space, and by others not affi liated to the business. By most travelers (your potential guests), they’re considered candid and trustworthy sources of information.

There’s more value in guest reviews than any copy you can create or photos you can take. Guests want to hear what stands out and what’s special, from people who have actually stayed there. Reviews put potential guests at ease.

VRP hosts who get great reviews tend to focus on fi ve things: cleanliness, essential amenities, accurate listing details, a smooth check-in, and proactive communication.

How clean, orderly and prepared your home is for your guests is a major reason they will return, give you good ratings, and refer your home to others. Guests will expect the clean, attractive space they see in your listing photos. As such, it is essential you (or your management company) has enough time to clean between guests, especially when there are back-to-back bookings. Guests will have the opportunity to rate the cleanliness of your space, and the average of your

55. https://www.tripadvisor.com/RentalInsights/vacation-rental-marketing/the-vacationrental-world-in-2018-so-far Accessed June 11, 2019.

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ratings will appear on your listing page on the various DIY platforms. If you consistently receive low cleanliness ratings, you may be subject to penalties from your listing service, lose current guest business, and hurt your future bookings.

Best Practices:

• Stagger your bookings to give yourself more time to prep between guests. A night or two before reservations can make all the diff erence in quality. • Charge a cleaning fee. Use the money to hire a professional cleaning service. • Leave cleaning supplies in your space so your guests can take care of spills and accidental messes.

Providing Experiences Diff erentiating yourself from resorts and other VRP operators is more diffi cult than it was in the recent past. With owners and property managers upping their game and providing ever-higher standards, sometimes it’s no longer enough to rely on luxury fi nishes and crowdpleasing amenities. Going beyond the norm and providing your guests with interesting things to do while on their trip will help your business succeed.

Your rental property is a very important part of your guest’s trip, but it’s not the only part. Inspire your guests with ideas of the best things to do in your area. This will help you stand out from other lodging options, deliver excellent customer service, and ensure your guests get the most out of their vacation. There may be an opportunity to earn a commission or affi liate income on the activities they purchase.

Tailor your guest’s experience specifi cally to them by getting to know them a little. Then, think about what they might enjoy doing based on their ages, stated interests, or reason for visiting. The more you know, the more relevant your suggestions and the better their experience will ultimately be.