Seasonal Pricing is nothing new in the vacation rentals industry but it’s arguably never been more important. We’ve explained before what seasonal rates are and why you should care about them but choosing how to set your seasonal pricing is a skill in itself. Part science, part art, getting your seasonal pricing right can be the most effective way to create that perfect balance between occupancy and profitability – if you get it right.
Also, setting the right seasonal prices well in advance is a very important factor for your future profits. Especially at this time when the vacation rental market is recovering from the coronavirus pandemic. Furthermore, now is the perfect time to review your short term rental pricing as we are entering the summer months and many travellers are making last-minute reservations.
This article explains how to set your seasonal pricing in 5 easy steps. Of course, every property manager (and every property!) is different, so what works in one case might not be right for another. But by focusing on these points you’ll have an easy way to work out a seasonal pricing strategy that fits you.
A quick reminder: what is seasonal pricing?
As the name suggests, seasonal pricing is when the prices you charge for something (in this case, the fee for your vacation rental property) go up or down depending on the demand of a particular “season”. This might be a literal season (charging more for a beach property in the summer), or it might be tied to a local event or time period, like how properties in Edinburgh can almost double in price during the eponymous Festival weeks, or the 360% increase seen in hotel prices in host cities during the Superbowl.
Hotels have been changing their pricing to fit demand for years, and over the past few years online travel agencies and sales channels like Airbnb and Booking.com have gotten in on the game. Some even use machine learning and AI to set prices according to an algorithm (and often charge property managers for the privilege).
How do I choose my seasonal pricing strategy?
Most online vacation rental platforms allow you to set a basic rate, and then add seasons as you choose. For example, Your.Rentals lets you choose a basic rate per night (and indicate if that’s different at weekends), and then implement seasonal rates during whichever dates you want. You can add as many or as few as you like, but it’s important that your seasonal rates cover at least the next 12 months, otherwise guests might book ahead at a cheaper rate and leave you out of pocket.
1) Decide your minimum and maximum rates
The first step in setting your seasonal pricing strategy is to determine your absolute minimum and maximum price that you’re willing to charge. It might be tempting to base this amount on how much income you need to bring in in order to cover the costs of running your rental property, but of course that is going to be affected by how many bookings you receive and how long they’re for. One three-night booking at $200 a night is going to bring in more money than 3 one-night bookings at half that price. This isn’t about occupancy vs price right now. Save that calculation for later.
Instead, this decision is about determining what is a fair price for your “brand” or “product”, regardless of season. Rolex would probably sell a lot more watches and possibly even bring in a comparable amount of money if they retailed for $100, but by charging a minimum of $5000 they establish their brand as one of luxury. What’s a fair minimum for the service you provide? What kind of company do you want to be and what are the kind of guests you want to attract? If you’re going for a laid-back no-frills vibe, then a low minimum price creates a fair impression in your guest’s mind. If you’re all about luxury, too low a price might undersell your value proposition and undermine your desired status, even if it’s during the “low season”.
2) Identify your key seasons
You know your property and its local area better than anyone (or you should!). Therefore it should be fairly easy for you to sit down with a calendar and split the year into three key seasons: peak season (when demand is highest), shoulder season (the periods immediately before and after your peak season) and off season (when demand is lowest).
3) Identify additional seasons
Within these key periods, you’ll also have additional periods that require specific seasonal pricing. For example, the first few months of the year might be typically low demand and therefore fall into your shoulder season or off season. However, if your property destination is suitable for romantic getaways, you might consider the weekend around Valentine’s Day to be a good opportunity for a price increase. Whether this higher price is the same as your key peak season is up to you.
To identify additional seasons look through your calendar for:
- Annual holiday periods (Christmas, New Year etc.)
- Public holidays
- School holidays
- Local events (annual festivals, sporting events, concerts etc.)
Pro tip! Don’t just look for these seasons in your area. If you often attract families from Scandinavia, you could identify school holidays in Sweden as an opportunity for a price increase, even if all the kids in your part of the world are still hard at work!
4) Establish your basic rate
The next thing to do is decide your basic rate. Most property managers have a basic price by default, that they then increase or decrease during a given season. This is the easiest way of thinking about your prices, and the simplest way to manage your listing on online platforms. Depending on how much pricing in your area fluctuates, this might be a little too simple for some property managers, but generally this is considered to be the average or at least most common price you charge per night.
Pro tip! The simplest way to manage your property might be to pick the longest of your key seasons and set that as your basic rate, around which everything else is an increase or decrease.
A basic way of determining this price is to do a quick search online for similar properties in your area. Filter your search by the amenities your property has, and then take a general average of these properties during your longest season.
Pro tip! Add and remove filters one-by-one to see if there is a particular amenity that makes a big difference to the price. For example, if properties in your area charge an average of $250 a night, but the ones with a pool can command twice that, then that will affect how you set your pricing.
5) Adjust your pricing for your seasons
Deciding your actual pricing requires taking into account a lot of different factors – what properties in your area charge, what amenities you have that they don’t (and vice versa), who you want to attract and the costs you need to cover, plus a lot more. You need to find the solution that works for you.
However, a general rule of thumb often used by Property managers is for your shoulder season to be around 60-75% of your peak season, and your off-season should be around 25-30% of your peak price.
You might decide to refine it further after taking into account weekends or additional seasons. Some periods during otherwise low seasons (such as Christmas) might be so in demand that they justify being increased to your maximum rate, others might only warrant a slight bump up.
Peak SeasonSchool Holidays
Rates and Multiple Cancellation Policies
After reading the best professional tips on how to set your seasonal prices in a simple way, it is worth mentioning the possibility of setting prices for the different cancellation policies you can offer. As we have already mentioned, setting the rates for your rental business is an art, and you must take into account many factors to master it.
Something that gave the large vacation rental platforms a headache since the coronavirus outbreak has been the lack of flexibility for guests. Using different booking cancellation options has been the main resource to ease up the massive negative effects of the pandemic. Therefore, it is now another element that property managers need to take into account when setting prices. Travellers want security and to not worry about the authorities suddenly closing the border or imposing a quarantine when they make a reservation. And you, as an owner or manager must know how to provide that trust while making the most out of your vacation rentals.
If you use Your.Rentals software you can now include different rates for different cancellation policies. These rates are based on your base rates, so they don’t require much effort to set up. We have dedicated an article to explain in full detail what the multiple guest booking options consist of, how they affect your vacation rentals and how to implement them.
Setting your seasonal pricing can be complicated, but this basic guide should form the starting point for deciding your pricing strategy. Using a property management system like Your.Rentals means you can create your seasonal rates and apply them to your listing in multiple channels from one free account. This will give you a powerful way to optimise your listings for occupancy and profitability, whilst helping keep things simple!
If you would like to share your strategies for setting your seasonal pricing, let us know in the comments!