The vacation rental market is a lot more unpredictable than it used to be, with Coronavirus and other related factors causing guest booking patterns to differ a lot from what we’ve seen in the past.
When it comes to setting your pricing for vacation rentals, you need to be prepared for these peaks and troughs, and adapt your rates accordingly to maximise your occupancy and revenue.
Alongside data providers AirDNA and industry experts Rental Scale-Up, Your.Rentals held a webinar in April 2021 to help property managers understand how to identify and adapt to booking surges in order to outperform their competitors.
You can watch the whole thing for free here, or scroll down for some key takeaways.
“When uncertainty is reduced, demand responds very quickly”
There is a clear intent and desire amongst guests for travel, but demand (in terms of bookings being made) reduces during times of uncertainty. When this uncertainty is reduced, for example when governments make announcements about reopening, the demand responds very quickly and we see bookings surge.
Graph indicating new bookings by British guests in relation to travel announcements
“Know how your feeder markets have changed”
Whilst you may be keeping a close eye on the rules and regulations in your destination, it’s equally important to monitor your feeder markets – that is, where your guests are coming from. When setting your pricing for your vacation rentals you should consider how your feeder markets have changed.
That means two things:
- Are there factors (such as lockdowns) preventing your traditional markets from travelling to you? And
- Are you now attracting different guests from before?
For example, due to reduced air travel there has been a major reduction in the number of guests travelling from the United States to Europe. However, many European destinations have seen a huge rise in guests from closer markets, particularly those within driving distance.
Changes in guest origin in different European markets
“Identify what would trigger a change in demand for your market”
Your pricing should react to changes in demand, and doing this in a timely manner can help you to ensure you maximise your occupancy and revenue. As challenging as it may be, keeping on top of the latest governmental announcements can be key to knowing when demand may be about to increase or decrease. But don’t just wait for these announcements to happen – press conferences and publications are often subject to rumours and leaks in advance.
Different destinations and property types will have different triggers for demand surges. If your destination relies heavily on air travel, the reopening of land borders is unlikely to dramatically impact your booking demand. On the other hand, if a particular feeder market is doing well and is able to travel once again, you may be able to capitalise on that opportunity by adapting your pricing.
Specific tips for different markets are discussed in the webinar.
“More flexible payment and cancellation policies reduce uncertainty for guests”
We’ve already seen that reducing uncertainty can be key to encouraging guests to book. By reducing the financial risk for your guests, you can increase the likelihood of them making a booking and you can command higher prices for doing so.
We’ve written several times about how more flexible payment and cancellation policies can increase your booking rates. Listings with fully refundable cancellation policies are dramatically outperforming all others at the moment, and it is unlikely that this trend will reverse any time soon.
Graph comparing fully refundable versus partially refundable booking creation
However, we understand that by adopting fully refundable cancellation policies, Property Managers are taking on a greater share of the risk. Thibault Masson from Rental Scale-Up gives the Property Manager perspective here (from approximately 27:00).
“What to do when you see increased demand”
Of course, setting your rental pricing isn’t as simple as lowering prices until bookings increase, then ramping them up again. It requires a careful mix of monitoring current demand, predicting the likelihood of future bookings and adapting dynamically to sudden changes. It may be the case that you are able to retain higher prices even when demand is comparatively low, because even if you don’t fill up your calendars right now, you anticipate a surge in last minute bookings that compensate for this. Or you may be able to offer higher prices to guests in certain markets, whilst reducing prices for guests for whom price may be a greater barrier to travel.
Uncertainty is the key factor preventing guests from making much-desired bookings. By identifying factors that may affect the level of uncertainty in your local and feeder markets, you can be the first to adapt to changes in booking demand to set your vacation rental pricing accordingly.
For more data on the current state of the market, as well as expert tips on identifying trends and how to react to them, watch the full webinar for free.