Getting Your UNFAIR SHARE of STR Bookings: Understanding Price Drivers

Week 2 of our series on getting your Unfair Share of the short-term rental market - digging into price drivers

Determining how to get your UNFAIR SHARE of bookings in your short-term rental market starts with understanding the factors that drive prices in the market. Knowing those price drivers will help you make better decisions about setting prices and developing marketing strategies. Over the next couple weeks, we are digging into strategies to get our UNFAIR SHARE of the market as described in my Last Blog Post.

Today’s post does double duty – we benchmark while at the sametime identify price drivers. “Kate, I have low occupancy – what more do I need to say?” Low occupancy is not the problem – it’s a symptom. IF you are actually under the benchmark; its not a subjective measurement. Maybe you are lower than last year, but guess what? Last year isn’t this year. The market IS different. So we have to start with understanding where you stand and then using that assessment to select strategies to improve your standing.

This weeks post is about understanding what drives pricing your market – and benchmarking where you are at in your market! So lets JUMP IN!

First, it’s important to understand that price drivers will vary from market to market. In some areas, factors such as local demand, seasonality, and amenities may be the main drivers of short-term rental prices. In other areas, factors such as location, property type, and competition may be more important. To assess how these factors may affect price – you first have to identify what the drivers ARE.

Read Reviews.

If you know the market – say you vacation there yourself, or perhaps its your home you may have deep insights, but I always encourage folks to minimally go through and read reviews that guests leave for short-term rentals in the market. Inevitably, some of them leave clues about what brought them and what they liked. I frequently share the story about my property that is next to a prime birding area - a hobby I know nothing about and only learned because my guests TOLD me.

Assess Top Picks.

Trip advisor provides clues as to what folks like to do when they are in the area; so assess Trip Advisor for your market. Again, even if you know this market, I can almost guarantee you’ll learn something new and it may reveal information about your audience you didn’t know.

Identify and evaluate the top grossing properties.

If you have an AirDNA subscription, this is a great asset. You can also access some good data in other data clearinghouses and AirBNB offers insights as well if your market has a lot of Airbnb listings, but AirDNA is my go-to. Study the top properties on a map – are they all congregated in a specific area? Any outliers? What amenities do they have in common, if any? Keep some notes. Top properities tell us ALOT about the market - in general.

Identify and evaluate comparable properties.

To determine the key price drivers in your short-term rental market, look at the competition. The key is not ALL properties, but comparable properties in your area and see what amenities they are offering. What features do they have? What might you find in their reviews?

Keep in mind, comparable isn’t always immediate neighbors. Someone may search “three bedroom, two bath, pet friendly” and get properties across the area - you may be competing with a property 50 miles away. If your market is highly location-driven, the further from the key location means the less desirable the property is – but that doesn’t mean it can’t be successful. It just means the overall revenue will be less than those closer to the key location.

Search in the booking platforms – VRBO and Airbnb, using filters to narrow down to properties that are similar to yours. Develop a comp set of properties that prospective guests are likely to be presented with when searching for your place – and deciding between. Assess pricing, occupancy, amenities, reviews.

I just worked with a client the other day on a small lake in an area full of lakes, including the “key” big lake. But there are only so many short-term rentals on that lake, and they charge a premium. So the audience for his place won’t necessarily be people looking in his precise location, but generally at a lakefront experience in the region – so across the region that property will be viewed against other lakefront properties. Some will be set on the big lake, others may enjoy the smaller lake that offers many of the same features – plus more room for parking, trailers, and no neighbors in view.

Seasonality.

I own in highly seasonal markets; summer beach markets in the midwest, where winter is very...wintery. The properties stay booked for summer; my marketing efforts are generally aimed at the shoulder seasons. Winter generally has about 10-15% occupancy. Seasonality for properties that aren’t in the top 20% of their market are likely where occupancy takes the biggest hit. We don’t typically think of seasonality as a price driver given we can’t control it, but keep in mind that in off season the highly desirable properties will likely draw the few folks who are interested in renting in the area, and the disparity will be more evident.

Supply.

With supply significantly increasing in many markets, this is a key metric to understand any shifts that may be occurring. I use AirDNA to assess supply – overall within the market and also by number of bedrooms over time. I’ve done several analysis and provided them, showing significant increases in many markets. Increased supply along with decreasing or steady revenue often means less occupancy and/or revenue for individual units. So understanding if increased supply is at play is an important component. Oversupply will often drive prices down.

Evaluate pricing and occupancy for your comp set.

Although average data for the market and size of property may be correct – it may not. So doing an analysis of your specific competitive set will help assess how your property compares in performance to similar properties. What is the range of ADR and occupancy? Total revenue? Most data clearinghouses (AirDNA, Data Rabbu, Pricelabs etc) will be able to help collate this data but I always suggest you dig in to validate it.

Analyze.

What are the key price drivers in the market, and what of those does your property possess - or not? In terms of occupancy and average nightly rate, is your property an outlier within your comp set? If you have higher revenues, Terrific! Do you know why? This question is important – it tells you something either than you need to keep doing or highlighting, or perhaps that could be lost without paying due attention. If you are below your comp set, its time to dig in. Did you just price yourself too high? Too low? Fail to appreciate a key price driver? We will dig more into what the results may mean in coming weeks. If you are right in the middle of your comp set – congratulations! If that isn’t where you want to be, then stay with us as we cover strategies to address your specific results in future blog posts over the coming weeks as we learn more about how to get your Unfair Market Share!

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Hey Boss! I'm Kate, owner/founder of The CEO Host. If you are interested in taking a leap into short-term rentals - or struggling with your existing business, my goal - passion, and new career, is to help YOU succeed. I've coached hundreds of folks getting started or looking to optimize, analyzed more deals (and duds) than I could count, completed thousands of hours of education and training, attended conferences... So don't be shy. A good CEO knows to bring in expert help - and that's what I'm here for! Lets HOP ON A CALL and chat!

p set, its time to dig in. Did you just price yourself too high? Too low? We will dig more into what the results may mean in coming weeks. If you are right in the middle of your comp set – congradulations!

Categories: : kpi, metrics, self management, short-term rental investing