Decoding the Power of Pricing in Short-term Rentals

How does price impact perception of your short-term rental offering?

Hey Boss,

Price isn’t just a number. It’s a message. It's a brand statement. Its an often misunderstood tool in our toolbox. Is it also an indicator of guest quality - or lack of? Let’s delve deeper.

Perception Is King

When you think of luxury brands in any industry, be it hotels, cars, or fashion, they all have something in common: a higher price tag. But what does that higher price get you? Aside from potentially better materials or more features, it buys a feeling, an identity, a brand experience. Price becomes a tool to communicate value.

In the world of short-term rentals, our guests aren't just buying a place to sleep; they're buying an experience, a feeling, and sometimes even a story. They want to feel a certain way about their choice, and price plays a pivotal role in shaping that feeling.

Consider this: the journey to the "book now" button is littered with both conscious and subconscious thoughts, ideas, and beliefs. In my Listing Optimization course (you can check that out HERE) we dig into this and how to use that information to optimize our listing. But lets just accept that the factors influencing the journey to the "book now" button are complex, multifaceted, and not always in the realm of conscious awareness - important because everyone comes with ideas about what their budget ought to give them, whether they are aware of those expectations or not. Those expectations will refine based on new information as they evaluate what is available, and assess how your offer stacks up as their understanding of what's available to them within their budget tier comes into sharper focus for this particular purchase.

Budget Tiers Aren’t Just About Money

We often simplify things and think that those who go for the lower budget tier are trying to save money, and those who opt for the higher tiers are less concerned about the expense. I've seen people suggest pricing too low brings in the "riff-raff" and too high brings in the "too demanding". But that's not correct - and it's more nuanced. The budget tier isn’t merely a reflection of one's financial capability but also about the value they perceive.

Someone might choose a lower tier because they are just looking for a basic place to crash for the night. Meanwhile, someone else might opt for a higher tier not because they are wealthy, but because they're celebrating a special occasion and want the best.

Aligning Expectations with Experience

The danger is when there's a mismatch between the budget tier, the experience offered, and the guest's expectations. If you're positioning your property in the $$$ tier but providing a $$ experience, you're setting yourself up for disappointment and negative reviews. Frustrated with being marked down in "value" in guest ratings? Look here first.

But how do you ensure that you're aligning expectations correctly?

Know Your Market: Research the competition. What are others in your tier offering? If hot tubs are standard in your budget range and location, then not having one might make your property less attractive.
Communicate Clearly: Ensure your listing paints an accurate picture. Use high-quality images, detailed descriptions, and honest reviews to set the right expectations.
Overdeliver: Where possible, add unexpected touches. Small gestures like a welcome basket or personalized notes can elevate the guest experience, making them feel they got more than they paid for.

Does Price Truly Define Guest Quality?

There's a longstanding belief in the rental industry that a lower price attracts less desirable guests, while a higher price draws in the more demanding ones. But is this really the case?

To some extent, there is a kernel of truth to these assumptions. Lower prices can attract guests who are primarily price-driven, and in some cases, may not value the property as much as those who pay a premium. They might not treat the space with the same care or respect as someone who's invested more into their stay.

On the flip side, a higher price can indeed attract a clientele with loftier expectations. These guests are not only paying for a place to stay but for an experience, a promise of excellence. They might demand more in terms of amenities, responsiveness, and overall service quality.

However, it's essential to remember that these are generalizations and don't hold true for every guest. There are countless budget travelers who treat properties with utmost respect and high-paying guests who are easy-going and undemanding.

The key is not to judge potential guests solely based on the price point but to have systems in place – like thorough guest screenings and clear communication about property rules and expectations. This way, regardless of how much they're paying, every guest is set up for a successful and enjoyable stay. And remember, the key is that your job is to understand what a specific budget tier offers for your market - and to communicate clearly what guests should expect.

Tailor Your Approach

Not every guest is the same. Some want the luxury of a personal concierge, daily housekeeping, and gourmet breakfasts. Others might just want a clean bed and Wi-Fi. Recognize the needs of your target market and tailor your offering to them. Understand their pain points and desires, and position your property to meet and exceed those. Need some help with this? My Listing Optimization Course walks you through the science and research of the journey to the "book now" button, how to whittle down to your ideal guest "niche" and how to use that information to increase your bookings - and to get guests willing to pay at the upper end of their budget for what you offer! Check out the course info HERE.

Closing Thoughts

In the world of short-term rentals, price isn’t just a tool for profitability. It's a strategic lever, an essential component of branding, and a direct communicator of value. Understand your market, set clear expectations, and always aim to exceed them.

Stay savvy, Boss!

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Need some help? I offer 20 minute calls - no strings, to help you answer your trickiest questions. Some folks go on to work with me - sure (hey, I have to make a living) but some folks just need 20 minutes and I'm happy to connect and learn from you, with you, and help you too. Book a time HERE.

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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 have some questions about your existing business, my goal - passion, and 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!

Categories: : self management, pricing