Digging into revenue management strategies for your short-term rental
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This is Week 4 in our Getting Your Unfair Share of Bookings Series for your Short-term Rental Business. Make sure to Check out other posts in the series:
Get Your Unfair Share of Bookings - Week 1
Understanding Price Drivers in Your Market
Conduct a Listing Audit - Week 3
A good revenue management strategy starts with the right house, in the right location with the right amenities. "Right" is subjective, but it requires having enough people agree that what is being offered is a unique value proposition. The story of “buy a house and toss it on Airbnb to mint money” isn’t going to be true for everyone though -I've talked with too many people who didn't understand the nuance and numbers. Supply and demand are real, and an average house in an average location bought at higher-than-average pricing isn’t going to command revenue like the elevated home with a view garnering a premium price. I say this to emphasize once again that knowing your market and having your expectations firmly in place is helpful, and if you haven’t read the previous posts in this series understand that your revenue management strategy needs to start with benchmarking, understanding price drivers, and completing a listing audit prior to finalizing your revenue management strategies find them HERE
Before we dig in, let's talk for a moment about your businesses unique value proposition. I'm not talking about how you invested blood sweat and tears to make the place habitable, although we are tempted sometimes to believe that our guests should appreciate all our hard work. Sorry, they don't. In the eyes of a complete stranger looking to spend money, what are their options and how does your place give unique value? Sometimes its - the right price in a good enough location with evidence that it will be clean and comfortable. Sometimes its enough beds and bedrooms with the right view. Sometimes its an overall experience unmatched in the market place - elevated décor, view, proximity to area attractions. Its a dance between what is offered and the perceptions, desires, and needs of the person with the money. Your unique value proposition isn't for everyone. The goal is to find enough some ones for whom it IS right.
If you’ve done the work to understand your unique value proposition, now we can dive into some revenue management strategies for you to incorporate into your business operations.
If you learn anything from me, its this. Know your data. You are running a business, and data is your not-so-secret weapon. Probably the most meaningful thing throughout my entire post-high school education was the first day in my program for my major in healthcare administration where my professor – and mentor, said “Know the data. And know people will interpret data to fit their beliefs.”
Its tempting to go to social media and say “Hey, I’m in (fill in the location) and my summer isn’t booked yet. Its crickets. What’s everyone experience?” And guess what the responses are? “Yeah, here too”, times 100 responses. We are programmed to look for evidence to support our beliefs, so remember that market averages are not YOUR averages and opinions given on social media are not representative.
In my last job prior to self-employment, I had to present to the Board of Directors quarterly. If I’d gone to the Board with a report based on anecdotal evidence from other businesses, I’d have been fired. I went with numbers, even if they didn’t always show that we were doing well. You should too. Don't crowd source questions that data should be answering. (Social media is great for collaborating, ideas, etc. I'm not dissing it, just noting strangers on social media are not vested or knowledgeable about your business).
When I work with my coaching clients, the last of the three parts of the program is all about setting up routines as the CEO of your short-term rental business – what numbers to pull and track over time, the cadence for when to pull and record, and what to do with the data.
DATA TO TRACK - Minimally, you should know how many rentals are in your market (ideally tracking similar size to yours as well), market RevPar, market ADR and occupancy, and then recording the same data for your place along side. You should also pull and record your pacing data, income, expenses.
Historical data is helpful, but only so far. Consumer behavior shifts and changes, so going to the bank on last years numbers is never a good idea – it’s a data point but it isn’t the only one. Stay plugged into industry and market trends. Know the data in your market, track pacing and booking data in your market, and adjust your expectations and efforts accordingly.
For example, AirDNA recently published data that the booking window (i.e., pacing) has shortened – meaning people are booking closer to their travel dates. While lots of folks have been concerned about their high-season summer not being fully booked, it turns out that it likely WILL book given strong demand – but if we are using last year’s pacing data we might think we have reason to worry and start lowering prices to fill remining dates. Which, cool beans for me – when folks go to book their summer holiday and my higher priced place gets those bookings!
I wish I could credit the individual who said the term “Be a calendar guardian” at a VRMA conference in 2022 I attended. I love this term. (If its you, let me know and I’ll update!) I use minimum stays to help get what I term “quality” bookings” - so rather than my high season getting full with weekend stays, I open my calendar with a higher minimum stay requirement, which I then might reduce to fill any gaps as I get closer to high season. There certainly are some folks who do just fine with filling their summer entirely with 7-day stays – indeed, if you are a top 20% property this likely is you, or could be (ie., premium house, premium location, established). This strategy should apply other premium times for your market as well, like holidays.
But it has other applications as well. In one market where I help manage a property, it’s a big weekend market with a shorter booking window, so I have a longer night stay requirement 45+ days out which reduces at day 44 – and finally it goes to a 1 night requirement if I have openings within 7 days.
I used the term “quality bookings”; to me this means in high season, I don’t wind up with a bunch of middle of the week orphan nights or turnovers every other day. Rather, I have longer stays who paid at or above market pricing. Shoulder season I like to continue to get longer bookings, although they often are not as long and I adjust my settings accordingly.
I’ll say it now, and I’ll say it again – there are many tools to support dynamic length of stay. The job of the tools is to automate what you already do, not to teach you how to do it. Learn what works for your place first and automate it if it feels right. I personally use Pricelabs, but it comes at a price and if you are only running one or two properties just set yourself some calendar reminders and be your own calendar guardian – save yourself money and the learning curve.
Your job? Figure out how dynamic minimum stays could work in your market and incorporate into your revenue management workflows
No, I didn’t say “Dynamic Pricing” because its become a phrase that is peddled a lot in our industry. As an owner operator with 1 or a small number of properties, you are now the target of marketers seeking to push their wares on you and convince you to invest in tools to automate adjustments to your prices.
Dynamic Pricing tools are helpful, but not required. In fact, allow me to reiterate the last paragraph – these tools should automate what you already do. If you haven’t set your prices or adjusted them, learn how to do this first. Decide later if you want to incorporate such tools. Plus, NOT investing in dynamic pricing tools just saves you money.
(In full disclosure, I think investing in some tool that makes gather market data easy is helpful and its one reason I really like Pricelabs but I also want to make the point that simple is totally fine and laudable.)
Why not just set your pricing at a specific rate? Frankly, you can. This is your business. The KISS principle is wonderful. You know – keep it simple, sweetie. (ahem.) Just adjust for high and low and shoulder season prices and set a calendar reminder to double check pricing once a month or so. Be aware of when events are happening. Maybe you miss out on a few bucks, but honestly – the cost of the tool and learning curve involve costs as well. If you are netting what you believed you should/could be - you've hit goal.
Keep in mind, pricing should never be a single rate year round. You SHOULD have a minimum 30% range from your lowest price to your highest price. Now, if your market has a standard range for higher than 30% - and many do, then follow that lead. One of my properties legit has 300% range, while another is barely 30%. Totally different markets. Yeah - so low season $299 and high season $1435 a night is an example of the pricing differential.
Your Job? Know your pricing and establish a routine by which your regularly evaluate pricing in your competitive set and market, and how that will inform your workflows and decisions.
Marketing your wares to get sales – whatever they are, is a numbers game. Conversion rates – the percentage of people who buy after viewing your offer. In our industry its often two steps - “Impressions – Views – Booked” and the rate of views to booked typically follows the general conversation rate of 1-2%, which is the average for just about everything.
How many eyeballs need to view your offering? The goal is to get enough eyes on your listing to ensure you hit the desired number of bookings. So if my average length of stay is 4 days and I’m in a market where 50% occupancy is the goal (and no – by getting your offering in front of 4x more people it isn’t going to magically want people to come off season. I have to be offering something people actually want and the audience for dead of winter in Michigan isn’t super big), that means I want about 46 bookings annually. That means I would need about 4600 unique sets of eyes to click through and look in order to get 46 bookings.
The Franchise Model. I know many folks who operate their business exclusively on a single platform, like Airbnb. I think of this as the franchise model. It provides ease, leverages the marketing power of the platform, and means not having to figure it all out – their systems, processes and tools make it easy to run your business. Expanding the audience in this model requires increasing the likelihood of someone seeing your listing in the search results – and the methods to do so are different, depending on the platform.
Get Diverse. I generally recommend listing on more than one booking platform as a way to expand the number of eyes on your offering. The downside is having to learn another platform. The upside may be significant in terms of reaching a new audience, but this may only make sense if you are in a market where there is an audience on both platforms; some markets just don’t attract the people who use Airbnb, for example.
Get on Social Media. Whether or not you opt to expand to use other platforms, social media can help get eyes on your offering. Joining and regularly posting about your offering in social media forums can be a zero cost way to increase the number of eyes on your property.
Advertise. Marketing your property through paid ad’s can be a great way to increase eyes on your offering, but there is some nuance in how to do this effectively – and not something to do if you are a new offering.
Leverage the Platforms. If you are leaning into direct bookings exclusively I'm sorry to say it is NOT a strategy that will increase the eyes on your property – the booking platforms have the lionshare of the audience. Building up an audience from scratch takes time and knowledge. The platforms are tremendous at getting eyes on your offering, and should be leveraged.
Be Pet Friendly. We know people travel with their pets, so if you aren't pet friendly (especially if this is an investment), why wouldn't you be more expansive in your potential audience? Cleaners have to clean anyway. Yes, things happen and yes - it might cost you a few bucks. But if you are generating additional income because pet owners will very willingly pay a pet fee why wouldn't you be pet friendly?
Be accessible. Accessibility is a big thing - meaning people with limitations can navigate your space. I have a property that is a ranch and I get bookings just because its a ranch style home. I have another property that is fully first floor living possible. If you are renovating, consider larger doorframes and accessible bathrooms. Look into ADA requirements. Again, if you have options to increase the pool of people who consider your property - take advantage of those opportunities.
Put in at least one King bed. There are amenities and choices we make in setting up our properties, and we can't set it up for everyone. But if you have space in your primary bedroom, then put in a king-sized bed. People who are fine with a queen won't mind, but people who insist on a King will pass on your listing if you only offer a queen sized bed - And there are a lot of folks to whom this applies. In the name of expanding your audience, this is an easy one.
Consider longer-term rentals. Airbnb reports >28 day stays are up 30% or so; these are called Mid-term rentals. Furnished rentals of >28 days. Typically considered "long term", there are many implications to expanding to this audience including regulations, legal, and operational. And don't forget if you are leveraging the Short-term Rental Loophole that you need an annualized average length of stay of less than 7 days. But if a mix of long term and short term feels right, I learned everything I know from Al Williamson.
Your job? Pick ONE STRATEGY that will increase eyeballs on your listing - and implement.
So, I JUST said that direct bookings as a strategy for getting more eyes on your listing isn’t great. I stand by my word. Building up an audience from scratch vs. leveraging the booking platforms – long game vs short game. If you want revenue, you’ve got to leverage the platforms.
Direct bookings are, however, a great strategy to allow you to increase your revenue AND maintain more autonomy over your business. I recommend every year that, as a business owner, you focus on increasing the share of revenue you generate through direct bookings.
As a guest, if I book your place through VRBO, I will pay a (whooper) of a fee PLUS you as the host will pay a fee as well. If I book direct through you, even without changing a dang thing about pricing as a guest I’ll pay less because I’m not paying the service fee to VRBO – and as a host you keep every dime. Win win – guest feels like they got a good deal, you increase revenue per booking.
More and more options exist to allow you to easily have a direct booking website for <$1K. Check out Leadpages. Channel managers often provide options as well. Then its just getting your workflows figured out, offer damage protection (I use Waivo for all my bookings) a rental agreement (have ChatGPT draft one and then pay a lawyer to review it) and a mechanism for taking payments (Stripe, Paypal).
Even without a website, you can put information in your rental about contacting you to directbook their next stay. I personally use business card magnets, others post a QR code, others leave an email address. Lots of ways to do this.
Also without a website, just posting organically on social media "DM me to book direct".
Your job? Do ONE THING this week to encourage prospective guests to contact you directly versus going through a booking platform. Do a social media post, order some magnets, business cards, update your messaging - whatever it is, do one thing this week. And then work on your strategy to increase direct bookings over time.
“Like this mattress? Buy here” signs in your short-term rental are going to destroy the illusion of “home away from home” for me. If you are doing this and its successful – cool. I’m not your ideal guest, and that’s okay. So when I say Upselling, what I am actually talking about isn’t vending machines in your vacation home or propositioning guests to buy your couch - but these are all things you can consider if it calls to you.
But you know sometimes you check out and get a “But wait” and an offer to add to your order? My first job was McDonalds and when I worked Drive Thru, part of my job was to offer an upsell – hot apple pie?
In my shoulder/low season, I upsell my guests to book an extra day all the time. I tell them that people often appreciate getting the extra day – even if they don’t stay the extra night, they like knowing they can leave anytime – have a leisurely last meal, grab one more hike and then leave around dinner time. In my markets, I offer ½ off the added day. Yeah, that’s a lot and not right for every market – but depending on your market, that may be a tantalizing price. I’d say 30% of folks grab the offer.
Alternatively, early arrival and late check's can have a price tag too. I personally respond to these to say (if I can) 2 hours is fine. If they reach beyond 2 hours - its a fee, because that means I now have to maneuver schedules.
Maybe you like the idea of upselling your Pad, and there are definitely lots of ways to upsell your guests. I’m not a fan, but I don’t have to be. If you are doing this successfully, I’d love to hear about it.
Another small but revenue producing move - we purchase our own damage protection and we charge a bit more than we are charged (and its still far less than what guests paid through one of the platforms PLUS no contacting guests about damages!). While it does require more administrative work on our end, it is also a bit more cash flow. I used Waivo if you want to learn more.
Your Job? Decide if there is an upsell strategy that interests you and put a reminder on your calendar for starting to work on implementing it. Maybe its creating a message template you can use, or writing up your "Standard Operating Procedure" for how much you will charge for early/late checkin/out, or maybe its checking out Waivo
We’re going to take a step back to talk about data again. When I was a kid, the Cabbage Patch dolls came out. (Yes, I’m that old). Man I wanted one. I remember it was on the news that a fight broke out at the toy store over the final one on the shelf. Maybe you remember the PS5 and how people were buying them just to resell - for 1.5x what they got them for because the initial run sold out quickly.
In 2021, when everyone was avoiding planes, traveling regionally, and looking for lodging that afforded the ability to NOT interact with other people (i.e., not hotels), if you had a short-term rental in nearly any market close to hiking/outdoors – you had a golden goose. Demand far outstripped supply, and people basically got out their checkbook and paid incredible premiums once most of the supply was gone.
Understanding pacing data - how far in advance people are booking, along with tracking supply, demand allows you to know whether or not you should increase, lower, or hold pricing. There is a lot of art mingled with science in this one, which is why I encourage folks to record and monitor data over time and build your confidence. But this data is key; dropping prices too soon means leaving money on the table, where as if supply is outstripping demand then not dropping them means you miss out.
Your Job? Get your pacing data. Unless you purchase a tool like AirDNA or Pricelabs, its not easy to get (at the time of authoring this). But a good checkpoint is to review your competitors calendars on specific dates in the future and see if they are booked - or not. You can usually get the data of how many rentals are booked from the platforms, but it is also important to understand the data from your comp set. Take some notes and do the same thing in 2 to 4 weeks. Build your muscles around this.
I won’t say too much here, but understand your offering is an experience. For some, it may be a utilitarian experience so the key will be cleanliness and ease. For others, it’s a once year family vacation with tons of pent up anticipation. Delivering on what you offer and understanding your audience needs is key to enjoying longevity as a business and optimizing your revenue. Keep the house maintained, functioning, and comfortable. Deliver on what the listing promises – and a little bit more.
If you DON’T deliver as promised in the listing – make it right. Whatever that means for the situation but understand just because your policy says no refund doesn’t mean that isn’t the right thing to do. It validates a guest who then will leave a good review – refunds are marketing dollars well spent.
Along with providing an elevated guest experience, a major part of your success will be managing reviews. We talked about this previous, and I'll keep saying it - Reviews are a marketing activity – both the giving and receiving. Future prospective guests shop first based on pictures and reviews. Then they read the listing copy (maybe). If you get a not great review – provided it is nested among a sea of great reviews, then simply respond to it succinctly and in a manner that shows you are a thoughtful, considerate host that future guests don’t need to worry about being difficult or not delivering on what you promise in your listing.
DON’T respond to reviews as a way to duke it out with a difficult ex-guest. Don’t be defensive. Don’t be long winded. Write it with your future guests in mind.
And any legitimate complaints – delivered via review or through private feedback, should be considered and, as appropriate, rectified.
Earlier I mentioned the year the Cabbage Patch dolls came out, the sold out PS5, and the year that short-term rentals exploded. All of these events meant value was increased because the item was in short-supply.
Even in a sea of available baby dolls, numerous video game console options, and tons of available lodging – rare can still happen. Its not enough, however, to be rare - people have to see and agree that it is rare - and assign value to rare.
Sometimes rare is searchable – a pool or hot tub might make your place rare. Sometimes rare isn’t searchable, so now you’ve got to work even harder to communicate your particular “rare”. And what was once rare may no longer be. What do I mean? Well, the first house in Orlando to theme out would have been in high demand. Now its pretty much expected.
Not all “rare” is in demand, either. A mountain themed cabin in a beach market probably doesn't work. So there is an art and science. But keep in mind, “in demand” means only 50 or 60 bookings a year, so – while I may not be interested in staying in a caboose in Podunk no where, likely there are 60 or 70 people interested in exactly that.
Rare can be many things and the value of what makes it rare may be simply increased occupancy, increased price or both.
Rare could be active and engaged social media presence – if your place is the only one they follow, or it could be rare in the form of an outdoor movie theater. Rare maybe wide mountain views plus double master suites. Rare may be an over-the-top themed game room (or not, if we’re in Orlando). Rare could be the house where a famous movie was filmed. Lean into – or create, rare and communicate it well. Rare could be offering ease – recommended itineraries, discounts and links to in-house masseuse, private chef, etc. Rare could be through themed décor. Get creative.
A final thought on rare. I just finished reading Get Different: Marketing that Can't Be Ignored by Mike Michalowicz. When you are first to do something, and it works, eventually others copy and, as more people are doing "it" that eventually dilutes the effectiveness. We know this, but Mike talks about this a lot in his book - and impressed it upon me not as a "it could happen" but as a matter-of-fact WILL happen, no biggie, its part of business. So you adjust and find the next "new" rare thing. So be creative. I have a pool in a market that doesn't have a lot of pools; it allows us to enjoy a much higher ADR. This year there are double the number of homes with pools in this market. Our pricing hasn't softened yet, but keeping an eye on it - and thinking "pool with Tiki bar" next.
Your job? What is your unique offering? Is it rare? How do you communicate it?
In some markets we offer many of the same things, which are in demand and potential guests will be seeking to confirm an amenity is available. Everyone expects a pool lanai in say Cape Coral and, in fact, are seeking to make sure your place offers it – but it needs to jump off the page in a sea of other pool lanai’s. Or the hot tub in the ski market – it’s the “Must have” amenity, and communicating that you have it is key. That said, avoid having it be yet another hot tub shot in a sea of hot tub shots. Whatever the amenity is, don’t just show it – show it off.
Insert this same thinking to the “in demand” amenity in your market, and market it differently. Maybe it’s a pool lanai shot as the sun is setting, or the ocean view from the deck where the table is staged with a cocktail and charcuterie board. Marketing is about differentiating from the crowd; and in this case, turning lookers into bookers is all about your listing photos and copy – and speaking directly to your guests needs and desires. Wetting their appetite for what YOU offer, not only satisfying the need but tantalizing.
Don’t make your potential guest guess what makes your offering different, but also don’t make them look hard to make sure you have the key amenities they need. I’ve seen listings who opted to just skip the pic of the hot tub altogether thinking “everyone has a hot tub” – which is a mistake given so many people shop by photos.
So make sure you understand what your guests are looking for and show it off differently than your competitors. A baron fire pit at 10am or a fire going with chairs and smores stuff at twilight lands differently, a comfortable spot to watch television or a nicely designed and stylish television watching area, a place to eat versus an invitingly set table all tweak shoppers differently.
Your job? What is THE AMENTITY in your market folks want? How do you Show IT OFF vs. show it? Make changes accordingly.
Consumer behavior is fickle and ever changing. Being The CEO of your short-term rental business means having a routine by which you evaluate your strategies, maintain and monitor metrics, and respond to changes in your data accordingly.
Your revenue management strategy has to be flexible and adaptable. Commit to doing a regular review of market and performance data - monthly or quarterly, and make any changes necessary based on both the numbers and you understanding of the short-term rental market and industry.
Your job? Create a list of the data you will capture and record, a place you'll keep it, and put a recurring appointment on your calendar each month or quarter for when you will do the work and analyze it. Hint - if you use google, grab a link to your doc or sheet and put it in your calendar appointment. Also, have a section in your doc or extra google sheet where you take notes of where and how you access the data so you repeat it each month the same way (include links - your future self thanks you).
If you just jumped into this - you might want to hop back and catch all the posts in the series "Getting your UNFAIR SHARE of bookings" - Learn about Price's Law and the work I did that showed it applies to STR HERE then lean into understanding price drivers in your market in the Week 2 Post and then Learn how to conduct an audit of your listing HERE - and grab the bonus material with the Interview with Paige Hayes about Interior Design for STR HERE Check, check check? We've got a final post in this series coming (and one more interview trying to get scheduled) - so SIGN UP on our email list to get notice when we post!
Feeling a bit overwhelmed? Short on time? Need to bring in an expert (Because you are THE BOSS and know that bringing in expert help is a Boss Move for successful CEO's!) The CEO Host will conduct a review of your property for you - you'll get benchmarking data, feedback on your listing(s) - a full written report with recommendations + 45 minute consult 1:1 with me + ongoing support. Interested? Learn More HERE Not sure? Hop ON A CALL and lets chat!
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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: : marketing, metrics, short-term rental investing, vacation rental investing