How to Nail Your Pricing | Manager Spotlight
When running a rental business, there sure is a lot to think about—reviews, bookings, maintenance, management… But one of the most challenging parts of a rental listing to get right has to be pricing. Too high and travelers won’t book. Too low, and you won’t make enough profit.
We caught up with Sally from property management company Invited Home. From Breckenridge to Maui, they look after around 100 properties across the US, working with owners to help manage their rentals and maximise their revenue.
Key to their rapid growth is a smart vacation rental pricing strategy—specifically, dynamic pricing. Hotels use dynamic pricing all the time, taking tons of data and feeding it into a clever model that spits out the optimum price for that location on that day at that time of year. The idea? To maximize revenue and profit by taking a whole host of external factors—including competition, seasonality, reviews, and fluctuations in supply and demand—into account.
To learn more about how this system works, we asked Sally about her company’s approach and—more importantly—discovered her top tips.
Thanks so much for talking to us today, Sally. We know you do a great job of updating your seasonal rates regularly. Can you tell us a little more about your approach to pricing?
Sure. Well, we’ve had dynamic pricing ever since I’ve been with the company (which is about three years now). We actually have an in-house revenue manager who used to work with airlines. And we now change our pricing several times a week.
How do you decide on those changes?
We base it on historical data. For example, last year we booked this home for these weeks at these rates. So, we’ll start out with pricing close to that rather than significantly higher or lower in the hope we can book it again.
We also monitor comparable properties in the area consistently. If we see similar properties of the same size or with similar amenities are dropping their rates because they’re not getting bookings, then we’re also going to drop our rates.
“So if we see similar properties are dropping their rates because they’re not getting bookings, then we’re also going to drop our rates.”
It’s a combination of data from previous seasons and keeping an eye on what’s going on around us. We make changes and adjustments on the destination and property level.
How involved are your owners with pricing? Do you have freedom to determine all your rates?
Obviously, we have some owners who are more particular who don’t want to take a booking if it’s below a certain rate. But when we take a new property on, we set the owner’s expectations about what revenue they can expect.
How do you decide on rates for brand new properties? Before you’ve collected data from previous bookings and seasons?
We’ll look at comparable properties in the area and how they’ve done historically. We also try to price our new homes aggressively to start with, to make sure they’re getting bookings and reviews. Once we’ve got that solid booking foundation and we have a couple of reviews, that’s when we start pricing them closer to what you may see in the area for that type of property..
Do you factor review scores or how much of the previous year somewhere was booked into your vacation rental pricing?
Yes and no! We don’t have a set rule—it’s more anecdotal. Once we’ve seen bookings pick up and reviews come in, typically we’ll raise rates. What we’re hoping for is a bunch of last-minute bookings to get the reviews and then we’ll adjust the rates to be more “traditional”.
3 EASY TIPS FOR DIY DYNAMIC PRICING
You don’t need the technical know-how or financial wizardry of big hotel chains or comparison sites to apply the principles of dynamic pricing. There are some really simple ways you can achieve the same results:
Keep tabs on the competition!
Look at the rates for similar properties nearby. Make sure you look for rentals with the same number of bedrooms / bathrooms or with like-for-like amenities. This will give you the best possible basis for price comparison.
Start prices off low
Attract last-minute bookings with low rates in busier seasons. You can then raise your prices when you have a review or two under your belt. Remember, listings with just one review receive more than double the interest of those with zero reviews.
Check local events and festivals
If your area is hosting a popular event or festival, demand will be peaking—and so should your prices! Think about who the audience is and add new messaging into your marketing to fit this target demographic and you’ll see an increase in reservations!
Pricing is not a “set it and forget it” component of your listing. Make changes throughout the year and you’ll be well on your way to a full calendar.
Check out the rest of InvitedHome’s properties on TripAdvisor Rentals.
Not yet registered? List your home with TripAdvisor and get instant access to your brand new dashboard where you can set seasonal rates and much more. Sign up, today!
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