Setting Rental Rates For Vacation Properties
Creating optimal rental rates can take a time and must be done right. We are talking about money aren't we? So spending a little extra time on this portion of managing your vacation rental can be very rewarding. But where do you even start? If you have chosen to have a property management company then you will be relieved that this is something they will take care of for you. That doesn't mean you should stop right here. Read on so you can do a little research and keep tabs on your vacation rental manager. For everyone else we dove in and created a step by step process to help you create optimal rates for your home, villa, or condos.
Research Your Market
Although it seems straight forward many vacation rental owners neglect looking at the competition. This is critical to your success and a recommendation that should be utilized even prior to purchasing and investment property. Formulate a system and dive in. We recommend starting with your handy search engine. Type keywords that you think potential travelers will be using to find properties similar to yours. In the top section you will find companies or individuals that are payment for placements. Click away and see what the major players are doing. This is a good place to figure out the seasons, peak times, minimum night stays, and other characteristics unique to your rental market. If you mess this up you could be leaving money on the table or not booking to full capacity. Below the search engine ads you will find natural rankings. These results will be more relevant to your search terms. Handle these the same way you would paid search positions but pay even closer attention. Once you have a basic understanding of the area it's time to narrow it down to exact competitors. To do this we recommend visiting the top homeowner rental websites and refine your search to identical or similar properties. For condos this should be a walk in the park. You will notice minor difference and a range of pricing. If you are staring late in the season it may be best to price on the lower end. Once established and bookings start to come in you can always go back and raise your rates. If your rental condo is better then most on the market feel free to price higher but nothing more than 10%. You don't want to price yourself out of the market. If your rental is more unique or a home narrow down your options to the most similar.
Optimizing Property Rates
So you have an idea of what you are hoping to charge. If you did your research as suggested above this should be an easy task. Unless your property is over the top you NEVER want to be the highest price property offered in your category. If you are not worried about competing on homeowner websites then it is not as critical. Travelers that use sites that put them in direct contact with owners are deal seekers. Nothing spooks a deal seeker than an overprice homeowner. Sometimes you have to swallow your pride and realize that your property is an investment and the market determines the rates. If you are new to the rental market you may want to come in on the lower end. This will help you secure bookings faster and allow you to slowly raise the rates to the desired level. Always try to remain flexible and keep enough padding on top to offer discounts. Discounts are a tool that you should not over-use but have in your artillery.
Discounting Rental Rates
Far to many property owners and managers crutch on discounting vacation rentals. When done in moderation this can be a valuable tool but if this is exploited your gross figures can be significantly impacted. How do you determine if it's time to start discounting? On average last minute discounting is by far the most effective. You are not only renting a property, you are also renting time. Time has an expiration date! Do not discount far in advance to lock in a reservation unless you want to offer a repeat rate brake. Repeats can be tremendously valuable. On average repeat guests will treat your property better and they know what to expect. That means less of a chance of a disappointed guest. Flexibility in rates is required unless you have a top tier property and do not care about rentals. Find something you are comfortable with and book away!
If you get creative you can avoid discounting and charge a fully inflated rate. Perceived value is far more effective than underpricing and deep discounting. How do you create value in a vacation rental? There are a variety of things you can do. Some simple and less costly than others. Simple steps like a stock of board games, blu ray players in every room with movies, pool toys, books, a game system, extra appliances, and so much more. Pay attention to details and pack your home full of goodies. You can also work out deals with local business or offer coupon books. The more items that set you apart the higher your perceived value will be.
Not everyone requires a security deposit but most property owners do. Your research mentioned above should help you understand if it is common practice in your market. Too high of a security deposit will deter potential renters. Too low of a security deposit will leave your vulnerable to damages and other issues.