One of the things I’m a big fan of is to learn from the best of the best. But that’s easier said than done in today’s world. I’ll give you an example.
As part of the upcoming launch of our new hospitality brand Freewyld, I’ve been working on a revenue management plan to maximize our revenue.This is an extremely important aspect of any hosting business, and without the right strategy you could easily leave 20 or 30% of your revenue on the table.
So I’ve been doing a lot of research to make sure I’m educating myself as much as possible. And what I’ve found is that there are SO many different opinions, strategies and recommendations out there…That’s it’s hard to decide who to listen to and what advice to take.
So what do I do? Well here’s my approach.
I ask myself the following question: Who do I know that has consistently been getting extraordinary results? And when it comes to revenue management, that person is John An. I met John in 2020 at our live mastermind event in Cartagena, Colombia.
He owns a number of condos in Hawaii, and over the last few years I’ve watched him consistently crush it on revenue. His 2 bedroom condos generate $200k+ a year, which is significantly higher than even his top performing competitors.
How does he do it? That’s what I asked him to show us on our weekly mastermind call a few weeks ago. And here are my takeaways.
Use data to inform your decisions, but not drive your decisions.
Here’s what I mean by that. It’s useful to know what your competitors are charging, and what you’ve been charging in the past. But every short-term rental is unique, and market circumstances constantly change. So the price that you got booked at last year, or the price that you competitors are getting booked at, isn’t necessarily the highest price that you can demand.
In the end of the day, you want to find the maximum price that the market will bear. You do this by actively changing your prices to find out what people are willing to pay at different booking lead times.
Occupancy is the ultimate indicator
And I don’t mean to say that your goal should be to be 100% occupied. Because if you are then you’re probably charing too little. What I mean by this is that you want to understand when demand for your units hits the market, and adjust prices based on if you’re ahead or behind the curve.
Here’s an extreme example to illustrate this point.
Let’s say you have ten one bedroom condos, and you know that there’s 100 people who are looking to book that type of unit in your market for a given weekend. And you also know that half of those people will book between 60 and 30 days out, and half will book in the last 30 days.
Now imagine that 30 days out you’re already 100% booked. That’s great, right? Well, not really. Because you’re missing out on 50% of the demand, and you’re WAY ahead of the demand curve.
In other words, you’re not taking advantage of the 50 people who still need to book. If you would have set your prices higher, of the 10 people who booked your units, some of them would have been willing to book at a higher price. And you’d still have 30 days to book the units that didn’t get booked.
Does this make sense? So what you want to do, is to set occupancy targets for various points in time, like 30 days out, 60 days out, and 90 days out. Then you raise or lower prices depending on if you’re ahead or behind.
You have to constantly monitor the market to understand when people are booking to set the right targets.
Fortunately, the major pricing apps (Wheelhouse, Pricelabs and Beyond) all have market data where you can get this information.
Last point on this, booking windows vary A LOT depending on unit type. For example, larger homes tend to get booked out way more in advance than studios and 1 bedrooms.So you should have different occupancy targets for different property types.
Work with John Ann to increase your Airbnb revenue
Going back to John, he recently started a service called TechTape, where he does the revenue management for you.
And he’s been able to increase revenue for the hosts he works with significantly, and save them a lot of time.
If you’re interested, you can schedule a call with him to get more details.
He’s offered a 10% discount for the Get Paid For Your Pad community, use coupon code PAD to take advantage of that.
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