How to create a minimum stay restriction strategy (Ep589)

In this episode of “Get Paid For Your Pad,” I had the pleasure of chatting with John deRoulet, an expert in the field of revenue management for short-term rentals. Our conversation delved into various strategies to optimize occupancy and revenue in this ever-evolving industry.

We began by discussing the significance of minimum length of stay restrictions. John highlighted the importance of setting these restrictions strategically, using them as release valves rather than rigid rules. By doing so, we can accommodate shorter stays that fill gaps in our calendar without losing out on potential bookings. This flexibility can be a game-changer, especially in urban markets where one- to two-night stays are common.

John emphasized the need to adapt to changing traveler behavior. While many people used to book flights before accommodations, this trend is shifting. Travelers are now more price-conscious, considering other destinations and timeframes if their initial plans become too expensive. This means we need to be proactive in adjusting our pricing and restrictions to remain competitive.

We also discussed the impact of supply in the market. Although the growth of supply is slowing down, it won't decrease significantly anytime soon due to institutional investors and other factors. This means we need to focus on perfecting our revenue management strategies to thrive in a competitive landscape.

Throughout our conversation, John shared valuable insights and tips, such as the importance of regularly reviewing your pricing tool's dashboard and embracing data-driven decision-making. Additionally, he discussed the benefits of engaging with potential guests to extend their stays, maximizing occupancy and revenue.
For more in-depth insights and educational content on revenue management, John directs us to the Wheelhouse YouTube channel, where you can find webinars and conversations with industry experts.

In summary, revenue management is a complex but essential aspect of the short-term rental industry. By adopting flexible minimum length of stay restrictions, staying attuned to changing traveler behavior, and continually fine-tuning our pricing strategies, we can maximize occupancy and revenue in this dynamic landscape. Remember to check out Wheelhouse's educational content for further guidance on mastering revenue management in the short-term rental business.

Jasper Ribbers:
Welcome back to Get Paid for Your Pad, episode 589. This is the second podcast in our series on revenue management. I have a good friend and awesome guest on the show today, Mr. John De Roulet. He's the head of revenue management at Wheelhouse, which as we all know, is one of the main pricing tools widely used by Airbnb hosts and short and mental house across the world. So John, welcome to the show.

John deRoulet:
Hey, thanks for having me Jasper.

Jasper Ribbers:
Yeah, absolutely. I'm really enjoying those monthly webinars that you do with the revenue management panel. I've watched a couple of them. That's a once a month thing, right?

John deRoulet:
Yeah, we do it like once a month to sometimes every six weeks depending on how full my calendar is and how full everyone else's is.

Jasper Ribbers:
Got it. Okay, well, but yeah, if anybody wants to learn more about revenue management, I highly recommend John's panels. How do people sign up for that?

John deRoulet:
Um, so if you go and either signed up following wheelhouse or just following us on LinkedIn, we always put out a registration. Um, we also send out all the recordings. And then if you go to the wheelhouse YouTube, all of the previous recordings are there, uh,

Jasper Ribbers:
Right

John deRoulet:
and they're

Jasper Ribbers:
on.

John deRoulet:
pretty useful because really the reason we were doing it is I have a lot of friends who, uh, whenever we're at conferences, we talk about just what's going on in our markets and it's a great learning opportunity. And we wanted to make sure, you know, everyone in the space kind of had an opportunity to just hear what other people are doing and thinking, and then. be able to reflect on what they might apply in their own portfolio.

Jasper Ribbers:
Yep. Gotcha. And you also have the RefBytes. It's called, right? The YouTube?

John deRoulet:
Yeah, I do that with Doug Truitt. We did it a lot after COVID. We just started it up again. That one's a little lighter. We're just talking about news and our own thoughts and opportunity, really, for me to hang out with Doug. He's a bright guy, and I enjoy sitting with him and chatting.

Jasper Ribbers:
Yeah, and we actually had Doug on the podcast on the last episode last week. So we know all about Mr. Doug. So all right, well, let's dive into it. So today I want to talk about minimum night stays. It's a specific topic, but even within this specific topic, there's lots to talk about, right? Last episode with Doug, we talked about revenue management, what it all is. We touched a little bit on the minimum night stay topic, but we didn't go too deep. Today, I really want to talk about how should we set our minimum night stay setting. And then also, what kind of adjustments should we then make? Because I just looked in Wheelhouse, there's like six different… adjustments that we can make. We can make adjustments for like gaps in our calendar. We can make future and last minute adjustments, and there's a lot of other stuff to dive into, so I want to pick your brain today on that topic. So let's start off with why should we have a minimum night stay in the first place? Like, should we just make every night, like one night bookings available? Like, why should we even have a two, three, four night minimum?

John deRoulet:
Yeah, it's a good question. And really the first answer is the most simple and not actually even RM related. It's your operational concerns or your regulatory concerns, right? Obviously, if you have something that prevents you from being able to operate the listing at a lower night stay then you have to be able to control that. Outside of that though, the big thing, the big idea behind a minimum night stay is you're trying to maximize the number of nights booked and… thus maximize the revenue. We know that some days are more valuable than others. And depending on how popular a day is, you can kind of fish for the people that are staying a little longer. But if you split a date range that's really valuable, it's actually very hard to book all of them. So putting in a minimum night's stay allows you to… to basically try and maximize that revenue over the date range, to not split it up. Now, there's risks that come along with that, too. Because every time you put a restriction in, you're reducing the amount of people who are actually able to see and buy your listing. So you're doing a little bit of guessing there. You're playing the game like, hey, if 1,000 people are coming for this day, 500 of them might be looking for two nights. But 200 might be looking for three nights. and only 100 are looking for one, and maybe only 10 are looking for one, the Friday or the Saturday check-in. So if you just need to get it booked, you might use the lower one. It's like, I don't really care if I split it, I just want it booked. But if you have a property that's really valuable, you really wanna fill all the nights. You want to get the longest stay because your chances of booking the, any, what I would call an orphan night, are greatly reduced.

Jasper Ribbers:
Right. Exactly. So let me give a really good example of this just to make this really clear. So I'm going on a skiing holiday in January and where we go in Austria and Europe. I don't know if it works the same here in the US, but essentially in Europe when you go on a skiing trip, oftentimes you can only book the hotel Saturday to Saturday. So everybody arrives on the Saturday and everybody leaves on the Saturday. Because everybody stays for a week or two weeks, right? So these hotels, they typically have a seven day minimum. And they even restrict it to the point where you can only book on Saturday, right? So that's a very restrictive, but because everybody is, you know, wants to go for a week, it makes a lot of sense because if one, let's say like one person books like a Wednesday. Now, No one's going to book the Saturday to the Wednesday or the first day to the Saturday. So that's kind of an extreme example, I guess, where you make it extremely restrictive and that's probably the optimal way to do it in that case, correct?

John deRoulet:
Yeah, it definitely can be. There's a lot of market areas where some of the restrictions themselves are actually almost like legacy from the operations of a previous time, where they do Saturday to Saturday because they've always kind of done it. It does stabilize the revenue really well, but maybe the market's actually not. They're just doing it because that's what other people in the market does. And sometimes that's fine, right? But Market conditions change. We've seen a lot of people this year come off of these restrictions that maybe they don't remember exactly what the revenue benefit was, or they don't know if it's still beneficial. I think the first question to ask when you're thinking about inputting a restriction is, is this day going to sell out? Is it a high demand date? Is it, to use a hotel term, is this going to be a compression date? Right? If you believe that it's going to be a compression date, then a restriction might make sense. If you don't think it's gonna be a compression date, then you probably wanna question the restriction. And that also occurs in those areas where you see like lots of Saturday to Saturday, everyone's doing it. The very early people who started pulling off that when they thought the market was actually softer than it had been previously, they got a lot of success because it turned out that a lot of customers didn't know that it was like Saturday to Saturday. or were looking for shorter stays, and now they became the only people available. So they kind of like,

Jasper Ribbers:
Mm-hmm.

John deRoulet:
even though demand in aggregate was lower, it looked like there was very compressed dates because there was very few properties available for the things people were searching for, and those people ended up getting booked. They may have even been able to charge a premium. And that's the other balance you have to think about with restrictions. A restriction is in a way a rate premium. You're almost taxing people to stay the day they want to stay. It's like, OK, well, I want to really just be there on Saturday, but I'll stay Thursday, Friday, Saturday. You have to be really careful about how you layer in a rate premium when you have a restriction. I've seen a lot of people post-COVID who were like, OK, we're stacking up the rate 30%, 90 days out. I'm also putting in a five-night minimum. It's like, OK. You only need one of those to be wrong to be overpriced. Now, if you're doing it on both of them, you're potentially like forcing that booking window in really short. So

Jasper Ribbers:
Hmm.

John deRoulet:
I think people should absolutely use restrictions, but you always have to ask the question, do I think this data is gonna sell out? And am I also pricing too high with the restriction?

Jasper Ribbers:
OK, so let's just take an example, right? Let's take secondary US city. Let's say we have one bedroom, and we are deciding what should our minimum stay be. Let's say this is a seasonal market. Summer is very popular. Rest of the year is kind of a bit slower. How will we go about deciding, aside from operational concerns, right? Let's just say we have a. you know, kick-ass cleaning team, we can do one-nighters, we can do last minutes, we can do anything we want. From a profit maximizing, revenue maximizing point of view, how do we go about, what kind of data that we wanna look at to make this decision?

John deRoulet:
Sure. So I'm going to put out a lot of kind of different factors that I think you should consider. I wish I could bring it down to like a simple three and I'll see if I can to get you most of the way. there's a few things that you need to consider when you're thinking about this. The first is just the seasonality of the market. That one's simple, right? Like, if you have different restrictions and dynamic restrictions, they're probably gonna align with market seasonality. Like, if you have a high season in July and a low season in January, you usually don't have the seven night minimum length of stay in January and the two night length of stay in July, right? There's situations where that might occur. But generally, If you're just selling to people who are like on an OTA or doing transient business, your restrictions are going to align with your seasonality. So that's the first part. Just identify what your high season is.

Jasper Ribbers:
And then just to be clear, so in our high season, we want the length of stay to be more restrictive.

John deRoulet:
That's where you'd consider more restrictive, length of stays,

Jasper Ribbers:
Right.

John deRoulet:
right?

Jasper Ribbers:
Got it.

John deRoulet:
Then what you probably want to know, these ones are related, is how big the property is? Because that's going to determine, it's probably gonna be the biggest thing that determines the booking window, right? You wanna understand when are people generally booking? For like, you mentioned in that example, like a one bedroom in a city. That booking window might be very short. You might be like 30 days is peak booking window or 21 days even. But if you have a five bedroom in that same city, it might be 60 days or 75. Right. That's going to change how you think about your restriction. And what it changes is not what restriction you set. It's when you decide to come off that restriction, you know, you kind of want to have like a release valve. You're like, okay, I'm going to try this restriction, but there's a point where I'm just going to let it book for, you know, if I can, cause I don't, I don't really know, you know, I don't want to take too much risk, right? So that booking window is like your release valve. You can look at that data. I would look at it by month, not on an annual basis, because really, that's the important part of like, identify your high season, identify the booking window for that high season in general. You can choose the median and maybe do a little inside the median is like a risk tolerance that I see a lot of people do. It's like for one bedroom, you kind of choose 30 days is, you know. your thing, you might drop off at like 21 or 14, right? So those are two factors there. You now know where you wanna put a restriction, when you want that restriction to drop off. The next part's deciding your actual restrictions. This one, I would just kind of like, there's a few factors that go into that. The first one is, this one won't be relevant to everyone, is how big your portfolio is. I know it sounds a little silly unit as individual, but the more units you have, the less risk you can take. So I worked at a company called Stay Offered for a long time where we grew. When I started, we had like 120 properties, and by the time the company was over, we had about 3,000. And that growth in individual markets really changed how we did restrictions. When we started out, we were super restrictive. As we got larger and larger, we became less and less restrictive and eventually switched to the point where we would start very unrestricted and actually add restrictions later. Um, because the risk of being wrong in your restriction and not having any bookings was so much higher than actually like underselling and then making up a little bit on the, on other units. So that scale is really important. You kind of have to choose that yourself, but I think there's a good little story that makes sense. It's like, if you, if you're selling one car. like you have a nice car, you're trying to sell it, all you gotta do is find the guy who's gonna pay your price. If you have a hundred cars on the lot, you gotta sell a hundred cars, so you're gonna sell them at a bunch of different prices. Same is kinda true with restrictions. If you have one, you can hold out, you can take more risk. If you have a bunch, you need to get data points, you need to get some off the lot. Before I just give you a big block of talking, do you wanna ask me anything about that or

Jasper Ribbers:
No,

John deRoulet:
interject?

Jasper Ribbers:
no, that makes sense. So we're kind of talking about a few different things, like what do we set as our restriction, when do we set it, and when do we release it. And you were saying, let's say most of your booking happens in the 30-day window, then you would typically release the restriction around 20 days or so. So that makes a little sense. Let's talk a little bit more about how we decide. You mentioned the seasonality. I think that may definitely make sense. But how do we decide whether we should do a two-night minimum, or a three-night minimum, or a four-night minimum? Do we look at length of stay data for that?

John deRoulet:
you can, the best data that's unavailable to us would be search data, right? Like not direct search data, but like OTA search data to just see like how many people are actually looking, what percent of the market's actually looking for seven nights, what percent of the market's looking for two, three, whatever. Unfortunately, that data's really not available to anyone in the market. Yeah, like anyone, nobody has it right now, except for the OTAs, they won't release it. Bummer for us, whenever that happens, we're all gonna be really much better rober managers. Since you don't have that data, there's a few things you can look at. One, you can just kind of look at what other people are doing. If you're in a market where most people are seven to seven, you're probably pretty safe doing that. You also could consider it an advantage to do something different. Maybe to put your price a little higher than everyone else but offer a lower length of stay, those kinds of things. You can also, this is something I think if you have enough inventory is worth doing. you can be a little less restrictive and improve that over time, fine tune it up, whether that's year over year or just if you have enough inventory to do it. Because if you get data points, you can make better decisions. If you don't have any data points and you have to guess, you really need to know when your cutoff valve is, because at the end of the day, you're guessing on the demand curve. Generally speaking, what you've been probably just want to look at is how other people are doing it. If you just go into the high season now, check it a few times, whether using a data source or just go to the OTAs and just type in some dates in the middle of your high season at different length of stays and just look at how many results are popping up,

Jasper Ribbers:
Mm-hmm.

John deRoulet:
you'll get an idea of, OK, are most people doing three nights? Are most people doing four? Are most people doing seven? That's one good way. It's just. kind of get an idea of the baseline in the market. You may also want to. think about like the day of the week. So this is much more relevant, I think, for an urban market where, well, let me put it this way. If you look at market occupancies by day, if you see significant differences by day of the week, that tells you something about minimum length of stay. If the market's at 80% occupancy on a weekend and 30% on a weekday, then you probably need to differentiate that. You also probably want lower minimum length of stays, right? It means people are coming for the… coming for the weekend, chances are you can't push beyond three nights, right? Cause that's like one extra night than what people actually want. So that's like that kind

Jasper Ribbers:
Sure.

John deRoulet:
of internal thing, you know, one extra night than what people want is maybe like what you can do. So. Heuristically, in an urban market, you're probably one night, weekday, two night, weekend, three night weekend outside of, you know, when you're pushing. Once you get to like three, four or five bedroom, you might be able to add a night to that on the weekends and the weekdays. I don't think like it's hard to book those on weekdays. If the market allows stuff like does a lot of seven nights, or there's not a lot of your very large inventory, which happens, you can probably push to seven. Um, In a traditional vacation rental market, you kind of want to see what other people are doing. You can mine your own reservation data. Like, are you getting a lot of seven night reservations? Right? That's a good one. Like if you've had less restrictive restrictions, you're like, you know, two nights, three nights, weekday, weekend, go look at your data and see what percentage of people are actually booking for seven nights. You know, if it's only 10%, then you probably don't want to go much higher. But if you get like 50% seven night bookings, you may want to maybe restrict it and… make people try to book those, especially earlier out, right? Because what you don't want is people to book your best properties for the three nights when otherwise you probably could have sold, you know, had a 50% chance of selling that for seven nights.

Jasper Ribbers:
Do you think that, do you see that larger homes typically have a longer length of stay? Is that true for all markets or is that very market dependent as well? Or is that kind of a general line of

John deRoulet:
I think it's pretty true

Jasper Ribbers:
rule

John deRoulet:
across

Jasper Ribbers:
of thumb?

John deRoulet:
the board.

Jasper Ribbers:
Got it.

John deRoulet:
And I think it's true for a couple of reasons. One is that… It's not that smaller properties don't get longer stays. It's I think larger properties don't get as many short stays. Like it's a hassle to like, I know there's people like this, I'm not. I wouldn't want to coordinate 15 people to show up for a day somewhere or two days. You know, it's like, that's insane. Especially in the last minute, right? Like five days before, like that means you're just like, you're basically looking for someone who's like house burned down and has a huge family. Think about the consumer profile of what you're selling to when you actually set that rule up. It's like, oh, OK, within three days, I'll open it up for a one-night stay in my 14-bedroom house. It's like, who are you

Jasper Ribbers:
Haha

John deRoulet:
selling to, man?

Jasper Ribbers:
Yeah.

John deRoulet:
Um.

Jasper Ribbers:
Yeah, and I guess the book and the booking window typically is different, right? So that release valve, as you described, like should happen at a very different time as well.

John deRoulet:
Exactly. And that's why knowing the booking window is really important because on a, in an urban apartment in downtown, that release valve might be within the week, you know, like, you know, most people on a hotel site are booking those within a week. You're really not giving up much by missing out on the bookings that came in for that, you know, one night earlier, you have a lot more to gain. But if you have like a five bedroom or a six bedroom or 10 bedroom house on the beach, those people might be booking that six months in advance. And so your release might be at like 90 days. And even then you have a greatly reduced amount of people booking, right? If you wait till like, if you had the same rule set where it's like within seven days, I'm gonna drop that from a five night to a three night, like the difference in the amount of people looking is significant between those two properties. And you should be able to infer it from the booking window.

Jasper Ribbers:
Got it. OK, so we talked about the default minimum night stay. We talked about how we set it up future versus last minute and seasonality, weekday versus weekend. Now let's talk about orphan nights. Now this is something that I noticed in our student groups that not everybody is aware of this. But you can. If you have like, let's say you have like a free night minimum stay, right? That means we can get gaps in our calendar of two nights and one night gaps that can't be booked. Now the major pricing tools have functionality where you could say, Hey, I want to have a free night minimum, but if there's a two night gap or a one night gap, then I want to allow people to book those gaps, right? So let's touch on that for a second. pretty, I guess the only decision that we have to really make there is like, do we allow people only, do we only allow people to book the full gap or do we allow people to book part of the gap?

John deRoulet:
Yeah, I… So we're assuming you can do it. I'd. I don't think it matters as much. I mean, I think it's always gonna be more beneficial for you to probably let people book anything in the gap, but the full gap is good too. At that point, I think it's actually a pricing decision. It's like, how are you gonna price in the gap, right?

Jasper Ribbers:
Hmm.

John deRoulet:
If you're going to go for the full gap, you should drop the rate in the gap, right? Cause you really want it to be booked and you're looking for a very specific fit. If you're going for anything in the gap, probably just leave it at rack rate and let it ride. I don't know what's really more beneficial. What I would probably do is just allow the shorter gap, if I could. Larger properties, I may not. I mean, because sometimes you just can't go too much lower. And at the end of the day, sometimes those nights are not going to be super sellable anyway. So I actually consider that more of like, it's binary. Open up the gaps if you can do it. Decide on a pricing strategy. I do see some people will drop like, to one night, but they'll like double the price. And I understand why you would do that, but. You have to understand that that's probably not gonna drive a lot of revenue, but the revenue it drives will be nice, right? Orphanites, I would describe a little differently. Those are a little bit interesting, because an orphan is like a one-sided gap. It's like you have a checkout, but you don't have the check-in triggering anything. So where I see people use that is, especially in urban environments. or really high weekend environments where you have a restriction on a weekend, but somehow someone splits the weekend. They're like, they check in on a Tuesday and then they check out on Saturday, or they check out on Friday even, and you have a three night normally. Now what's gonna happen is you still have that restriction in place, that like three night, but it's really hard to find the one person who's gonna stay Friday through Sunday. And so you want that to drop to two. You wanna offer

Jasper Ribbers:
You mean Saturday

John deRoulet:
up.

Jasper Ribbers:
to Monday, right?

John deRoulet:
Yes, Saturday. I said both, Friday through Sunday night. Whatever. The idea is that either the Friday, it's like a Friday check out or a Saturday check in, where you break up. You lose one of the key nights.

Jasper Ribbers:
of the weekend nights. Yeah.

John deRoulet:
And if you're restricted, you totally lose it. You probably already lost it because it's hard to book those anyway. Now you're looking for like a one-night stay or two-night stay. But if you have the tools in place in the system, you can automate dropping those restrictions so that you know you're always keeping the restrictions on open days, but whenever they get broken up, you have a higher chance of booking it.

Jasper Ribbers:
Right.

John deRoulet:
That becomes

Jasper Ribbers:
Gotcha.

John deRoulet:
like a really valuable urban thing

Jasper Ribbers:
Yeah,

John deRoulet:
because you get a lot of one to two nights.

Jasper Ribbers:
that's a really interesting one, right? So let's say that we have a free night, because I see a lot of people do this. They have a, let's say, two night minimum on the weekdays and a free night minimum on the weekends. Right? So they're really looking to get the Friday to Monday booking or the first day to Sunday booking. Right? And then… You know, but somebody could book, to your point, somebody could book Wednesday to Saturday. Right? And now that Saturday night is a very valuable night that might be difficult to book because now Saturday to Monday can't be booked because you have the free night minimum on the weekend. So if that's the case, then essentially you would say, okay, if my weekend is split, now I'm going to allow the Saturday night to be booked by itself, for example. So I'll allow people to book the Saturday to Sunday as a one night, even though it's a weekend. Right.

John deRoulet:
That would basically be the rule set. I also encourage people because the Friday night split is easier, like when someone checks out on a Friday and breaks through a weekend, it's easier to sell like the Friday night and a Saturday night for two night. Selling it just a Saturday night is really hard. And it's also risky, right? That's like the kind of guests people are pretty nervous about. Usually what I would encourage people to do when they see split things is still have the automations to try to make these available. One of the benefits of these two is even if you don't sell the Knights, just the visibility of your portfolio is always going to be better on OTAs. Like it contributes to the development of your advertising by having more open availability. But I honestly, I would like check those reservations and call those people right when they book or send them an email and ask, like offer them a deal on the Knight and ask them if they'll just extend.

Jasper Ribbers:
Right. Yeah, that was going to be my next question is actually, you know, other than allowing the, you know, the shorter stays if it fills up a gap or if it's right after an existing reservation, like what are some other things that we can do to really dial in that occupancy? Because, you know, if you think about it, let's say you have 30 days in the month, right? Let's say on average you get like five or six bookings. And let's say that between each booking is a one or two night gap. Now you're easily at, that's easily like, you know, eight, maybe even 10 nights of unbooked occupancy, right? So like, to get above like a 60, 70% of occupancy to really get to like, you know, 80, 90, close to 100, really have to manage those gaps in those days. So you mentioned reaching out to the guests. Is that a, what kind of conversion do you, feel like you get on that strategy.

John deRoulet:
Um, pretty low, but I think it's worth doing if you have the resources to do it. I think when we did it at Stay Offered, we got maybe like 10% conversion. You really have to get them right after they book it because like,

Jasper Ribbers:
Mm.

John deRoulet:
especially people who are flying in, if you're a drive-in market, I bet you, you have a lot more flexibility to do this. Um, but if you're a fly-in market, people have like a short window to change their flights, it's a little more, it's less restrictive now. It used to be really restrictive. You had like 24 hours or you're screwed. And they just tell you no.

Jasper Ribbers:
Hehehe

John deRoulet:
So like, you kind of want to hit them like right away and be like, Hey, you know, we noticed you booked this. Would you like this extra night? Stay an extra night, you know, especially when they're planning, like they're kind of excited so you can get people to convert on that. There's another touch point too, which is interesting where like, if you get to the very like last minute, you're like a couple of days away from that checkout. Um, if it's not booked. you can offer them a late checkout as a fee, and just give them the night. You

Jasper Ribbers:
Yep.

John deRoulet:
know? That actually was really successful. It's like, hey, it's not booked. The chance, I don't know what the chances of me booking this for rack rate. I'm just going to offer it to them for $75. And they can stay as long as they want. Sometimes they'll stay the night. You let them know, hey, do you want a late checkout? We'll actually give you a whole night. People do take that up quite a bit.

Jasper Ribbers:
Interesting. That's a good one. Yeah. You still make a little bit of extra money. And then the guests probably going to appreciate it too. Right. It's a good deal to them as well.

John deRoulet:
Yep.

Jasper Ribbers:
What about, oh yeah, one, one actually one question. Like do you think people, when people go on a trip, like do you book your flight first or do you book your, your stay first?

John deRoulet:
I think people almost always book their flight. And

Jasper Ribbers:
Yeah,

John deRoulet:
I actually

Jasper Ribbers:
I think so.

John deRoulet:
have been talking to people on those revenue management webinars about like… When we think about people having tighter wallets, when we think about the economics changing. the flight and the gas eat a lot out of people's budgets and they're very much willing to change their plans or where they wanna stay or their ideal kind of like stay because of that cost that they incurred earlier. And so you have to be really careful about like the behavior that we saw this year where people were like, I'm just gonna hold the rate, like blah, blah. It's like. man, these people are willing to go stay somewhere else if they're gonna come here. And even worse, they might actually just go somewhere else. I think that's something that's really common right now is consumer sentiment about travel is still high. People want to travel. What's changing is where they go and when they go. So. I think

Jasper Ribbers:
So

John deRoulet:
I'm

Jasper Ribbers:
what's,

John deRoulet:
pretty sure people book their travel first.

Jasper Ribbers:
yeah, I think so too. And so what's changing?

John deRoulet:
Um… just in terms of like the market.

Jasper Ribbers:
Yeah, you're saying, you're saying, you know, the people still want to travel, but where they go and when they go is changing. So are people choosing more budget, budget locations or are people going in like lower cost times?

John deRoulet:
Yeah, I think it comes down to people's wallets. I brought this up on my conversation with Doug a couple months ago. It's kind of funny because you talk to people and they're like, people still think of millennials as being like really young. Like that's Gen Z. Millennials are like, you know, the middle age of millennials, like 35. Right. So that's the family demographic now. That is by far one of the most squeezed discretionary income brackets in the United States. So if you're like a beach market who markets to families, that cohort that you're marketing to is the ones who have the least amount of discretionary income in the country, right? Those people still express that want to travel, but where they might've gone to Destin every year and paid whatever they were gonna pay during COVID because they needed to get out and they wanted to go somewhere, they're now saying like, hey, Destin's a little expensive, why don't we look at Tampa? Or why don't we look at… you know, North Carolina or look at this. And so there's a huge benefit to understanding almost like how other people are pricing now, it kind of like a high level is like, do we think these other markets are too expensive? Because if people can go there, they might choose to go there. The other thing too, is I'm seeing a lot of people who are having quite a bit of success in the shoulder seasons now, because they started pricing really conservatively early and what that's indicating to me is that people who were you know, summer was soft, they were looking at other dates too. They were looking six months into the future and saying, ah, you know, I was going to plan to take this vacation in July, but it looks like it's going to be a good deal on October. Why don't we go? You know. You really got to think that

Jasper Ribbers:
Mm-hmm.

John deRoulet:
far ahead now. You can't just think in the 30 days.

Jasper Ribbers:
You know, you work at Wheelhouse, right? You work with a lot of clients and different markets and stuff, so you probably have a pretty good pulse. What's a… Can you give us an update on 2023? How good was this year or how bad was it and how's the rest of the year looking?

John deRoulet:
Um, gonna be a little different by market. I think this is a tough year for folks. Um, I think it's a really tough year for folks who don't have a lot of pre COVID memory, um, or

Jasper Ribbers:
Mm.

John deRoulet:
experience, uh, cause the seasonality trends post COVID were a little bit odd. Like you had a bunch of markets that like actually shifted seasonality, which is usually very stable. And that's kind of like, you know, you'll talk to a lot of revenue managers who've been around a long time and they're like, yeah, you know. trend-wise it looked a lot like 2019. We're just have higher rates. And if you have that data and that experience, then you kind of probably feel a little better. I think it's been really hard for people who got into the business the last couple of years and don't know how to, they don't have any revenue management strategies in their repertoire to deal with anything other than this unusual COVID situation where it's like, keep your rate high, whoever's available in the last 10 days is gonna get the highest rate. It's like, that's not normal. Most people only have a few dates like that. And even those dates this year, people kind of overpriced. I think a really good thing for people to do, especially if they've had a really tough year, is go and look at your historicals and then look at your current rates. Because there's a lot of clients I talked to where it's like, you could cut your rate 20% and still be projecting 10% growth. But the customer is not going to pay 30% premium over what you did last year. You know?

Jasper Ribbers:
Yep. Yeah, it's interesting because I see in some markets that this year is actually pretty similar to last year. I don't see a big difference in some markets, but then in some markets I do see a difference. So I think it's very segmented. But I feel like it's definitely a lot better than what we were kind of expecting at the beginning of this year. Do you agree with that?

John deRoulet:
Partially, it kind of depends on who you talk to. I think Q1, people were really bullish on the year, especially if they had a summer high season. I think some of the people who had spring high seasons. they felt it early, right? It was like, if you had stuff in downtown Miami, you were like, oh man, this is not very strong, you know? I think once we hit around spring, that's when I started hearing from a lot of revenue managers that were pretty experienced, that they were like, hey, things aren't bad, but I'm pacing behind, right?

Jasper Ribbers:
Mm-hmm.

John deRoulet:
And I think the ones who ended up being most successful, who actually grew year over year still. A lot of them started becoming very conservative a quarter before the summer. They were like March, end of March, April. They were like, I'm going to actually re look at what rate position I have. I'm going to be much more conservative in terms of our growth. And I'm going to see if I can pack on the occupancy. And so when we look at the year as a whole, there's a lot of diversity because overall, like there's people who did pretty well and they're kind of bolstering what happened actually in the summer season where in many places rates kind of collapsed, very short booking windows, a lot of people stressed. And so what you have is you have people who booked earlier and maybe at the time what were low rates ended up bolstering the whole market. You have some people who booked really early and their rates are not only like they were low at the time, but they ended up being the highest rates in the market. Those people who booked like a year, nine months in advance. Then you have a whole bunch of people who had a bunch of vacancy. And so that's why you can talk to people and say, they're like, yeah, you know, it wasn't too bad. What, you know, it's not great, but we're, we're doing fine. And then you have people who are like, this is a disaster. Like I have nothing on my calendar.

Jasper Ribbers:
Mm-hmm.

John deRoulet:
It's the Airbnb bust, you know.

Jasper Ribbers:
Right. Yeah, exactly. Yeah.

John deRoulet:
I think next year. And hopefully people will have learned from like holding the rates too high that strategy is really not going to work most of the time. And they're in a position to be more competitive. I do think that occupancy, it'll be interesting to see if occupancy continues to erode. I think it'll really depend on people's behavior. If people continue to high rate, hold high rates, then I think market occupancies will erode and then some people will do really well because they'll operate different than what everyone else is doing. Um, yeah.

Jasper Ribbers:
What do you see in terms of supply? Do you see still an increase in supply? Or is the fact that things have slowed down a little bit, does that remove inventory from the market?

John deRoulet:
On the supply side, I think we'll see a lot slower growth, but I don't think it's really going to reduce very quickly. I don't think people can afford to just get in and out after one year, even though they might incur a lot more losses and it might be the best thing they could do if they bought too high. And I don't think there's enough individual buyers to shift the market supply that much. There's too much institutional money that will hold

Jasper Ribbers:
Hmm.

John deRoulet:
that. They'll hold those assets for a little while. So I,

Jasper Ribbers:
Got it.

John deRoulet:
I think that The supply problem will be around. It'll continue to grow, but just very slow. But I don't think there'll be a big correction for at least another year or two,

Jasper Ribbers:
Got

John deRoulet:
maybe three.

Jasper Ribbers:
it. Yep. Makes sense. Awesome, dude. Any final thoughts before we wrap it up?

John deRoulet:
In terms of minimum length of stay, I would just say like make sure you set those kind of release valves and like pull those minimum length of stays off. Be a little bit more conservative this year and think of minimum length of stay like a rate premium. Whenever you put a restriction on it's very similar to adding like a 30% rate premium for every night, you know? So if you already think your price is pretty well, maybe don't add the restriction or

Jasper Ribbers:
Yeah.

John deRoulet:
experiment with it and know when you're going to pull it off.

Jasper Ribbers:
And you made a good point too where, you know, if you have a very restrictive minimum length of stay setting, then like you're not going to be seen by as many people, right? And even if people don't book your place, like, and they're still seeing your listing, even if they don't book. Plus I think Airbnb and other OTAs probably, they probably don't like it if we put too many restrictions, right? So it probably could hurt our search rank position as well.

John deRoulet:
Yeah, a small tip I like, which is you can do with these platforms is in your low season, just leave your stuff low all the time because the OTAs really want to see that you're giving them the inventory. Especially the hotel OTAs punish you for having blocked off inventory because they just assume you don't want to sell it there. So if you're not going to displace revenue anyway, you might as well leave it kind of open, especially if you have volume, right? A little different if you only have one or two units. You probably do want to hold for a little bit higher than one night for longer.

Jasper Ribbers:
Sure. Yeah, makes sense. Awesome, John. Well, I appreciate you jumping on here on our second revenue management episode. We're going to do probably like, I don't know, maybe four or five or six of these. As we're really diving into this topic, we feel that revenue management is kind of like, there's not that much education and there's a lot of confusion. Do you see that as well?

John deRoulet:
Yes. Um, I think revenue managers right now are kind of like, kind of like mystics. They're like palm readers, you know, like it's very intuitive and they're usually pretty good, but it's, it's hard to explain hard

Jasper Ribbers:
Yeah,

John deRoulet:
to learn.

Jasper Ribbers:
I know it's hard to, it is, it is hard to explain. Um, and that's why, you know, something, because I've been listening to a lot of people talking about revenue management and oftentimes there's it's a, it's a little vague, it's almost feel like, oh, they don't really want to give me the real strategy, but then it's like, it's so, it's such a complicated topic as well. Right. Where there's never really like a one set rule that works, you know, for, for every property in every market. Right. So. It's a complicated topic.

John deRoulet:
It's one of those things where like, so I'm an artist, I paint. And I actually talk to a lot of revenue managers who are creatives. And I think the reason is, you know, we talked earlier about those factors and I was lifting off a lot of factors. The actual logic tree is really complex. So what you have to do is you have to look at the patterns long enough where it becomes intuitive. Where you kind of like, it's kind of that same entrepreneurial sense when you talk to CNO, it's just like, I just feel like, you know, there should be more demand here. Let's go lower the rates. Like, He's processing a lot of information to get to that conclusion. That would probably be really hard for him to explain. Revenue management is the same way. You learn all these concepts and there's a lot. It's never just like three. It's like

Jasper Ribbers:
Mm-hmm.

John deRoulet:
10 data points you might consider. But if you learn how they relate, you can start to do it intuitively. And that's kind of where you want to be as a revenue manager is to kind of feel your concern. And that's why I use that concept of like risk tolerance. Like know when you feel at risk so that you can… decide to go look into the specific data points that you know are relevant to a specific topic.

Jasper Ribbers:
Yeah. Well, that's a great point. Um, you know, it's kind of like, it's more of a soft skill, right? Like for us as a hard skill, like mathematics where it's like, yeah, free and free is six, like you can't argue about it, right? Whereas revenue management is like, well, you say the optimal price should be 180 and another person says 220 when we can't prove either way. Right. So I think, I think, uh, I think you're right with you. You gotta have experience. And that's why I think it's so important for everybody to get in the habit of dive into your pricing tool, dive into the market data on a weekly basis. I ask a lot of people in our Legends X course and our mastermind and ask them, how often do you look at your pricing? And it's typically like, well, it's on my schedule to do it every week or twice a week, but I usually am too busy to do it. So I usually actually only look at it once a month. And it's like, if you get the habit of like… start looking at your dashboard. These, you know, the pricing tools give so much information these days, you know, there's market dashboards and like, you know, there's all this data that we can look at. So even just like getting in the habit of looking at it and thinking about it, like, should I make some changes? Should I not make some changes? And having some strategy behind what you're doing, over time, you're gonna develop that intuition that you're talking about.

John deRoulet:
Yep, yep, 100%.

Jasper Ribbers:
Awesome. John, thank you so much, man. Appreciate it. And, you know, just before I let you go, let, let people know where they can find the, the education that you're doing with the, with the podcast and the, and the webinars again.

John deRoulet:
Yeah, so any educational content I've done recently has been through Wheelhouse. So if you go to YouTube and go to the Wheelhouse YouTube, all of these great webinars are there, the conversations with big revenue managers that we do monthly. My conversations with Doug, they're a little bit more kind of what's going on now based, but some of the older stuff's really interesting from a conceptual level. And then we do a bunch of other training materials as well, both for the Wheelhouse platform, revenue management in general. I'll also be speaking at both VRMA and DARM this year, so feel free to come up and say hi to me if you're at either of those. We'll be doing a bunch of coursework, really specific to revenue management. If you ever watch my coursework, you'll notice, even though I work for Wheelhouse, I rarely talk about the platform, unless I'm specifically training on it. So it should be applicable to anyone who's just learning about revenue management, whether you're using Wheelhouse or not.

Jasper Ribbers:
Awesome. Cool, man. I appreciate your efforts in the industry to educate us on this topic and I'm sure we'll have you on the podcast another time. So thanks so much and to the listeners, I hope you enjoyed this podcast. We'll be back on Friday with another Revenue Management podcast. We'll see you then.

John deRoulet:
Thanks so much, Jasper.

Jasper Ribbers:
Sweet dude.

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