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How to develop a revenue management mindset (Ep 617)

Ep 617

In this episode, Jasper Ribbers interviews Mike Savage, the founder of Synergy Stays, about revenue management in the short-term rental industry. They discuss the importance of revenue management and how it has evolved over the years. Mike shares his personal experience with revenue management and the strategies he has implemented to maximize his revenue. They also emphasize the need to think beyond pricing and consider other factors like operations, distribution, and marketing. The conversation highlights the role of pricing tools and the importance of creating incentives to attract bookings.

Takeaways

Revenue management is more than just pricing; it involves optimizing all aspects of the business to maximize revenue.Thinking like a revenue manager and being strategic in creating incentives and promotions can help attract bookings and increase revenue.
Pricing tools are valuable for analyzing the market and making real-time adjustments, but they should be used in conjunction with a revenue management strategy.
Considering factors like operations, distribution, and marketing is essential for effective revenue management.Systematizing revenue management processes can help scale the strategy and make it easier to replicate.

Before we wrap up today's episode, remember to connect with us on Instagram @getpaidforyourpad for exclusive content and behind-the-scenes moments, and don't forget to hit that ‘Subscribe' button on our YouTube channel for even more great content. We appreciate your support, and can't wait to see you on our socials. Stay tuned, and keep being awesome!

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Read The Script Here

Jasper Ribbers (00:01.206)
What's up everybody. Welcome back to get paid for your pad. Today, my guest is Mr. Mike Savage. He is the founder of synergy stays out of Charleston, South Carolina. And we are going to talk about my favorite topic, revenue management. And I think also one of your favorite topics, Mike, isn't it?

Mike Savage (00:20.925)
Absolutely Jasper, I love making more money with our short-term rentals. Thanks for having me, it's been a pleasure. I've been listening to you for years now, I think that's actually how we originally got connected, listening to your podcast and jumped into Legends X and the rest is history right now. I'm doing Cashflow Mastery with you and yeah it's just been a lot of fun and for me personally the Cashflow Mastery has just really changed the way

Jasper Ribbers (00:26.307)
Ha ha.

Mike Savage (00:50.369)
doing so much of what I'm doing and really my focus, right? I've owned and operated short-term rentals since 2015, which is kind of crazy. I guess kind of one of the OGs. I never thought of it that way until I realized how many people are just really jumped in the last couple of years. And just, it's been so fascinating, right, to watch the evolution. I know you're in the same boat. You've been doing this for a while.

revenue management's always been there and always existed. I just don't know that it was, there was such a need for it, right? Especially once 2019, once we hit COVID, I mean, we were just trying to keep up with the money that we could make, right? But as we obviously came out of that last year, that was really a shift for me. Coincidentally, I, you know, when I started this, I was full-time with the City of Charleston Fire Department, kind of doing this on the side and I, you know.

chose to leave the department in 2021 for kind of personal family decision. And so for me, those short-term rentals represented probably about 80% of my income at the time. And again, we did great through COVID, but hitting 2023, it was kind of like, oh shoot, like things are shifting quick, right? And I've got to figure this out. Like this is my livelihood. So that's for me when revenue management kind of really came to the forefront and fortunately came across you and what you were doing.

Jasper Ribbers (02:24.106)
Yeah, I appreciate you giving that background. And yeah, things have changed a lot, right? Over the last five years, like as you mentioned, I think we all have seen that in 2023 and continue to see that now in 2024, where it's no longer the case that we can just throw out a couple Airbnb listings and just kind of set it and forget it, sign up for a pricing tool, put some base prices in there,

and kind of hope for the best. So yeah, I'd love to explore that a little bit more of you of what did your revenue management strategy look like kind of before you joined Cashflow Mastery and what are some of the biggest changes that you've made that had the biggest impact for you?

Mike Savage (03:14.441)
Yeah, so I'll kind of start out again, like, you know, going back to when I left the fire department, you know, I think around that time, I was just starting to use price labs, getting familiar with that a little bit, incorporating that into what we were doing. Also at that time, I was self managing a few of my listings. I actually still had some of my listings or one in particular being managed by another company that had been managing it for a couple of years. And, you know, they had always done a good job. They, you know, good guest reviews handled any issues.

They handled the flow really well. Um, but again, when, when things started to shift and the money and the, you know, the finances really came to the forefront, I felt like I had a lot of questions for them, right? Like, Hey, like, how are we doing compared to the market? Like, what are other listings doing? And they just didn't have those answers for me. And that's when I really kind of started to stop and think like, you know, again, this is now my primary means of income. Like this matters. And if they can't answer that, then like.

Either I need to, or I need to find someone that can. So, you know, I kind of dove into the revenue management. Coincidentally, I took over that listing June 1st of last year. So we're really just coming up on one full calendar year. We have a little bit of occupancy left in May coming up, but more or less, we've got a year's worth of data. Our gross revenue for that calendar year is $80,190. And…

I look back this morning just to double check, you know, again, that manager who I'm not, you know, thrown under the bus or anything, they did a really good job in a lot of ways. And I went through other property managers, short-term rental managers before them that didn't do as good a job. But year over year, their income had been $58,110. Again, we did just over $80,000 last year. So we grew it by just over $20,000, 37%.

Mike Savage (05:11.601)
And how do we do that? Right. Like, and that's where I'll kind of touch. I think in revenue management, we, we so often focus on the pricing strategy, right. Which is, I would say the foundation of revenue management. Uh, but there's really multiple tiers, I think, like, and really starting with the property itself. Right. Like when we, even starting when we're looking, when we purchase a property, like right off the bat, based on where that property is located, what characteristics it has.

what amenities or proximities to place certain desirable locations. Like it already falls right into a certain revenue tier for that area. Like we already know what it's a range of what it's capable of based on the property itself. Then kind of tier two is so, you know, and we make some decisions, we add certain amenities or we, you know, work on the decor of the property. And that kind of sets the foundation, I think, for our revenue management. Then there's our marketing.

right on our OTAs, like good quality pictures, listing description, what good does it do us to be in a great location or have great amenities if we're not capturing those and marketing them effectively, right? And then finally is the pricing strategy, which we tend to focus on talk the most, but what are the good as a pricing strategy if it's dead on, but we have a lousy listing that doesn't appeal to potential guests, like.

Yes, we can still make money, but we're dropping our prices just because of the listing. So I think it's so important to note, like all those are part of revenue management, right?

Jasper Ribbers (06:46.274)
Dude, a hundred percent. Um, it's, it's so much more than pricing, right? Cause in the end of the day, the way I think about revenue management is like everything that we do in order to maximize the revenue on a property, right? It goes into operations, right? For example, you know, we need five star reviews, right? We need super host status, right? These are things that will drive more revenue. Um,

And so we need operations to be dialed in, right? How we, what kind of messages do we send out? How do we communicate with our guests, right? How do we set expectations? Right. Um, there's operational limitations too, maybe with the cleanings and can we do one night stays, can we take last minute bookings, right? There's a lot of operational aspects to it. There's distribution. What channels are we going to be on? Are we going to be, you know, charging the same prices over different platforms? How, what's our direct booking?

strategy? Are we giving discounts to our past guests? You know, marketing, as you mentioned, it's the listings. Who's our guest avatar, right? And what kind of, to your point, like, what kind of amenities can we maybe add that will give us a really good ROI? And I'm not necessarily talking about like, okay, let's, you know, let's build out a pool. Let's invest

Jasper Ribbers (08:05.35)
Um, you know, maybe we get a few extra towels or maybe we provide salt and pepper and oil or something, you know, and it could be little things too. But yeah, to your point, it's revenue management has its tentacles in every part of the business. Right. So, um, so yeah, I think I love that you mentioned that because I think that's one of the biggest misconceptions that people have, uh, the people that join our core schedule mastery. And now we, we launched our revenue management service. So we have a handful of clients there.

And most people seem to think that we're just going to set prices in price laps. That's not the case. Like we're going to, we're going to analyze the entire business and see where are opportunities to drive additional revenue, uh, to the portfolio. And the end of the day, that's, that's what it's all about. And especially, you know, to your point as well, like, you know, your livelihood depends on Airbnb increasing your revenue by 10% or 15%, right?

Those are dollars that go straight into your pockets unless you're managing, but for the properties that you own, right? That's additional money that goes right into your pocket. And that can make a big difference on, you know, on the, for a lifestyle and for a business and everything. Right. So what, what are some, um, what, what would you say were the, what are the things that kind of have had the most impact on, on your revenue management strategy?

Mike Savage (09:30.505)
Yeah, yeah. And I'll add, we too have shifted our focus to the revenue management, just seeing the importance of it. Our business synergy stays. We do full-fledged property management for short-term rentals here in the Charleston market and surrounding areas. But we're actually fine-tuning and shifting our focus to that revenue management and specifically focusing on

full management with those properties that we can feel we can really make a difference and maximize revenue for them. One of the biggest things I've learned, I actually, I just thought of this morning, Jasper, this analogy, I'm going to share it with you. You can use it on some of your potential revenue management clients, because it's the lesson that I learned, right? Like I've been using price labs for several years and I know other people use Wheelhouse and Beyond Pricing. I personally like price labs. I know that's the one you like as well. And without a doubt, right? Like it definitely helped.

my revenue management, it saved me a lot of time and energy, but I kind of liken it to like a football game, right? Or a football team and like, you've got your quarterback, right? And they can get up to the line of scrimmage and they can see what the defense is doing and they can make a lot of adjustments for you, right? Like they're going to shift some blockers, maybe blocking assignments, they might send a receiver in a different road or they're going to change some things up. Like they're that real time, you know, game manager making those small calls and…

changes. That's my price labs to me, right? Like that's what price labs can do for us. It's analyzing the market in real time. It's seeing what's happening and it's making those nice little adjustments for us, saving us a ton of time and energy so that we don't have to go in and change every single day. But at the end of the day, right? Like what is that quarterback, even a great quarterback, without a head coach or an offensive coordinator who's on the sidelines, up in the box?

They have a much more high level view of everything that's happening. They bring a lot more experience, right? Like they bring a lot of experience and knowledge that the quarterback might not have. Um, you know, you're not going to win a lot of football games without a coach. Um, and that's just kind of how I like him with the revenue management and with, with our pricing tools that we use. I think too many people think that the pricing tool is the revenue management to your point. Um, and so it's really been a lot about educating people, you know, about, Hey, this is what revenue management.

Mike Savage (11:54.369)
really is because people just don't understand that.

Jasper Ribbers (12:06.878)
Yeah, yeah, 100%. Like the pricing tool is important, but it's a tool, right? I think there's still people out there who think they have to choose between setting prices manually using your knowledge of the markets and your experience and using your knowledge of your guests and your properties. Or you can give it to the algorithm, and then the algorithm is going to do it for you. That's not the case, right?

Uh, you, you use that pricing tools and extension of yourself, right? So it's like you plus the pricing tool together as a team, you know, you can maximize your revenue and you can do better than just the tool or just the, you know, using your own knowledge. Right. So yeah, I think that's another very important, uh, you know, misconception uh, that that's out there thinking that revenue management is simply signing up for a pricing tool and letting the pricing tool run.

uh, your, your pricing, right? So yeah, I appreciate you bringing that up. Um, do you have some, any like particular, like kind of concrete strategies that you've applied recently that worked out well for you?

Mike Savage (13:06.057)
Yep.

Mike Savage (13:12.183)
Yeah.

Yeah, actually, there's one thing from this morning that I was going to share, and it's kind of to a bigger point as well, like something that I've really learned, you know, I want to give some credit to you Jasper for cashflow mastery. Like, right. You teach a lot of specific, you know, tips and tricks and things we can do. Um, but honestly, for me personally, those have been helpful, but what's, what's bigger is really learning to think like a revenue manager. Like I feel like I've.

been able to go out and figure out a lot of stuff. I've shared a few things with you that I've been doing. That's pretty awesome, right? Like there's no better compliment, I think, for a teacher than like for me to be able to go out and figure out things that maybe you haven't even seen yet or figured out how to do. One of the things that I've come to look at revenue management as is like, we can kind of go out and architect our desired outcome to a degree, right? Like before it was just such a…

mindset of like, you know, we throw our pricing out there and what comes to us. And of course we try to price reasonably. And, um, but like, we can really create, you know, I think an important point. We, we talk about restrictions, right? Like in the S so we're heading into the summer season here in the Charleston area, we're starting to book for June, July. Um, we're seeing about 20 to 20 to 30% of the markets been booked so far.

I have a few bookings scattered in there, not too many, right? Cause I don't want to be the first booked. Um, we're heading into peak season. I know that just about everybody's going to book up. So those, those ones that are underpriced, they're the ones that are getting booked right now. Um, but I, I've started to look at the calendar specifically for those June, July months, and what I noticed, which was pretty interesting is like our weekends are booked at 88 to 92%, right? Like they're pretty much fully booked. Um, weekdays, like Sunday through Thursday.

Mike Savage (15:05.673)
And this is historically, this is looking at last year where the market ended. We were looking at about 46 to 66% weekdays. What I took from that, right, is like on the weekends, we're going to get booked. It's a matter of are we going to maximize that ADR, that average daily rate, to help maximize our revenue. On the weekdays, there's a little more opportunity there to grow our revenue through occupancy, right?

The market is going to give us out of those five days, Sunday through Thursday, the market's going to give us maybe two to three days booked based on market averages. So what I've started to look at is like, hey, wait a minute. I want to make sure those weekdays get booked, but I also don't want to discount those weekends. I know those are going to get booked. So even for like a seven night stay, the weekly discount, I'm not a big fan of discounting that Friday, Saturday night if they're going to book.

you know, Monday through Sunday. So I've started to do a lot with the Airbnb rule sets. And that's been a powerful tool where we can apply a long state discount for only the days that I want to, right? So I'm applying those to Sunday through Thursday in those months, May, June, July, not applying it to the weekends and really incentivizing.

Jasper Ribbers (16:23.159)
Mm-hmm.

Mike Savage (16:30.669)
some of those longer bookings. So like just this morning, one came in from one of our properties, a Sunday through Thursday booking. Can I credit it to that? I don't know, but what I know is that, because we also only use a two night minimum stay for those weekdays, which is a little risky, right? Like we don't really want a two night booking, but we do want all those eyes and all those click throughs on our listings. We want that traffic to boost our SEO.

But we don't really necessarily want that two night booking. It'll happen and we'll take them when they do. So again, this is how we manage that, right? Like if they book, we started at four nights. So two and three night booking, they're not getting any discount. They're paying our full premium price for those weekdays. Four nights, we've got it at 10% discount. Five nights, I think we're at about 12% discount. And so again, coincidentally, like we're seeing a lot of these Sunday through Thursday bookings coming in.

you know, Monday through Thursday, Sunday through Wednesday, like we're getting these four or five night bookings, filling up those weekdays beyond what we know we would probably typically book them in terms of occupancy. We're booking them further out. So yes, we're giving a slight discount. We're also avoiding those last minute discounting that's gonna come into effect once we get into June. Yet we're still preserving those weekends because we know that two night weekend, that Friday, Saturday is gonna book up all day long and.

Jasper Ribbers (17:41.704)
Mm-hmm.

Jasper Ribbers (17:51.328)
Mm.

Mike Savage (17:57.441)
Our price is probably going to go up on that actually as we get closer and closer.

Jasper Ribbers (18:02.574)
Right. Yeah. I think, you know, the strategy that a lot of hosts use is they will just charge higher prices further out, like right. The far out premium. And then if things don't get booked up, they'll start applying last minute discounts. Right. And, you know, a lot of, I think a lot of hosts are starting to kind of realize that that's not necessarily the best strategy.

because especially when the market is somewhat weak, scrambling for last minute bookings by just keep lowering your prices as you get closer to check-in, well, sometimes you'll have to discount it so much in order to still get bookings, which is not necessarily the best strategy. I like what you were saying where it's like, hey, let's look at, let's look.

further into the future and let's think about like, what are the days that are going to be harder to book? And let's make it attractive for people right now to book those days so we don't have to scramble last minute, right? And to your point, you know, if the weekdays are harder to book, you know, adding a discount there, you know, a couple months in advance will help you in multiple ways, right? First of all, Airbnb sees that you're offering a discount. If everybody else is offering a premium,

premium for further out bookings. And you're the one who's saying like, hey, you know what? If you want to book these days, three months in advance, I'll give you a small discount. Airbnb is going to show your listings more to users that are looking to book in the future, right? So I think that's a great strategy, Rick, really thinking ahead and not just waiting last minute to scramble and try to fill up those weekdays.

Mike Savage (19:54.325)
Yeah, a hundred percent. I think your point is great too. I know we've talked about this, you know, those promotions and incentives on Airbnb. It's just such a big part of getting bookings and

Jasper Ribbers (20:03.939)
Uh, hey Mike, I think you've used this.

Mike Savage (20:09.957)
Can you hear me?

Jasper Ribbers (20:14.31)
Yeah, I think there's a little bit of a lag. I can hear you now.

Mike Savage (20:17.481)
I've had a lag on my end a little bit, yeah. Okay. I've had a lag, like hearing your responses a little bit too.

Jasper Ribbers (20:26.638)
Oh, okay. No worries. This, this records locally. Um, so the quality will be fine. Um, if you want to just pick it up and just kind of respond to what I was just talking about and then we'll manage it that way, I'll wait for you to finish and then I'll, I'll speak again and we can kind of go back forth.

Mike Savage (20:26.969)
Just continue on.

Mike Savage (20:51.249)
Yeah, to your point, Jasper, I think it's huge to note just what an impact those incentives that we can use, especially on Airbnb, to get those bookings into have Airbnb help promote our listings even more. And I think that's an overlooked part of revenue management as well. Again, we think about the pricing, but it's also kind of this game that we're playing to…

achieve the pricing that we want, but also maximize the marketing and maximize the number of people that are seeing. And that's why, again, we have to think carefully. We might prefer that three, four, five night booking during peak season. But if we put that restriction in, we're not getting those guests to see our listing that are looking for two nights or one night. We want those guests to see our listings and

Jasper Ribbers (21:45.067)
Mm-hmm.

Mike Savage (21:48.505)
that activity to us, we just don't want the bookings. So that's where we're really being very strategic in removing as many restrictions as possible, but then creating the incentives to get the right people with the right bookings that we want to ultimately book our properties.

Jasper Ribbers (22:09.474)
Yeah, and there's so much that you can do these days, right? With the pricing tool, the pricing tools offer so much flexibility to create all sorts of strategies, right? You can use adjacent day pricing, right? So if somebody books, let's say you have a minimum night of three or four nights for your peak periods of the year.

But then if somebody wants to book like a two night stay that's adjacent to another booking, then you might wanna allow that, right? Cause it doesn't create a gap. Now, you're using the Airbnb rule sets. That's where you can get really, really granular on your strategy, right? You can pretty much like customize anything you want in using those rule sets. The only, I guess the one thing to keep in mind is though, like how do you scale that, right?

Cause if you have like a handful of listings, then you know, you can do that. You can get really, really nitty gritty and add all these types of rule sets and discounts and whatnot. But what if you have like a hundred listings, you know, how, how could you scale that strategy over larger portfolios?

Mike Savage (23:20.521)
Yeah, true. I mean, that's a great point. That's where obviously as much as you can do from your price labs or whatever pricing tool, right? Like that's, that's always optimal because that's your easiest and quickest way to apply across. I do like that about the Airbnb rule sets is, you know, again, we can get in that multi-calendar view, see all of our listings, and we can apply that rule set universally across multiple listings pretty quickly. So it's not like.

the custom promotions, right, where we have to go into each listing, pick specific days for that listing. We do that literally one listing at a time. And those can be incredibly powerful, as you know, right? There's a time and place for them, but they're not something that we can execute at scale. Whereas, you know, our price labs settings, we can. And also I would say the Airbnb as well, we can.

do a lot over multiple properties at one time.

Jasper Ribbers (24:25.05)
Mm-hmm. Yeah, yeah, for sure. Yeah, that's a good point. With the rule sets, you can create whatever rule you want, and you can apply it to as many listings as you want. But I think also, like, what I'm focused on right now is, as I'm onboarding more portfolios through our revenue management service, I'm building out systems that I can give to team members in the future.

uh, to do some of the heavy lifting, uh, for me. Right. So is, you know, like revenue management is really more of an art than a science. Right. It's like, it's hard to define exact rules of like what, you know, what you think is optimal and like, it's a lot, there's some like feeling that comes into it, some good feeling and like some, just some experience, um, that you have. Right. That you can apply.

But I'm thinking like, Hey, what's, what's systemizable? Like, what are some things in revenue management where we can say, okay, you know, step one, do this step to do this, look at this data, and then based on that, make this decision, right? So that's kind of what I'm focused on right now is like, how can we, how can we put whatever we do and what we've learned, how we can, how can we put that in a process so we could potentially hire like a virtual assistant to take over some of the work for us.

Mike Savage (25:43.605)
Yeah, a hundred percent. And that's, you know, yep. Yeah, admittedly, you know, that's what we're right, learning through cashflow mastery right now as well is kind of how to do that. I've come so far with the revenue management, still plenty of ways to go. And that's how I kind of describe to people right now. Like right now, I feel like I'm almost like a mad scientist, right? Like just trying all these different things and some things work and some things don't. We're in the process now of kind of, like you said, picking out those things that are clearly very effective.

And then we identify, okay, how can we now systematize those and make them so we can easily replicate them at scale?

Jasper Ribbers (26:41.534)
Yeah, 100%. Um, cool, man. Well, I appreciate you, uh, sharing your, your knowledge and your journey here in the podcast, uh, you, you know, appreciate you going through all, pretty much all of our programs. Uh, which is, uh, which is amazing. It's amazing to see, see your growth and, uh, appreciate your dedication, uh, to our programs as well. Um, before we wrap it up, uh, why don't you let people know, uh, where they can find you if they want to stay in one of their units or maybe people who, uh,

are interested in property management in South Carolina and Charleston. Where can they reach out to you?

Mike Savage (27:18.901)
Yeah, absolutely. We've got a website, Syne Again, Syne We've got all of our properties on there and we also do have our services in terms of revenue management as well as our full short-term rental management as well. Happy to, you know, feel free to reach out, happy to answer any questions or help out as best we can. We love what we do.

Jasper Ribbers (27:44.134)
Awesome. So synergy stays local.com. If you want to get in touch with Mike, check it out online. There's a contact form so you can get a, get a hold of him. And with that said, I hope you enjoyed this podcast and Mike, thanks again for joining and we will be back with another one soon. See you then.

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