Airlines and hotel chains employ entire teams to determine what their pricing and booking settings should be to maximize revenue. But most short-term rental (STR) hosts don’t have access to the same kind of data, nor do we have the resources to hire world-class data scientists. So, what can we do make more from the properties we manage?
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Co-founders Andrew McConnel and Cliff Johnson are the CEO and CCO of Rented, the premier provider of full-service revenue management for professional vacation rental managers, best serving Airbnb hosts with a portfolio of 10 to 1,000 listings. The Rented team is also in the process of launching the first-of-its-kind revenue management software, sharing the technology they use as a standalone product for STR businesses that want to keep their revenue management discipline in-house.
On this episode of Get Paid for Your Pad, Cliff and Andrew join me to discuss what differentiates revenue management strategy from pricing strategy, explaining why vacation rentals are more difficult to price than other commodities. They weigh in on how to set fees for your STR, offering insight on why they don’t recommend charging for extra guests and what you might do as an alternative. Listen in for Andrew and Cliff’s view on pricing with a dynamic algorithm versus a host who knows the market and learn how to maximize your STR revenue—with a little help from the team at Rented!
What differentiates revenue management strategy from pricing
- Takes ancillary factors into account (e.g.: # of reviews)
- Price = number, revenue management = discipline
How Andrew and Cliff think about setting cleaning fees
- Consider demand for property and ownership structure
- Include incremental costs but don’t try to recover fixed costs
What hosts should think about as they set STR fees
- Are you making money?
- Is the homeowner earning enough to stay?
- Will the guest feel nickel and dimed?
Why Cliff and Andrew don’t recommend charging for extra guests
- Creates incentive for guests to lie
- Potential benefit in terms of revenue sharing, email list
What Andrew and Cliff suggest as an alternative to extra guest fees
- List smaller version of property (i.e.: 2BR option within 6BR)
- Make available in off-season or for midweek stays
Pricing with a dynamic algorithm vs. a host who knows the market
- Depends on quality of data, competence of person
- Combine good data with revenue analyst for best results
What listings are most difficult to automate pricing
- Unique properties in small markets (i.e.: Spanish castle)
- Algorithm shows seasonality but needs manual intervention