Revenue Management Strategies for Airbnb Hosts (Ep 588)

In this episode of “Get Paid for Your Pad,” I had the opportunity to dive deep into the world of pricing and revenue management for vacation rental properties with Doug Truitt. We covered a range of important topics that every host should consider when setting their property's rates and managing their bookings.

One key takeaway from our conversation is the importance of setting the right base price for your listing. Doug emphasized that while looking at what competitors are charging can be a good starting point, it's essential to recognize that each listing is unique. Your property's base price should consider factors like seasonality, weekdays versus weekends, and the amenities you offer.

We also discussed the significance of understanding booking patterns. Doug highlighted the 30-day window before arrival as a critical period to monitor. If your occupancy isn't on track within this timeframe, it's time to assess your strategy.

When it comes to adjusting prices, Doug recommended a strategic approach. Rather than making drastic changes, consider small, incremental adjustments to gauge their impact. You can also experiment with minimum length of stay restrictions to optimize revenue.

Doug emphasized that your brand's reputation plays a crucial role. While lowering prices may attract more bookings, it's essential to strike a balance to avoid attracting lower-quality guests. Your property's reviews and overall guest experience should remain a top priority.

Additionally, Doug mentioned the significance of post-booking strategies, including nurturing guests to become repeat customers. He stressed the importance of minimizing costs associated with third-party platforms and maximizing direct bookings.

If you're interested in learning more about these pricing strategies and revenue management, Doug recommended checking out their podcast, RevBytes ,available on YouTube. You can also visit Roamy's website for more information or reach out to Doug directly at doug@romey.com.

In summary, getting your pricing right for your vacation rental property requires a thoughtful approach that considers various factors, including your property's uniqueness, booking patterns, and brand reputation. Incremental adjustments, along with post-booking strategies, can help you maximize your revenue and build a loyal customer base.

Jasper Ribbers:
Welcome back to Get Paid for Your Pad, episode 588. Today's guest is Doug Truitt. He's the head of commercial at Aromi. And we are going to talk about revenue management today. And Doug is a real expert. He's a veteran in the short-term rental, or the vacation rental industry. I think he has about 20 years of experience, just been taking a sneak peek at his LinkedIn profiles. Learned a little bit there. But yeah, Dirk, welcome to the show.

Doug Truitt:
Yeah, thanks for having me. I appreciate it. This is going to be a fun, fun topic to talk about and get into, uh, and did some details.

Jasper Ribbers:
Yeah, absolutely. Yeah. So we, as we were talking about before we started recording, you know, the revenue management side is, is like you mentioned, it's a kind of an underserved a topic in our industry, a lot of hosts struggle with, uh, you know, getting a strategy in place and a lot of hosts are kind of overwhelmed with the one, the thousands of parameters that you can set in the pricing tools. And it's, uh, it's definitely a big challenge. So we're going to, uh, you know, to see what we can do to help out here today. But I would love to talk a little bit about Roamy before we get into it, because I was looking

Doug Truitt:
Yeah.

Jasper Ribbers:
at your website and it definitely looks like a really cool brand. There's one phrase that really got me when I was looking at it, saying that the vision for the company, which was founded 2016, was that travelers shouldn't have… the choice between two flawed options, which is number one, a cramped hotel space and number two, an inconsistent vacation rental experience. So I'd love for you to give us a quick background of yourself and also tell us a little bit more about the Roamy brand.

Doug Truitt:
Yeah, yeah, sure. So I've been in the vacation rental space for about seven, eight years total in hyper-focused in the vacation rental space. Prior to that, I had about 15 to 18 years in the hotel space is where I kind of got my hospitality roots. It was in the hotel space. And the reality with the difference between a hotel space and the vacation space that quickly was learned is, you know, there are lots of wins on both sides of those types of accommodations. And I think from what, you know, the founders at Romy, Andreas Giovanni and also Brandy Canale and Iskander, they founded the company on the nature of that people shouldn't have to choose between. uh, you know, the flawed options that happen and the flawed experiences in the hotel space as well as a vacation rental space, right? Um, and it's not to say that they're respectively doing things terribly wrong. It's just more so that kind of what you and I were talking about before we started recording, which is the fact that. You know, the society of travelers are softly speaking, louder and louder, both in reviews, as well as what they are wanting and wanting to spend their money on, and they want something that's going to have the best of both worlds. um, the consistency of a hotel and the cleanliness standard and really good branding and, and really confidence in what you purchase. Um, but also the space and the freedom and the, the ability to have more group and intimate connections with your, your family and friends, um, from a vacation rental side of it. So really the way I like to think of it is it, it's the best of both worlds. It's, it's, uh, the best of vacation rental is the best of hotels, but none of their flaws. Um, and so that's, that's really what we're striving to do at Roamy is inspire human connection by providing something that you don't have to try to kind of force it to work for your vacation or what you're trying to go after something that just feels natural, feels right. And it just feels good for you and your, your family and your groups. Um,

Jasper Ribbers:
Mm-hmm.

Doug Truitt:
group travel is definitely on the rise in a lot of ways. Um, and we see it a lot by having, you know, larger options for people. in terms of occupancy. Say you have 12 people that want to go down to New Orleans and have a great time enjoying hurricanes, hurricane drinks, and all that kind of stuff walking about in the CBD or in the French Quarter. Those kinds of moments and experiences transcend for years and years. But it also works too for nomadic travelers trying to work in a new place for a little bit of time and have a place that feels like home. but doesn't feel like a hotel where I have to go and eat the, you know, moderately okay breakfast every morning or, you know, uh, have to pay really bad high prices for a dinner that's not that great or something. So, yeah,

Jasper Ribbers:
Yep.

Doug Truitt:
that's kind of, that's kind of Romy. That's a, that's myself, that's Romy. And I think what we're, what we're after really want to inspire community connection and provide something for people. Um, one of the things that we pride ourselves on currently, uh, to kind of wrap this part up was just that, you know, hotels, obviously you get your room cleaned. You get those things happen for you and you're not paying exorbitant amounts of cleaning fees or any of that kind of stuff. And then vacation rentals, they get this big thing of cleaning fees is a hot topic in the space. But then a lot of the vacation rentals on some of those flaws, they ask you to take out the trash and clean the dishes and do all these things to leave. And you're like, what, I paid a cleaning fee and a really high cleaning fee or whatever it is. So like our belief on that side is that, you know, just go. You don't need to clean. You don't need to do all these extra things for our product. When you purchase it, you're purchasing a vacation in a time with your family or loved ones or business or whatever you're doing. And it's like, you shouldn't have to have this stress and anxiety of trying to get to the airport or your car or whatever it is you're doing to get out of the place. It's like, just go. You just go. And so that's one of the big things that we've been trying to focus on.

Jasper Ribbers:
Yeah, hitting the nail on the hat when it comes to that was just a couple months ago. I was in Mexico actually where we had exactly that situation where we had to leave. And then suddenly I realized like, oh, look at, check out the instructions. And it's like,

Doug Truitt:
Yeah.

Jasper Ribbers:
you know, place the garbage here. Do, you know, do the floors, do this, do that. And I was just, oh, no, what do we do?

Doug Truitt:
And you're also kind of like, I paid money. I paid for this, I thought. But then I'm supposed to do it.

Jasper Ribbers:
I know, right? And that's exactly, that's exactly the challenge. I was just speaking with a buddy of mine who came over. He's a, he's an executive at a Fortune 500 company and he travels a lot, right?

Doug Truitt:
Yeah.

Jasper Ribbers:
And I was talking to him about this and he spends a lot of money on travel and vacations and everything, but he, he doesn't want to stay at Airbnb for this exact reason. He's like, yeah, one time, one time, like the host isn't there and, and I have to wait and, or I have to do this. I have to do that. Like, I never know what to expect. I just don't want to deal with it. I'm just booking to Marriott because I know what they get. I know exactly what to expect. If I have a problem, I call a number and somebody helps me. And, you know, I, so I think there's a huge. There's a huge gap as you mentioned. And yeah, it's very cool to see that there's more and more brands now, you know, coming into the space. I mentioned Rwanda, which is one of my favorites and obviously our own brand that we're launching in a couple of weeks, FreeWild is we're aiming to solve this problem, not just that problem, but you know, some

Doug Truitt:
others

Jasper Ribbers:
other problems

Doug Truitt:
as well.

Jasper Ribbers:
too. But,

Doug Truitt:
That's exciting.

Jasper Ribbers:
but yeah, it's super cool. And then for, if people want to check out the Roami it's R-O-A-M-I. So Roami.com. Check it out. It definitely looks like a great brand. But yeah, let's dive into the topic for today before

Doug Truitt:
Yeah.

Jasper Ribbers:
we're at the end of this podcast without talking about it. Revenue management. I feel like a lot of people don't really have a clear idea of what revenue management really is. Some people think it's pricing. Some people think it's like everything from marketing to distribution to pricing and operations even. So what's your… What would your definition of revenue management be?

Doug Truitt:
Yeah, so my definition of revenue management is, a lot of folks have probably heard this before, but it's selling the right product to the right customer at the right time. But I also add in another layer to that, which is on the right channel. And mostly because I believe that, you know, I've said this a lot before, but it doesn't matter if I set my rates at $500 or $100 a night, if it's not seen. It doesn't matter. It's not going to get booked. So there's a distribution component to it. So it's gotta be the right channel to, you know, some people prefer to go to Airbnb to purchase their product. Some people prefer booking.com. Some people prefer Expedia or Verbo or Hopper or, you know, Marriott or all these other various, you know, channels you can do it on. So they have a, they have their own behavior and following and what people like to see. So that is a very considerable piece within the revenue management definition of philosophy that I believe in. So.

Jasper Ribbers:
Would you say it overlaps with marketing? And the reason that I'm asking this is I was on a call actually yesterday with one of our clients and we were looking at the pricing and we noticed that a couple units were underperforming,

Doug Truitt:
Hmm.

Jasper Ribbers:
underperforming a lot. And so we looked at the prices and compared to the market and everything, and it didn't seem off at all until we actually looked at the listings and we realized that… This unit, this particular unit was in a, is in a very natural area.

Doug Truitt:
Hmm.

Jasper Ribbers:
And this host had only the first 20 photos or so were only photos of the inside, so the living room and the bedroom. And then we looked at all our listings that performed better and they were all highlighting the natural environment, the lake, all the stuff that you can do outdoors. And so I realized, okay, well, this is probably not a pricing problem. It's more of a marketing problem. Right. So how, how does that kind of overlap?

Doug Truitt:
Yeah, I think it overlaps in the way that, you know, knowing your customer, knowing your audience, knowing the target of people that you're actually trying to attract and who are likely to convert on your product. And then leveraging the power of that SEO or SEM that's being spent from those channels that you're distributing to, to actually appeal to that audience as well. To your point in this situation, a natural environment or natural kind of type listing. Definitely you'd want to be able to show the environment where the property is located, like actually see the impact of it is. But it might be a consideration on Airbnb, that Airbnb most of the time they say that their customers like to see the first image be something that is a whole unit shot, showing as much of it as possible, even potentially showing humans or people interacting. inside there. They say that seems to get the most, you know, eyeballs or looks from a marketing perspective, which would be your impressions. Um, and then you need that organic funnel to be from the impressions to the clicks, to get right into the listing, to the view, and then carry that momentum forward into getting that conversion. Um, so to that point, if it's mostly focused on all the inside stuff, but yet the most valuable piece about that product is the location it's at or the environment it's in. And the natural surroundings, it's worth layering a few of those photos. I think one of the strategies I've always liked to do is to try and give a healthy mix within the first five to eight photos that gives you a good overall summary of what the property is and what it is, because the attention span of people, from a marketing perspective, the attention span of people gets shorter and shorter as they flip through photos. So if you can capture their interest to keep going through the photo set that keeps their interest higher and hopefully gets better conversion in that way. Um, so that's a, that's a great find that you had on that, but it's a very real thing that connects marketing as well as distribution with revenue management, because it doesn't matter what you set your prices at, if it's not seen, or it's not interesting enough to get to that place. And when you look at

Jasper Ribbers:
Thanks

Doug Truitt:
the

Jasper Ribbers:
for

Doug Truitt:
funnel

Jasper Ribbers:
watching.

Doug Truitt:
and I'll give a small tangent here, but when you look at the funnel of how people purchase things, They're not considering price as the first thing that makes it their way to purchase something. The first thing is what is that first image? What are the dates that I'm looking for? And where is the location I'm looking for? Then they see the picture. Then they get their interest piqued. They click it. Yes, there may be some pricing in the search results that are sitting there, but they click that listing to go in to see more about it and see what it's about. What's the description? What's the title? What's the rest of the images? And then they get to saying, Okay, I'm making a financial decision now to look at the checkout cart and the total price and all those aspects. But it's a common misconception, in my opinion, that people think that price is the first thing that people consider when it's actually closer to the back half of the funnel.

Jasper Ribbers:
Yeah, that makes sense. Yeah. So I guess, you know, one, one takeaway for everybody who's listening is, because I see a lot of those do this, if they, if they don't get the occupancy, they just keep lowering the prices, right?

Doug Truitt:
Mm-hmm.

Jasper Ribbers:
Where it's like, hey, before you lower those prices, let's, let's look and see if there's something else that we have to fix, right? It might

Doug Truitt:
Yes.

Jasper Ribbers:
not be the price might not be the problem, actually, right? So

Doug Truitt:
Number

Jasper Ribbers:
that's,

Doug Truitt:
one

Jasper Ribbers:
I think

Doug Truitt:
thing

Jasper Ribbers:
that's

Doug Truitt:
you should

Jasper Ribbers:
very

Doug Truitt:
do

Jasper Ribbers:
important.

Doug Truitt:
is, you should number one consider, is your listing live and bookable? Invest

Jasper Ribbers:
Right.

Doug Truitt:
your resources into understanding if your listings are live and bookable. Can it be accessed in an incognito window on your computer that you're not cashed to? Can people see it? Can it be booked? And is the dates available? And then navigate from there what's happening.

Jasper Ribbers:
Right. Yeah. Let's see. Let's put ourselves in the shoes of a new host.

Doug Truitt:
Sure.

Jasper Ribbers:
We have 10 listings. We just started. And we just heard on a podcast or a blog post, we read, hey, we should be using a pricing algorithm. So we sign up for one of the tools. We don't pricing, wheelhouse, or price labs, whatever it is. We go in there and we see a million graphs, a million numbers, a million parameters. And we are not a numbers guy or numbers girl necessarily. We feel overwhelmed. What, what can we, what do we do? What did we start? What did we focus on?

Doug Truitt:
Yeah, that's, it's really tough, right? Um, you know, John, uh, day relay and I, um, we do a podcast, um, called RevBytes. And, and some of the things that we talk about in that component is that revenue management in general is there's a lot of technical piece to it, but there is a lot of art to it as well. There's a lot of like feeling and understanding of what you're seeing and what you're dealing with. And I can only imagine for some people who are not experienced in it or who are kind of dipping their toes, finally starting to get into it, that it's very intimidating to see some of these tools and levers and all these things that these revenue management softwares are putting out there. And even the PMSs are bringing a lot of this stuff into play too. And the biggest things that I would say you need to focus on with any of these kind of dynamic pricing tools and systems is really just take a good tour of it. Give dedicated time to try and understand it and learn it and look at the info pieces. Don't be afraid to ask questions. There are no dumb questions when it comes to really anything about the hospitality space. You need to really uncover every rock and understand every component. I think the simplest thing that people could do once they get into their revenue management system or software is really just kind of start looking at CompSet features. Most of the. the big guys like Wheelhouse and Pricelabs, they have CompSet features within their platform that allows you to see what other people are doing in your physical area. Once you've gotten that listing up there and you have the address located in there, you can take a scope and look at all the other properties by bedroom types. You can look at different areas to select the CompSets and see what other people are pricing at or doing. Not that you need to price what exactly everybody else is doing, but get really a good ballpark of what everybody else is doing in that area. to help narrow your decision on what you want to do. And then to really start with building out those base rates and figuring out, and those platforms will help you do that too in some automated ways, but tugging and playing those base rates are gonna come at the tune of figuring out your product, the customer you're trying to sell to, what they're looking for and all those pieces that determine what you want to do. But then the next thing after that would be is really looking at pickup. looking at the reservations you've already got on the books, what you've been getting, what seems to be the best velocity or the amount of bookings that are coming in at the most optimal rate that kind of looks like it, and then trusting your gut as well, right? Like I said, it's that art piece, feeling like this just doesn't feel quite right. I feel like I should be getting more for this. Play with it, watch it like a hawk and see if it picks up, and if it doesn't pick up, you need to make adjustments. because obviously we're dealing in a world of expiring inventory, right? It's not a can of crushed tomatoes that if it doesn't sell, I can put it back up on the shelf tomorrow. There

Jasper Ribbers:
Thanks

Doug Truitt:
is an

Jasper Ribbers:
for

Doug Truitt:
expiration

Jasper Ribbers:
watching!

Doug Truitt:
date. So.

Jasper Ribbers:
Can you explain those terms like pick up and velocity?

Doug Truitt:
Sure. So, pick up would be essentially the reservations that you're getting. So, looking at like the creation date basically of bookings. So, if I'm looking at a stay date of say October, I wanna look at the velocity meaning on the creation date as dates progress, how many bookings am I getting for those stay dates, right? As it's happening. Is it a velocity of a lot? at one point in time, meaning maybe there was a booking window, which booking window is the creation date, the difference in date between the creation date and the arrival date. So it's like, do I have majority of my people booking 60 days in advance or they booking 30 days in advance and utilizing that kind of component and velocity to say how many of those bookings am I getting at certain timeframes. Being able to look at that historically too, if you have some historical data will help you influence you. by looking at last year's and saying, did I pick up a lot of revenue or bookings for this stay date during this timeframe? And if I did, why am I not getting it right now, asking those questions? So that would be velocity and pick up. And then I layered in their booking window as well. A lot of folks in the community know it as DBA or days before arrival as well in that kind of nomenclature as well.

Jasper Ribbers:
Right. So you mentioned a couple of things here. So first of all, like the base prices, I mean, when you open up a pricing app, it's pretty much the first thing you have to determine, right? Is

Doug Truitt:
Mm-hmm.

Jasper Ribbers:
what's my base price. Now you mentioned the good place to start is kind of looking at what are the competitors with similar listings are charging. Not necessarily means that you have to charge the exact same. Because in the end of the day, every listing is unique, right?

Doug Truitt:
Correct.

Jasper Ribbers:
So that's a good place to start. Um, and then, and then looking essentially what you're, what you're saying is we have to understand like, when do people typically book? Uh, because if we understand that, then we know 30 days out, we know that, Hey, you know, about half of the, the people have booked by now,

Doug Truitt:
Right.

Jasper Ribbers:
right? So we should be about half of the occupancy that we're targeting. We should have that, right? If we don't have that, then we should, uh, look, look. look at their listings and see like, okay, is there something wrong? You know, look at some other listings. Are other people not getting the same amount of bookings right now? And then potentially adjust prices or adjust the marketing or distribution. But if we, if we were to adjust prices, is it as simple as like, if we're behind, let me, let's, let me say the, I like to call it the booking curve. Uh, that's another thing with revenue management is so much terminology that it's easy

Doug Truitt:
Yeah.

Jasper Ribbers:
to get confused. But if we're kind of behind, if we feel like we don't have the amount of bookings that we should have, is it as simple as just lowering the price and then do we lower the price temporarily for the next 30, 60 days or do we just jack the base price down?

Doug Truitt:
Yeah, that's a great question. And in a lot of ways, a lot of revenue managers sometimes, excuse me, feel the pressure of, I really only have a couple of levers I can pull, which is I can raise the rates or I can lower the rates. But there are some combinations with what we discussed with the marketing and distribution aspect. I would say that there's a few things. One, there's minimum length of stay settings, right, that you need to think about. Are you putting a three night minimum on a weekend? Meaning forcing people that if they want to book on a Friday, they're gonna have to stay all the way through and check out on Monday. Or are you doing it on a Thursday? And are you doing it at certain intervals where it's like going back to that days before arrival or that booking window, it's like, are you putting a three night minimum, 90 days in advance for people? And then when you cross that threshold, are you adjusting it to a two night minimum if you're not getting the bookings? So. That's a lever in itself where it's like, you may not need to lower your rate, you just need to lower your restrictions to preventing people from booking. So that's one aspect. The other aspect would be, really taking a look at kind of what you said earlier, which is like, before you go and adjust price, go through that triage kind of methodology. Am I live and bookable? Can I find everything? Can I pick a random date? and make sure that those rates are aligning with what I had as a strategy compared to where my source or my property management software or my revenue management software is saying that those rates are they in parity? Do they match? Um, are your cleaning fees or your taxes, are your additional fees, are those all in line with what you had originally designed and set up? Then from there go and start making decisions to lower rates and whatnot. Cause a knee jerk reaction to lowering rates may not always solve the problem. And if you do get picked up there, but you had a, an accidental miss on a cleaning fee or the tax rate was too high that you had on the setting or something, you might get caught in a place where somebody might make a booking, but they book it at a lower rate, but it's just because of an error on something else. So it's a good pulse check before you lower or raise rates to kind of check those things to see if anything is acting a little bit funky.

Jasper Ribbers:
Mm-hmm.

Doug Truitt:
Yeah, I think that probably covers most of it.

Jasper Ribbers:
And then if we do want to lower those prices, right? Is it like, let's say we're 30 days out. Let's just use an example, right? We're 30

Doug Truitt:
Mm-hmm.

Jasper Ribbers:
days out. We're typically 40% occupied at this time, at this point in time. And right now we're only 20% occupied. So we're panicking a little bit. Uh, we're looking at some competitors and we're seeing like, Hey, the market hasn't changed, you know, the booking lead times, none of that has changed. Right. And we're looking at. that were doing those checks that you mentioned, were still visible. Now we come to the conclusion, okay, like we do want to lower the prices to attract more bookings. Now what's the best approach to that? Is it going in there manually and just, you know, just adding like 10%, 20% off? Do we lower our base price or what's the best way to do that?

Doug Truitt:
Yeah, usually when you've established a base price with your revenue management software that is doing dynamic changes based on their algorithms of how they factor things, whether it's market, comp set, occupancy, up and down, that kind of thing, how that decides to kind of influence your rate. The base rate, usually you don't wanna touch too much if you've set it up. You want that base rate to be something that the algorithm kind of bounces up against. You do want to make sure that you get a floor. I should have said this earlier, but you want to make sure that you have a floor set up. And what I mean by floor is meaning that you're telling the system that I don't care if you decide an algorithm, you need to drop it by 50% on the rate. I don't want the rate to go lower than $100. You could say, you could establish that floor and make sure it's there. Now there are very rare instances, but you can also maybe set a ceiling. which is a max, like don't raise the rate farther than this because what you're trying to avoid is turning off the booking funnel or turning off the bookings that can come in and can be driven by people, by an algorithm thinking it's needing to do something. If you're going to lower rates, one thing, it really depends on your business model. If you're a traditional vacation rental with key level or one listing for one property, type business model. It's really tough to make really drastic rate changes because if you go really, really low and you book it, well, guess what? There is no going and reselling that same property again because it's gone. But I do very much believe in the strategy of small incremental changes and micro managing and focusing on that listing if you're. you know, figuring out that it's not picking up what it should in those that 30 day window or whatever it may be. Do a $5 drop or a 10 5% drop today. Then see if you can you pick up no pickup drop it again, drop it again, drop it again, drop it again and then try to then see where you get the booking that picks up and hold it. So it's kind of a good methodology of like a B testing so to speak, which is, you know, if you have more than one property in that same area, take one property. and start dropping it incrementally and see if something picks up. If something picks up, it might be conditional. They based on that area and that similar room type or property type that is like, yep, your price a little too high. Um, the other thing I should have mentioned earlier, apologies for kind of going back and forth for the audience there, but, um, one thing you want to do too, when you're setting up your, your revenue management software is don't get lost in thinking that one rate, one base rate rules at all, meaning don't have one static rate base rate for the entire. year. Taking into consideration your seasonality of the area you're in, right? If summer is your peak market, then obviously you want something higher at that timeframe. Also layer and even more granularly weekdays versus weekends. A lot of this feels like it should be common sense in so many ways, but I have seen a lot in my history and my experience, uh, lots of folks that kind of one, one base rate that sets it and forgets it. And it's kind of like, you know, you gotta, you gotta make sure that you're accommodating for seasonality, um, and doing other, uh, manipulations in that way

Jasper Ribbers:
Mm-hmm.

Doug Truitt:
to fix it. But hopefully that answered your question, I think.

Jasper Ribbers:
Yeah, I've got a couple of things I want to go back to, but what you just mentioned, the seasonality of weekday versus weekends, that's something that typically the pricing apps will do for you.

Doug Truitt:
Mm-hmm.

Jasper Ribbers:
So is that something that we should look at and maybe adjust based on our markets?

Doug Truitt:
Sure. Yes, because there's always situations where maybe events aren't picking up the way that the algorithm thinks it should, right? Maybe the algorithm detects an event in the market that's four or five months out, and you start getting into three, two months, and your property isn't picking up as much as what the rest of the market may be. And that's kind of when you go back into that triage. Can I be found? Am I live and bookable? What do things look like? Does it look good? And then you start making adjustments to. I know in wheelhouse there's a lot of great kind of, I don't know what the exact terminology they have for it, but I label it as like sensitivity. So it's like you can dial the sensitivity of certain things within the settings of how it looks at certain demand events or demand things that are coming into the algorithm. And you can say, okay, well, when you see these things do so much, but not the full thing, you know, the full monty of 450% all the way. Give it a little bit more of a, you know, dumb it down a little bit. And that can be helpful, right? Because

Jasper Ribbers:
Hmm.

Doug Truitt:
you can control those large swings that maybe potentially could happen with certain things.

Jasper Ribbers:
Yep.

Doug Truitt:
But yeah, you're right. Most of them do have some built-in seasonality or stuff they'll take into play when they look at the comp set or look at the market to give you that advice or what the base rate should be. But again, it's up to you to use your gut and what you know of your product and your area to kind of help dial that in. It's a good starting point, but you need to kind of. fine tune it yourself.

Jasper Ribbers:
Right. Now you also mentioned minimum price. That's an interesting number as well. What would you recommend? How do we define what our minimum price should be?

Doug Truitt:
Yeah, that's, I mean, that's a huge, huge subject because again, it's a dependent upon your business model and what your aspirations are for your company and for what you're doing. Say you are a business model, traditional vacation rental that you're, you're managing it for somebody else who owns the place, but you're giving a percentage a cut of profit share or revenue share or whatever you're giving to that homeowner or whatever it is. The reality is that you know, you may have a higher minimum. than you would on a different style business model or a different agreement because of the fact that it's not worth it for you in a business for what your margins of your business needs to operate or do what it needs to do. So you may have a higher minimum because of that nature and saying, it's okay if I don't get a booking. I'm only gonna take bookings at a minimum of this and let the algorithm bounce off of that. I think the other component that really helps with understanding your minimums can be in terms of like, capacity and thinking what's going on with regards to goal setting or budgets or projections that you want to do for your business. If you know what your costs are and you know what your margins you need to be successful are, then that can help shape how you set your minimums. Because if you set it too low, you could be paying for that booking. You could be paying to actually service that thing. Those things are scary because they can trickle in and they can leak in where you weren't really paying super close attention to it.

Jasper Ribbers:
Mm-hmm.

Doug Truitt:
We all want bookings, we all want conversion in the revenue management world, but is it the right booking, right?

Jasper Ribbers:
Right.

Doug Truitt:
Is it the right margin that's gonna contribute to the business' success? And that's where you kind of have to kind of throttle that a little bit.

Jasper Ribbers:
So I've got three more questions on this topic. Number

Doug Truitt:
Sure.

Jasper Ribbers:
one is, should we be worried about attracting a lower quality guest when we lower our prices? And should we consider that when we set our minimum price?

Doug Truitt:
Sorry, my internet cut out there for a second. What was the, can you say the question again? Sorry.

Jasper Ribbers:
Yeah, so a lot of hosts are worried that if they lower the price below a certain level, that they're going to attract a lower quality guest.

Doug Truitt:
Hmm

Jasper Ribbers:
Is that a valid concern?

Doug Truitt:
I mean, I think it is, but I also think it's also been given too much consideration and too much like it's hyped up too much. I don't think it's, you know, a lot of times I talk about the, the 1% rule and you know, if, if you have a bad situation happen where you have a guest who comes in and you know, has a party and trashes the place and costs you a bunch of extra, you know, operational headaches and logistical components. It's kind of like, if that was 1% of the time, don't let that 1% turn into a 99% paintbrush where you just paint the rest of your entire business that way, in preventative. Because it could be preventing you from getting bookings and revenue that could contribute to your margin. The other thing too is that when you drop your minimum price, you drop things lower, you actually open yourself up to potentially getting longer length of stays. So if you have a lower price, somebody might be more willing to stay seven nights, but then they would be willing to stay four nights or five nights. Um, being a family guy, I have three kids and my wife and I, if we're taking a vacation and we see that it's only an extra, you know, 150, $200 to stay an additional night, we're probably going to do that just for the nature of feeling more comfortable, more secure and feeling better about our vacation rather than feeling like I can only constrain this vacation into three nights or four nights. Cause all the rates are so high. So you could open yourself up to getting longer length of stays by having some of those lower prices. And it also on the inverse of what we said earlier with minimum length of stay, you could lower your minimum price. That's another strategy. Lower the price, raise the minimum length of stay restriction. So you make it the same price to stay for five nights that it would be to stay for, you know, three nights

Jasper Ribbers:
Mm.

Doug Truitt:
or four nights or something. And that could be a way to help you make sure that the total revenue you get a booking is a good value. rather than thinking I'm going to give up a couple of nights at really low rates that are high demand nights.

Jasper Ribbers:
One of our consideration is what we talked about at the start of this podcast is our brand, right?

Doug Truitt:
Mm-hmm.

Jasper Ribbers:
We might not, we might have a certain minimum price that we want to charge because we want to be perceived as a, as a high quality brand. Is that a good consideration as well?

Doug Truitt:
I think it is if you know your audience and you know that it's appealing to people because again, price shouldn't be the determining factor in the search results that says, wow, this is a high quality place because they're charging 600, 700 a night. No, it's gonna be what are the amenities? What are the offerings? What are the reviews saying about the place? Are they saying that the host and that the company is doing a great job and is very responsive and… They have clean, they have good cleanliness scores, they have good communication scores, good response rates. Is the images a great ambassador for the brand? Is the content a great ambassador for the brand? The price, again, in that funnel, the price should not be the leading indicator of the service or the quality that you're gonna get.

Jasper Ribbers:
Makes sense. Yeah. So like, so just as an example, if I go on the website of Four Seasons Hotel, and I see it's like 99 bucks, I'm probably just gonna think, wow, I'm getting a steal. I'm probably not gonna think like, oh, this, this must be like a budget hotel, I guess, right. So it's that makes sense. Yeah.

Doug Truitt:
I mean, I think people do draw a correlation when they say, oh, Four Seasons Hotel, and it's 900 a night. Yeah, that makes sense. It's the Four Seasons. But that thought of Four Seasons comes from the stories you hear about the extra service that the staff do for people at Four Seasons, and the luxury amenities, and the perception, and the persona, and like all of that. It's not the price. The price is impacted by all those things because people start to alter and say, well. Now that makes sense why it's $900 a night, because it's the Four Seasons. But that didn't come from the price. That was a byproduct of the service and what they offer.

Jasper Ribbers:
Last question on this. You know, when, when somebody books, we have a direct monetary benefit, which is the amount of dollars that end up in our pocket, right? There's indirect benefit too, because this person is going to hopefully leave us a review,

Doug Truitt:
Yes.

Jasper Ribbers:
right? Which helps us attract more bookings. This person could come back. This person could tell somebody else about their experience, right? And we get somebody else to book with us. That has value too. To what extent should we take that into account when setting not only our minimum price, because it could be a reason why you say, you know what, I'm OK with $40 booking on a unit that typically gets booked for $100, $150 because of the indirect. especially if you have a new listing, like getting a couple of reviews is very important, right? So how much

Doug Truitt:
Yeah.

Jasper Ribbers:
of an effect should that be in our strategy?

Doug Truitt:
I think it should be considered. I don't know that the review score, and this is something with a few companies in the past that have tried to tackle it, it's trying to draw a correlation of incremental dollar value per review point score or sentiment, that kind of thing. And it's really difficult to actually draw it out to say what rate is worth what based on the review score. I will say that from the standpoint of the post-booking process, right? Revenue management is so focused on acquiring a booking, getting that conversion, getting people to purchase, and then it's kind of like move on to the next and try to figure it out. The thing that should be focused on is two components. One, cancellations, right? It's one thing that it really gets not talked about or discussed a lot with revenue management in the term of how are we protecting the revenue that we acquire. right? Holding accountability for the right, you know, cancellation policy, all those other aspects, watching that revenue, cancellation revenue, and then backfilling it with whatever we can. Then the other component with that post-booking piece is really having a good post-marketing strategy because majority of your first time bookings are not going to come off your direct site. They're going to come from Airbnb. They're going to come from booking.com. They're going to come from these other places and what you do with that information after they book and after they check out. is really nurturing those folks to see you as a brand, to build back into coming to you and your direct site and being a lifetime value kind of customer and coming back, getting that LTV score up. As far as all of those components impacting rate, I wouldn't say that it really impacts a ton of rate decisions, but it does instill a lot of confidence if you have a higher review score that is in that component of triage again. Am I live and bookable? Do I have the right fees? Do I have the right things? Are the reviews good? Those are things people consider to convert on, but I don't know that, I really would say that a higher review score dictates a higher rate

Jasper Ribbers:
Hmm.

Doug Truitt:
in so many ways. It makes the conversion a lot easier, but not necessarily adjust your rate strategy.

Jasper Ribbers:
Right. Okay. And I guess just to wrap this up, I guess we could then say to your point of if we, if we have a strong post-booking marketing strategy where we're reaching out to the customer, trying to get them to come back, then I guess that increases that indirect value of acquiring a gas. Cause like you mentioned, the LTV

Doug Truitt:
Absolutely.

Jasper Ribbers:
goes up, which stands for a long, lifetime value, right?

Doug Truitt:
Yeah.

Jasper Ribbers:
Um, okay. Yeah, that makes sense.

Doug Truitt:
Well, and at the end of the day too, you're trying to minimize your amount of costs and who's getting a piece of your pie. Airbnb, Booking, Expedia, Verbo, all those channels. And even if you have a traditional revenue share model or profit share model like the vacation rental space, the homeowner is getting a cut too. And so what you're left with is not as much as if you got it to book on your direct site. So it's all about trying to throttle that margin as well within that. which I know doesn't have a ton to do with the rate you set because it's about the cost, but it's, you know, are you marking up your rate on some of those channels to offset some of the commission costs? Are you doing those kinds of things to then instill and make sure that you're not just getting people to go back to book on Airbnb every single time? So, yeah.

Jasper Ribbers:
Got it. Awesome. Well, we've been talking for a while, so I'm going to wrap this up. But I really appreciate your insight today, Doug. So

Doug Truitt:
Yeah.

Jasper Ribbers:
thank you so much for taking the time. If people want to contact you or are interested in Roamy, where can they go?

Doug Truitt:
Yeah, yeah, just go to go to romey.com or you can you can email me at doug at romey.com um and or just kind of come find me on linkedin or something like that be happy to help give some give some uh tidbits here and there or just the talk shop if somebody wants so

Jasper Ribbers:
Awesome. And the podcast that you do with John,

Doug Truitt:
Yeah.

Jasper Ribbers:
can we watch that somewhere?

Doug Truitt:
Yeah, it's called RevBytes, R-E-V-B-Y-T-E-S. You can search it on YouTube. We haven't put it on Spotify or any of those other aspects yet. We will at some point. But you can search RevBytes on YouTube, and you can find that

Jasper Ribbers:
Sweet.

Doug Truitt:
there. We have about 10 episodes from what we did before, and we're going to be having our next episode. We're going to record tomorrow, actually. So.

Jasper Ribbers:
Right on.

Doug Truitt:
Some good stuff there. We're very transparent. We get in depth with some things, but we definitely are trying to help everybody understand a little bit more about what's going on and be transparent.

Jasper Ribbers:
Awesome. RevBytes on YouTube. I'm definitely going to check it out. So thanks, Doug.

Doug Truitt:
Yeah.

Jasper Ribbers:
And thanks to the listeners. Have a great Friday. Have a great weekend. And we'll be back on Monday with another episode. We'll see you then.

Doug Truitt:
Take care, thanks again.E

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