The economic landscape for short-term and vacation rentals is swiftly changing, bringing new challenges each day. The industry experienced a screeching halt in demand caused by the global pandemic and in many leisure markets, a summer with a blossoming revitalization of demand.
It’s easy to get off course with moving targets, unpredictable scenarios, and multiple versions of your unit or portfolio’s 2020 budget. Getting back to basics with revenue management fundamentals and reframing all of the levers available during periods of quickly shifting demand will help you regain your stride and plan for a solid close to the year.
1) Use Historical Performance
Review and analyze occupancy and rate performance for your portfolio by season, event, and day of week periods. Compare and benchmark against your historical trends and relevant market performance data. Determine if there is an opportunity to increase revenue for future periods by driving occupancy, rate, or both.
2) Analyze Current Booking Activity
Significant changes in booking pace can be caused by overall supply/demand volatility, a shifting booking window, the shrinking/extending of traditional seasonal periods, or some combination of these. Analyze your pace and that of the market to determine if your pricing and availability are deployed optimally to address changing conditions.
3) Determine Supply Changes
Establish a process to periodically review changes in the amount and quality of supply in your market. Analyze relevant changes in competing destinations that may affect your local market and adjust strategies accordingly.
4) Leverage Your Systems
It may sound obvious, but if you’ve invested in technology to optimize performance, utilize those systems. Leverage the capabilities in your chosen property management system (PMS) and/or revenue management system (RMS) by spending time to configure your settings and enable automation properly, event triggers, alerts, and data that drive AI pricing/forecasting engines. Strike a balance between providing inputs that your system can’t learn on its own, against constantly overriding recommendations, which run counter to having the system in the first place. Strive to become a superuser as you will find that the most successful revenue managers in any organization are usually also the top system experts.
5) Review and Update System Settings
Configuration settings and automation in your PMS and/or RMS should align with your strategies and tactics, which will drive performance. However, don’t fall into the trap of “set it and forget it.” Establish a process to frequently review comp set definitions, stay restrictions, pricing rules, policies, discounts, and promotions to ensure that they correctly apply to high and low demand periods.
6) Understand Your Pricing Power
Analyze each home’s baseline pricing as it relates to location, bedrooms, amenities, ratings, and overall quality for your market. Conduct a price/value exercise versus your competitive set to guide your ideal positioning. Define and apply varying premiums for your unit attributes during high and low demand periods.
7) Manage High Demand Periods
Ensure your pricing and stay restrictions will protect your peak nights and drive production to your shoulder and gap nights. Compression caused by special events, holidays, and local demand drivers are opportunities to maximize the rate as market availability decreases. Hold rates appropriate for the surge in demand, and position your units to sell later rather than earlier compared to your competitive set. Remove any length of stay or affiliate pricing rules that apply discounts, and peel back from less profitable channels.
8) Manage Low Demand Periods
Market your units attractively by having compelling rate value, reduced stay restrictions, and the most lenient cancellation and deposit policies your business model can support. Enable discounting by activating promotions from third-party channels that will turn on tagging, utilize slash through pricing, and help promote a higher sort ranking. Configure discount pricing rules that encourage both early bookings and last-minute deals. Provide availability on as many channels as possible while maintaining a profitable rate structure.
To quickly and clearly understand when strategies should be adjusted, consistently reforecast using current data. Relevant levers that affect pricing, availability, promotions, marketing, and distribution should be on standby and ready to activate should thresholds in your forecasts be triggered. Whatever tool you have for forecasting should be easy to adjust and read, especially when sharing with other stakeholders within strategy and performance discussions. Invest time and effort in establishing forecast tools that work for you and not the other way around.
There will always be market leaders and laggards. To seize the opportunity of maximizing rates while capturing your fair share of occupancy for your unit or portfolio, be nimble and invest the time to review your positioning.
The fundamentals are simple, yet it is easy to be led astray in times of uncertainty. We have an opportunity to lift the industry—if we collectively invest in analyzing the data and adapt our strategies to align with these times of massive change.