We just had an excellent and lively discussion at the Data and Revenue Management (DARM) conference hosted by VRM Intel last week about what strategy works best for pricing vacation rentals. The answer was decidedly equivocal: It depends.
Like many decisions, determining whether to handle vacation rental pricing in-house or to outsource depends largely on three factors: time, passion, and skill. If you have the time, passion, and talent to do it yourself, you should. Suppose you don’t have all three of those things. In that case, you should be supplementing your work at a minimum with additional support, whether that involves hiring someone to do it in-house or using external tools or consultants to support your efforts.
Time
The cruel reality is that there is no substitute for time when it comes to pricing vacation rentals. The data in this industry is highly fragmented. There are some major holes in data quality and relevant comp sets that make it impossible to automate optimized pricing for a single property fully. Unlike our friends in the airline and hotel industries, our vacation rental properties are snowflakes, and each one carries its own unique qualities. These qualities include attributes like reviews that change over time—to move this snowflake analogy even further. Even the snowflake itself is constantly changing shape. Can you imagine if each room in a Four Seasons had its own unique reviews? The pacing of each property, as well as bookings, changes daily.
Our estimate based on managing pricing for thousands of properties is that optimizing pricing tends to take an average of 30 minutes per property per week. The more commoditized the property, the more time savings you can get through automation. Even in highly commoditized property types, there is always incremental value to add through manual intervention.
Most managers deprioritize this relative to guest issues and owner communications. With good reason—if you don’t have happy owners and happy guests, you are unlikely to have properties to price! All too often, we see pricing treated as one of many tasks assigned to a team member who doesn’t always give it the attention, and indeed time, that it requires. Are you dedicating 30 minutes a week per property of a team member’s time to pricing? If not, you should consider outsourcing or hiring someone with dedicated time focused on this activity.
Passion
Do you enjoy geeking out over analytics and data and using those insights to make pricing adjustments? If the answer is no, you shouldn’t be doing it. You should either hire someone who enjoys that or outsource to a company or consultant focused on that. Like many endeavors, people tend to perform much better on pricing when they get excited about getting the right rate at the right time to capture that perfect booking. Most managers get excited when they see that booking, but fewer tend to get excited about the work it takes to get the price right to enable that booking to happen.
Remember why you got into this business, and remember that it is yours. If you find yourself doing things you do not enjoy, change the things you are doing! This does not mean your company should or can stop that work entirely. It just means that you need to fill your days with the things you are passionate about, not ones you dread doing, and find others to take care of the work that is still necessary but that you no longer want or need to perform.
Depending on the market you are in, you may have a more challenging time finding someone passionate about pricing. If you have the passion yourself and the time and patience to train someone, that can be a viable option.
When we launched Vacasa, Eric and I were obsessive over rates and spent a bunch of time every week, really every day, focused on this critical task. As we grew, and the company’s demands changed, so too did the demands made on our time. At that juncture, it was important for each of us to focus on those things only we could do and to hire and train people to take on things, including pricing, that required the time and attention we could no longer give it. Depending on your own size and stage of your business and your personal passions, such a transition may be overdue.
Skill
This may be a slightly more sensitive topic in that it requires you to take a clear-eyed and objective look at your own skill sets. The reality is there are things that we may have and make time for, and which we are passionate about, that we just are not that good at. The proliferation of amateur bakers during COVID-19, and the dry and misshapen creations they post on social media with such pride, is a perfect illustration of this. You may love it, you may have the time for it, but in truth, you may not be very good at it.
This is not to say anything bad about you as a person. In fact, recognizing and accepting your limitations are essential to building, scaling, and maintaining a successful business. The fortunate thing is that each of us has our own skills. Building a successful management company is less about you possessing all the requisite skills than your company delivering on all the requisite skills for your owners and your guests.
Depending on the skill itself, and your location, it may be more or less difficult to find and efficiently hire for the skill set internally. The truth is there are only so many data scientists, revenue analysts, data analysts, and so on in many vacation rental markets. Simultaneously, hiring full-time employees for each of these functions rarely makes sense for anyone managing fewer than 1,000 homes. This is not the end of the world. Fortunately, many companies, such as Rented, can outsource business-critical, but not in-house critical, work.
This gives you the best of all worlds:
1. The time to do the work you need and want to do
2. The ability to fill your time with what you are passionate about
3. The ability to efficiently access talent and skillsets you would not otherwise be able to tap into
As a vacation rental manager, you always have a lot on your plate. As more travelers choose vacation rentals in preference to hotels, and the competition increases, these demands are likely to do anything but decrease. Understanding that your business must do more, and do it better, is not the same as defaulting to you having to do more and more. Following a structured approach to focusing on your own trifecta of time, passion, and skill sets you and your company up for long-term health and success. Good luck!
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