“Life moves pretty fast. If you don’t stop and look around once in a while, you could miss it.” – Ferris Bueller
Classic movie. Basic concept. When it comes to short-term and vacation rentals, one of the most basic and important concepts is the price. Of course, elements of operational excellence, like cleanliness and safety, are a necessity, and having good content and images is a fundamental best practice. But pricing accuracy is what can take rental income from good to great.
Why is pricing accuracy so hard? We live in a fast-paced, on-demand, instant-gratification consumer world. As additional demand floods the short-term rental segment and shifts away from hotels, the revenue risk and reward is high, and we have to keep up. But how do we do it?
I was so intrigued by why vacation rental revenue management was so behind compared to the maturity of this discipline for the hotel, airline, cruise, and car rental industries, and I did some research to connect the dots. By looking at the history of pricing technology and capabilities between vacation rentals and hotels, we can learn a lot about why revenue management is evolving as a new discipline and is still in its infancy.
This timeline is a brief review of the lodging industry booking technology evolution. (HINT: Pay special attention to Instant Book.)
What we do know is that Instant Book has been the only way to book a hotel for over 20 years, and similar to airlines, hotel rates can change from minute to minute. Instant Book powers faster results, speeds up the guests’ expectations, and powers more dynamic market pricing power. It can move so fast that it becomes impossible for a human to keep up with all optimal rate changes for the next 365 days. As you look at your market, is most of the inventory Instant Book? If your market is mostly operating at instant booking speed, you may be more likely to leave money on the table if you are not practicing dynamic, daily rate updates. The 10-minute, $10,000 mistake is no joke.
Whether you choose to update rates manually or use a revenue management pricing system to help you, the daily review of rates for the next 365 days can be a critical best practice to achieving your optimum revenue potential.
To expand on this further, we can share some real-life examples.
A Quick Case Study with Coachella: Though many concerts have been canceled, rescheduled, and canceled again throughout 2020, the demand impact of Coachella on the Palm Springs market has proven an exceptional story. In March, the original show dates in April were rescheduled to October. Most tantalizing about the announcement is that it wasn’t initially even posted on the official Coachella website!
The day that the announcement was leaked on social, the market saw a massive booking volume spike for the new October dates. Because it wasn’t even official, and there was no warning, these dates were not priced correctly for any home in the market. Within 24 hours, there was a backlash of complaints and a desire to reject these bookings. There was A LOT of money left on the table, and nobody saw it coming.
Not every revenue management system is created equal, but a solid revenue management system could detect a burst of demand into a market and immediately trigger a price update or even a stop sell if it were better simply to hit the pause button for 24 hours. With many hotel reservation management software providers, these types of immediate optimizations are possible. Though we may have to wait for an overnight update to the current short-term rental PMS providers—I’m not aware of any that have developed a configuration for automated optimization based on real-time demand shifts—it’s still better than having days go by before reacting.
There are so many more examples of a 10-minute, $10,000 mistake, but you can easily see how Instant Book is a game-changer, and our revenue management savvy and technology need to evolve to achieve optimal performance. Rates move pretty fast. If you don’t stop and review your rates daily, you could miss an opportunity to make some big bucks.