In business and life in general, they say to avoid extremes. Make a solid plan, make corrective adjustments, but stay the course and “fly in the middle.” Because 2020 was a year of extremes, it did not afford us that option. The pendulum swings were both swift and wide. Extremes in bookings, demand, staffing, politics—you name it, we experienced it.
As we reflect on this past year and get excited to see each other in person again at the upcoming Vacation Rental Data and Revenue Management (DARM) Conference, it’s important to really take a look back internally and identify our biggest challenges so we can ask the right questions and get the answers that we need.
We all have experiences to share. We all have had horror stories, success stories, and likely plenty of aha moments along the way. We all have something to offer, but more importantly, what do we want to learn from each other? What do YOU want to learn the most?
Revenue Management Strategy
Revenue management in the vacation rental industry is an amalgamation of many different moving parts including distribution, pricing, digital marketing, and reputation management. Throw in the seemingly infinite metrics and data points, some of which the industry can’t even agree on, and vacation rental revenue management gets complicated pretty quickly. But how do you eat an elephant? One bite at a time. So, we’ve been breaking down and analyzing our strategies and processes to find out what worked this year, what stood the test of time in extreme climates, and what we completely abandoned.
Like you, we learned a lot at Casiola this year. Some lessons were forced out of necessity, some were happy accidents, some were intentional wins that knocked it out of the park, and others were failures we had to abandon quickly. We learned that no matter how much we think we know, we have to stay humble. If something is working, exploit it. If something is not, quickly move on. At the DARM conference in August, we’re looking forward to sharing our experiences and hearing what strategies worked (and didn’t) across the industry.
Related: Property Management Newcomer Casiola: How their Fresh Look at the Industry is Making them Successful
Each of these strategic components is fundamentally important to the revenue management process. However, the best strategies in the world are only as good as a company’s ability to execute them efficiently.
More often than not, I find myself creating strategies around my ability to implement them, which feels like uncomfortably working backward.
We are only as fast as our slowest component and only as strong as our weakest link. From a conceptual perspective, this is true for almost any category in any business. To use an analogy: What purpose does it serve for a restaurant to create the fairest seating arrangements for their servers if the hostess isn’t properly trained on table numbers? Everything we do, start to finish, we should do with intention. However, even with the best intentions, failure occurs. Evaluating each and every step of our processes—and our tools— and their effectiveness is paramount.
Careful Evaluation of Technology
For vacation rental revenue management, we have recently experienced incredible technological advancements, but we also still have significant limitations. It is no secret that, with so many moving parts and our industry’s relative youth, software systems have yet to come up with a full solution, start to finish.
How many metaphorical “hands” does one reservation go through from start to finish? Until product evolution produces a more comprehensive solution for our processes, most of us find ourselves piecing various components together. And what happens when one of your software components doesn’t completely align or integrate with another? Layer in a workaround!
The more complicated your strategy or process, the more layers and even additional software products need to be added. A perfect full solution is something we just do not have. Instead, it feels like there are an overwhelming number of “perfect partial solutions,” almost to the point of tech fatigue.
Whether it is your website, booking engine, pricing technology, PMS, channel manager, or the channels themselves, now is a great time to take a hard look over the past year and evaluate your weakest links. What parts of the process didn’t hold up under pressure or with rapidly changing dynamics? Were there components that required a disproportionate amount of company resources? Maybe you had to contact support too many times, sacrificing resources from your reservations team, which resulted in lost revenue from missed booking opportunities. Find your weakest links and cut them out, replace them, or fix them.
In my experience, most technology vendors are more than willing to collaborate with property managers and value their input regarding product features. If part of their product isn’t working for you, tell them. There are brilliant minds out there eager and willing to build and adapt their products to your needs. Sometimes it takes longer than we want or requires a bit more nudging. Sometimes the squeaky wheel gets the grease, and sometimes it requires a ton of persistence. However, if we don’t constantly try to better our strategies and our ability to execute them, we do not evolve as a company or an industry.
Here’s a great example. Our pricing software supported a dynamic minimum LOS (length of stay) strategy we wanted to implement, but our channel manager did not. Again, what good is developing a strategy if there is no way to execute it? We had two options: abandon the strategy or try to collaborate with our channel manager to find a solution. After tons of troubleshooting, together we were able to find the core issue, and they agreed to write the software fix. Had we not brought this up, we would have had to abandon our strategy. Had we not pushed so hard, it might not have been known that this issue existed for us.
Collaboration with Other Property Managers
As we all navigate through the pandemic, collaboration is key. This includes collaboration with our vendors and among ourselves. Is there another property manager that has the same technology mix that you do? Just like vendors, most property managers, so long as they are not direct competition, are willing to share pain points and solutions.
How often do we listen to someone speaking and immediately tune them out because “they don’t use our PMS” or “my channel manager doesn’t have that issue” or “that’s a great solution, but my PMS won’t connect to it”. If you find someone who uses the same software mix, the conversations become infinitely more advanced and useful.
I recently had a one-hour phone conversation with another property manager who asked me to explain my pain points. Thirty seconds into my spiel he said, “Now, I’ll just stop you right there. This is your problem . . .” He had cultivated relationships with all the same vendors I had and had exactly the same issues. He told me how he solved the problem, potentially saving me months of trying to figure it out on my own. We were able to compare what worked and what didn’t and take each other through each of our processes start to finish to get fresh, yet experienced eyes on it. That’s the beauty of networking, folks! Now that we have conferences again, take every opportunity to get to know as many other people as possible and look for similarities in tech usage.
OTA Channels and Mix
This year was perfect for both highlighting and exposing what did and did not work. However, what did and did not work might be different than what is and is not working. For some markets, it was a climate of feast or famine. It is important to document which processes, including all of the technological applications involved, worked and did not work in each scenario. We might be feasting on bookings now, but let’s not forget how we navigated the famine.
This is a great time to take a look at our distribution strategy and evaluate what changed in our channel mix year-over-year.
Are you happy with your distribution matrix and the process involved?
Have you taken a deep dive into each channel and analyzed the costs and benefits of each? Was there a certain channel that outperformed?
Was there a channel that fell short?
How did this affect your channel mix ratios?
Were you able to execute revenue management strategies and take advantage of promotions on each channel?
At Casiola, when the pandemic hit, we were quick to leverage what was working on each channel and what was not. Whether it was a cancellation policy change or a channel promotion, we evaluated what was driving bookings and focused our energy on the levers we could pull to increase them. It forced us to look at our metrics on a granular level, focus on what brought in the volume, and thin out what did not.
However, this was a double-edged sword that created a problem for us over time. By forcing a disproportion in our distribution, we put too many eggs in one basket. It was necessary at the time to find bookings wherever we could, but when the dust settled, it was imperative to move back to a healthier channel mix. Too much leverage in any one channel creates vulnerabilities because having too much third-party influence over your revenue simply is viciously dangerous territory.
It was important to create a healthier mix. As long as we maintained a healthy ratio, we could put effort into growing each channel more. With a combination of our pricing software and channel manager, we were able to throttle back bookings in the overactive channel but not cut them off. This afforded other channels access to our inventory the other was previously taking up.
Did you have a channel that outperformed the others in your market? Which ones did not, and why do you think that is? Was there a strategy that you used that had an impact on a certain channel? How do you re-establish a healthy balance when the scales tip too far to one channel? What do you consider a healthy balance and why? These are all questions to reflect on.
We could fill an entire VRM Intel Magazine issue discussing data alone. After all, data is the cornerstone of revenue management. Our industry’s challenge is not with the lack of data, but with using it effectively, determining what is quality data and what is not, translating that data across multiple platforms, and having systems that are on the same page about metric calculations.
I would simply implore you to find out where your data comes from. If someone provides you with data, where are they getting it from? Are they transparent about the sources? How granular are the metrics?
For example, when looking at the technology platforms you use for determining competitive (comp) sets and benchmarks, really find out whether you are comparing apples to apples. Perhaps the identical seven-bedroom home down the street is in your comp set, but it has a pool and yours does not. Is it truly a comp? Comps are most certainly determined by more than data alone, but it’s important to understand what data is being used nonetheless.
If you use pricing system and they make a change in ADR for a certain time period, how do you know what has and has not been already calculated? Is there transparency? Or maybe they are only using market data to calculate your pricing, but you are already outperforming the market. Understanding what is being used will help you make better-informed decisions.
Perhaps the most important question is whether you can access this data outside the platform and access it with ease. I recently heard this referred to as “data liberation,” which could not be more accurate. In a world of so many technological layers, we need to have a constant: our data.
In some scenarios, you might not need to liberate your data because it has no use outside the platform. However, what if you are using more than one platform to make informed pricing decisions? Perhaps you use one tool for benchmarking, one tool for internal pacing, and another tool to implement pricing changes. It becomes daunting really quickly. What if that platform doesn’t have the ability to perform a function on its UI, but you know it’s fairly simple to do in Excel? How easy is this process?
Pro Tip: First determine the quality of this data and then determine if it will be held hostage.
This has been an interesting year with many curveballs. We were forced to face issues we didn’t expect. Processes involving everything from operations to technology to strategy were tested almost to the breaking point. Many of us had to develop entirely new processes or find creative ways to optimize our current ones. Tons of good came out of such a stressful time; it forced evolution in many ways.
However, we are not out of the woods. Not even close.
It’s no secret the vacation rental market has become a dominant vertical in the travel sector during this time. Travelers have come to see STRs not just as a viable option for lodging, but in some cases, a preferable one.
However, a substantial increase in market share for one vertical almost conclusively means a decrease for another. We will have a target on our backs, and we must continue to evolve both individually as companies and as an entire industry.
We must collaborate, educate, network, develop, and strategize, and we must not stop learning. I’m looking forward to seeing you at DARM and sharing our battle stories and experiences!