The new year is fast approaching, and short-term rental trends are already taking shape. Preparing your short-term rental business for 2023 is vital for your continued success, so we polled our team of vacation rental experts at Beyond for their big bets and recommendations for 2023. With a combined 25+ years in the short-term rental industry, they brought forward thoughtful predictions plus actionable advice for operators to win in 2023.
Julie Brinkman, CEO
Property managers should already start preparing their businesses for an expected economic downturn next year. The first thing they can do is bring the unknown to the known by staying on top of booking pace and watching booking on a dollar basis, and quality basis, to see if they are coming in at historically normal levels.
Make sure that your business tactics, tools, tech, and processes are responding to current conditions. At Beyond we want to make sure we are empowering users to not only use their gut to make decisions but also have that data-backed action to do the right thing with their pricing, channel management, and direct booking to ultimately drive more bookings and revenue.
Second is diversification. Think about your property portfolio like your investment portfolio: Make sure you have bets in all the right places so that your seasonality and other factors are not such peaks and valleys. We know that travel for pleasure is resistant to recessions, and we can look to the most recent, albeit short, 2020 downturn for tips to prepare. In 2020, we saw that as soon as people could travel, they did so in record numbers. However, they got in their cars and not in planes mainly due to expense (among other factors). If you are in a fly-to market, can you start marketing and capturing guests from a driving distance? Can you expand your owner base into different markets? If you are a super luxe fly-to market, think about those condos you can start picking up or properties that will appeal to guests who might not be taking those super luxury vacations. We can get protection against any sort of economic blowback from a diverse inventory.
David Kelso, Co-Founder & CTO
Next year, more and more operators will rely on automation tools to make accurate decisions about their businesses. While there has been a precedent to rely on historical data, forward-looking data is going to become more relevant and critical to success for vacation rental operators next year, and this includes demand-side data and pre-booking data.
However, just having a lot of data is not the answer – there is a lot of noise and it can be overwhelming. So it’s important that operators have access to the right amount of actionable data – at Beyond, we pull together a massive amount of data and distill it down to what’s relevant and useful for each customer.
Another big trend to watch for next year is the increase in competition from the hotel industry. We’ll see more consumers comparing hotels to vacation rentals as options for their stay. However, there is a lot of opportunity for short-term rental managers and hosts to compete directly with them. Some of our most successful customers have built their businesses and reputations on creating a personalized, unique experience for their guests. Hotels will never excel at this, and it’s a great place for STRs to differentiate themselves.
Overall, automating back-office work will be essential to creating exceptional experiences for your guests and your owners. When you have your operations and revenue management taken care of and in good hands, you can focus on the multitude of other things that make your owners and guests happy.
Maria Flores Portillo, Managing Director EMEA
In 2023, the good news is that we will see continuous growth, but we will see that average daily rates (ADRs) and/or occupancy rates will be challenged in some markets. This, coupled with raising costs due to inflation and heightened supply competition is going to compel property managers to stay as nimble and smart as it gets. To maintain margins in this competitive market, operators need a strong focus to use technology to differentiate.
One thing that property managers and hosts need for success next year is the right combination of data and experts. Our industry has access to a plethora of data. But with so much data, you want to make sure that the data you receive helps you take action. Even better, are your data and the tools you are using taking action on your behalf?
Making revenue decisions based on experience or historical portfolio performance alone is a non-starter. But similarly, leveraging data or a pricing tool and leaving those on autopilot will be a recipe for disaster given how quickly the market changes and the increased competition.
Ryan Saylor, Head of North American Partnerships
In most vacation rental markets, competition has been heating up over the past 1-2 years. Next year, I think we’ll see property managers get a lot more creative with the distribution of their listings in order to stay ahead of the curve.
From managing online promotions and boosting listing visibility to A/B testing content and photos for specific listings, property managers are going to have to innovate their revenue management practices heading into 2023.
Property managers and revenue managers need to ensure that they are regularly reviewing their holistic revenue management strategy in order to be successful in 2023 and beyond. Simply using a dynamic pricing tool and sporadically reviewing data is not going to be enough to win against the competition, especially with an increase in supply and inflation concerns. Property managers should enable themselves with the right tools and practices to stay on top of their revenue management strategy, including what has worked in the past and how their business is shaping up in the future compared to previous years.
Jeffery Breece, Head of Revenue Management
Next year, we are going to continue to see that speed and nimbleness when adjusting rates are paramount for success.
In 2020 & 2021, we saw victory go to those who could strategically raised rates quickly. Now, we will see the opposite, as revenue per available night (RevPan) is stagnating year over year, due to rates out-pacing demand and squeezing occupancy.
The advantage will go to those property managers who are tightly connected to the market data, knowing when & where to adjust prices down. We are going to see a lot of the great revenue management leaders either be stubborn on rates and let their properties sit empty, or they will adjust rates too late and need to have fire sales at depressed rates. Those that adjust ahead of time, based on data, will be just fine even in this slowing market.
Historical data will continue to be more complicated to use, and we will see a split on how and if it is used. Bargain tools and more basic revenue management strategies will simply ignore the older data and move on. Sophisticated tools and models will actively realize the difference in the market and changing macro inputs, and actively adapt pricing to these trends. We will see great performance from pricing models that have evolved from the learnings of Covid-19 trends, while other models will just simply miss the mark.
Taylor McManus, Director of Customer Experience
We’ve already seen this trend rear its ugly head towards the end of 2022 and there’s no indication that it’ll slow down in 2023: professional property managers who focus on rules-based or customization-heavy pricing strategies will miss out on revenue and lose owners.
With a softening market and talks of recession, it’s incredibly important that property managers’ pricing strategy is responsive to rapid changes in the market. Reliance on historical data to set customizations will drive ADR’s too high too long, requiring PM’s to discount to get booked. On the other hand, focusing on ill-informed competitor rates will start a race to the bottom. With uncertain forward-looking demand, property managers need to allow their algorithm to do the work for them but more importantly, they need to communicate how and why their pricing strategy does this to their owners. If owners perceive a lack of confidence in the pricing strategy for their property, or have misaligned performance expectations they will look to large-scale operators or local competition who will promise better revenue outcomes.
There are three things that will be true of successful property managers in 2023:
- They will have aligned themselves with a sophisticated revenue management tool that factors in forward-looking macro-economic factors and doesn’t require the use of customizations.
- They will set a revenue management strategy based on advice provided by seasoned revenue management professionals who can help them cater their tool to the needs of their business.
- They will proactively communicate their strategy to their ownership group and explain why an algorithm-focused pricing strategy will drive the most revenue.
What 2023 short-term rental trends are you preparing for? Take charge of your revenue management strategy for 2023 and work with Beyond today. And see just how much your business can grow with our calculator.