Still pricing based on what you earned last year? That strategy could be costing you money. Historical Anchoring—a feature where pricing is tied to past booking performance—might seem like a safety net, but in today’s volatile short-term rental market, it can leave you overpriced, underbooked, and outpaced by competitors. Anchors sink ships, and they also sink revenue.

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Understanding Historical Anchoring

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For those wondering, the term Historical Anchoring references a dynamic pricing tool feature where users can tie future pricing strategies to past booking performance. For example, if a short term rental listing sells for $500 on New Years Eve last year, historical anchoring would prevent this year’s price from ever dropping below that.

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But here’s the problem: The market doesn’t care what you earned last year. Demand shifts, guest behavior evolves, and what worked last year ago might be totally out of sync with today’s trends. This feature, while designed to enhance pricing strategies and protect inventory dates, can end up doing more harm than good, leading to overcomplication and underperformance  for revenue managers. Plus, there is always the risk that bad data may be informing your historical anchoring strategy as some PMS and channel manager connections may include fees, taxes, and markups as a booked rate that can inflate minimum prices. 

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Ultimately, anchoring your pricing strategy to past data does not reflect current market conditions. The past few years have shown how volatile the short-term rental market can be, and solely relying on historical data will leave you falling behind competitors. 

Customization Complications

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Revenue managers are often responsible for a multitude of tasks, including, but not limited to, controlling a dynamic pricing strategy for their portfolio. Scaling a dynamic pricing strategy alongside a growing portfolio can be a challenge, but modern revenue management systems are built to support scalability as well as visibility. Challenges often arise, however, when a multitude of pricing customizations start to overwhelm a revenue manager. As you can imagine, Historical Anchoring has proven to be a complicated setting for revenue managers to manage at scale. 

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Let’s say you manage 50 properties and use Historical Anchoring to prevent any bookings below prior year booked rates, meaning that you have date-specific settings for all 50 properties. If each property had 40 bookings last year, you have 40 “minimums” that Historical Anchoring is setting for each property. That translates to 2,000 customized minimums across the portfolio per year. This can certainly be overwhelming and difficult to both manage and keep track of, ultimately leading to some dates likely being held at a high minimum. 

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The overuse of customizations is also a clear sign that a dynamic pricing tool is unable to accurately pick up on market and hyperlocal nuances. Overcorrecting for a bad algorithm is a one-way ticket to underperforming against your competitors.  

Revenue Implications

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As the familiar saying goes, “past performance is not indicative of future results”. While the overall goal of a revenue management strategy is to grow revenue compared to prior years, this is not always possible for every single day at every single short-term rental property. Revenue management is all about the balance of both average daily rate and occupancy, not one or the other. Optimizing both (or sacrificing one) can still lead to increased revenue year-over-year. Setting a hard rule where pricing cannot go below prior year rates limits the ability to effectively price listings for current market demand.

Alternative Approaches

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While there are benefits to using a tool like Historical Anchoring, they ultimately do not outweigh the downsides. Protecting homeowner expectations as a short-term rental revenue manager is an important part of the role, but there are other, smarter ways to achieve this. For example, focusing on the use of real-time data and predictive analytics can help align your pricing strategies with what guests want today, not what they wanted a year ago. Additionally, inviting owners into your revenue management strategy and showing them how you are optimizing both average daily rate and occupancy for them will showcase how advanced your strategy is compared to competitors. 

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The use of Historical Anchoring is a cautionary tale of the overuse of customizations to make up for a bad dynamic pricing model or algorithm. It’s time to critically assess your dynamic pricing tool - is it generating more work for you or saving you time to focus on other revenue-generating tasks?