As we all know, the impact of COVID-19 has led to the cancellation and postponement of many events around the world. With so many events moving to new dates, how will this impact pricing strategies in their surrounding markets?
The 2020 Olympics in Tokyo have no doubt been the largest events to be postponed, with the games now set to take place next year from July 23rd to August 8th. Similar large-scale events like Coachella and the Kentucky Derby have been postponed for later this year. Coachella, for example, has always taken place in April, so how will the new October dates play a role in pricing strategies amongst vacation rentals in the market? Here at Beyond Pricing, we’ve been monitoring changes to vacation rental pricing in these markets to price postponed event dates accurately.
Market Pricing Reactions
As events have been rescheduled, property managers have looked to update their pricing strategies to avoid losing out on ADR. While some properties using dynamic pricing have reacted appropriately to event postponements, some property managers have increased pricing without any real basis in supply or demand. Here’s a look at average pricing for Indio in 2019 compared to 2020:
As you can see, prices for the new Coachella dates in October this year are far exceeding last year’s 2019 rates. Since we know supply is also typically greater in October compared to April, average prices in the market are very high compared to historical event dates. Taking into account how some properties in the market are pricing very high in relation to supply and demand can help when setting your own pricing strategy to drive the most revenue.
Historical Event Data
Finally, we can look to historical event data to see how much an event drives up prices in a market compared to an average day. The way that an event increases prices for a market in relation to average prices for surrounding dates with no event demand drivers is a factor that can be applied to any part of the year, in addition to changes in seasonality and day of week influences. This type of data is used to set initial prices for a postponed or rescheduled event, which is then updated as the event draws closer and more guests look to book a vacation rental property. Similar to how we reviewed year over year pricing and the market reactions to event postponements, we can use historical pricing and ADR data to set our expectations for the new dates this year.
Change in Seasonality
Seasonality for a market refers to how supply and demand changes on a predictable basis throughout the calendar year. With some events moving to the second half of 2020 due to the coronavirus pandemic, seasonality will no doubt play a role in how markets will react to major events. Let’s take a look at Coachella as an example.
Indio, CA hosts Coachella and other events throughout the year but the most popular time of year for the area is late winter and early spring, as travelers look for warmer desert weather in the colder months. Coachella also usually takes place annually in April, which causes a surge in demand for both event weekends. This year, Coachella has been rescheduled for October, which historically has been a slower part of the year. While the rescheduled dates will no doubt influence demand and seasonality for October, it is still important to consider that it is typically a slower time of year.
Change in Seasonal Day of Week Factor
In most markets, property managers know that demand is higher on weekends compared to weekdays, and prices should follow suit. This difference in price based on what day of week it is can be measured and applied to your pricing strategy, including for events. This factor can change seasonally in the same way that weekday demand can change throughout the year. For example, warmer beach markets see less of a difference in day of week price variances during spring break season, as visitors usual travel throughout the entire week equally. For our Coachella example, we can focus on using the correct seasonal day of week factor for Thursday through Sunday, as the event only takes place on weekends.
Using each of these factors in relation to new event postponement dates that are continuing to be announced will help markets react to large-scale events being rescheduled for later this year and next year. Using these techniques and data points will be important while markets are still being impacted by COVID-19, but also for any future impacts that may cause events to be postponed as well.
For real time insight into your market, be sure to check out our Coronavirus support page. For weekly analysis from our Revenue Management team regarding the pandemic, don’t miss our Pandemic Pulse as well. If you'd like to learn more about how Beyond Pricing's dynamic pricing solution can help your business navigate these uncertain times, be sure to give us your information here and we'll set up a time to chat.