A cohesive revenue management strategy for your vacation rental business can be challenging to build and even more so to execute on. It involves good communication of reports, key performance indicators (KPIs), and advanced metrics across all stakeholders and platforms, internal and external. It’s not easy, but it doesn’t have to be overwhelming. 

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To help you build out your revenue management strategy, I have identified a few red flags that I spot in the booking and reservation data. Spotting these red flags can ensure that you are able to immediately course-correct your pricing and revenue management strategy. 

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1. Minimum stays not aligned to the market

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Pricing and availability go together. Even if you have your pricing set to dynamically match market demand, you are still typically setting your minimum stays. It’s important to monitor your forward-looking occupancy for any drop offs, especially when they are in sync with optimistic minimum stays. While your 7-day minimum stays may be in market alignment in peak summer, expanding them over Memorial Day weekend may be causing you to miss out on the majority of travelers.

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Pro Tip: Ask your data provider for free data on average minimum stay requirements in your area.  

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2. A long list of “unsellable days” (and no reaching out)

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Some days just cannot be sold to guests, and that’s okay. Maintenance, deep cleaning, and other operations tasks, as well as regulations in some places, are all valid reasons to not sell a night. However, these nights do cause lost revenue so it's important to check that these nights are intentional. Reviewing these days to ensure that your minimum stay and gap-filling policies are working as intended is important. Additionally, if they are truly not bookable to new guests then do outreach to booked guests on either side to see if they will extend their stay for a discounted rate. 

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Pro Tip: Review your list of unsellable nights weekly, there tends to be more than you think!

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3. A high percentage of reservations from last minute discounts

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Last minute discounts (LMDs) are a great feature, but they should not make up your entire strategy. Using LMDs to pick up last minute occupancy can help boost revenue, but you need to be careful not to discount your peak booking window or under-price bookings you would have gotten without a discount. 

Address this by setting up LMDs by the lead time in your market, bedroom size, and time of year. This will help ensure you aren’t undercharging for peak nights and still taking advantage of last minute interest. If your average booking lead time is close to when you start offering last minute discounts, you should revisit your LMD settings.

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Pro Tip: Aim to get somewhere between 10-25% of your bookings from LMD.

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4. A high percentage of unbooked days at minimum price

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Setting a minimum price can cause a lot of friction between property managers and vacation rental owners. During low season, property managers want the lowest possible price in order to get some revenue, while owners still want to ensure guests meet their standards and pay a premium — even when every other vacation rental is empty. Finding the balance is tricky, and, in most cases, it seems easier to just accept what the owner wants. However, that may not always be in their best interest and can leave money on the table. Instead, educate your owners on how to extend their booking season by not overpricing low and shoulder seasons. They will thank you when it’s time to pay their mortgage.

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Pro Tip: Every 6 months, check the percentage of unbooked days at minimum price by each listing. Have a conversation about lowering minimum prices with the owners with the biggest percentages. 

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5. Missing markups (and profits) on booking channels

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onversion can feel insignificant compared to OTA fees, but you still want to have a clear line of sight on your profitability. Use dynamic markups to increase or nullify fees across OTAs and consider adding a small service fee to direct bookings to offset those costs, while still encouraging travelers to book through your most profitable channel.

Pro Tip: Dynamic channel markups are a great way to maximize profitability but be careful not to cut your booking season short on certain channels by pricing too high in low and shoulder season.  

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6. Occupancy and average daily rate (ADR) move in opposite directions 

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We all want higher rates AND occupancy. While 2021 proved we can have it all, this may not always be the case, and we may have to give one or the other up to maximize total revenue. Good revenue managers will keep an eye on forward occupancy and ADRs looking for deviations that suggest a misalignment in their rates to what the market will bear. If rates are up but occupancy is down, or vice versa, you aren’t adjusting your prices enough to react to the market.

Pro Tip: Any pricing review should include comparing future ADR and occupancy versus the same time last year (pacing). Look for date ranges where this year’s ADRs are more than +/- 10% while occupancy is over 10% in the other direction as a start. 

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7. Drastic bookings pace change day over day

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Most Revenue Managers I know watch bookings pace like a hawk. Spending a few minutes every day on the number of reservations that came in the previous day (and week) is imperative to pick up on any issues. This practice will show you how you are pacing compared to last year and doing this in-depth can be a red flag to show you what listings are over/under pacing or alert you to any issues with channels or websites if bookings through them just suddenly stop. If you see any drastic changes it can be the easiest way to detect that something needs your attention. 

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Pro Tip: If you have the time, don’t just review the number of reservations that came in, but also map where in the calendar they are checking in for. Any unexplained clustering of reservations on certain check-in dates, or large empty days may be a sign that a period may be mispriced across all your listings.  

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Are you ready to level up your revenue management strategy? Let’s start working together. You can learn more by requesting a demo.

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