Over the last 12 months, inflation around the world has grown exponentially — the UK and the U.S. have each reached record highs this year. Consequently, property managers (PMs) need to react quickly to changes in their costs.
While some might be able to absorb rising costs, most have needed to pass these to the guests in the form of higher rates. We’ve already seen this happen over the past year with Average Daily Rate (ADR) going up between 2021 and 2022 by 31%.
With that in mind, we decided to explore how inflation impacts the holiday letting industry and, most importantly, what property managers can do to combat it.
1. Fully Review Your Overall Short-Term Rental Pricing Strategy
The first thing to do is review how much it costs you to have a guest spend a night, aka your marginal cost per listing. Ensuring that your minimum prices are at least covering your costs is the bare minimum to ensure that all reservations are still profitable. Increasing the final cost to the guest is obvious, but taking this a step further, exactly what levers or mechanisms should we use? Is increasing my nightly rate the best option or just adding on to my fees?
2. Manage Your Owners’ Expectations
As a property manager (PM), your most important relationship is with your owner. Share your strategy for tackling inflation with owners to get ahead of any worries or concerns. This will go a long way in engaging with and strengthening your relationships with owners. And if you can get ahead and manage your owners’ expectations in advance, explaining any drop in demand or helpful rate decreases will be much easier.
3. Retain Your Owners By Having These Conversations Early
Your business relies on client retention so by proactively talking to your owners, you may significantly reduce the possibility of an owner turning their back on the short-term rental market. This would be a good time to review your pricing strategy with your owners too, specifically taking a look at your minimum prices. It’s important to reassess the minimum prices on your listings as your costs and overhead change to ensure that no one takes an unprofitable booking.
4. Attract New Guests By Keeping Up with Guest Demands for Sustainability
Consumer desires drive markets, and holiday consumers are no different. Today’s energy-conscious travellers are discerning customers who more and more are looking for sustainability when planning their holidays. People want to see what efforts have been made to reduce the carbon footprint of a holiday home, and your homes will stand out from the rest with renewable energy.
Renewable energy is going to become a key solution in continuing to deliver the kind of return your owners have come to expect. For example, installing solar panels could reduce the carbon footprint of the holiday home by up to 80% over the course of a year. Over the coming months, think about your portfolio and which of your properties would lend themselves best to adaptation to solar panels, air-source heat pumps, home batteries, or other renewables, and begin the conversation around future-proofing your owners’ investments.
5. Consider Alternative Revenue Streams
Consider adding in new streams of revenue to help with rising costs. Upsells or upgrades, for example, can be an easy, low-effort way to start. Think about adding in upsells like early or late check in, concierge services, mid-stay cleaning, or grocery delivery on arrival. These can be low effort and offer higher returns.
Property managers can also think about turning individual properties in their portfolios into “destination” locations as a way to attract new and repeat guests. Buying low-cost wholesale additions to add to your list of amenities and marking this up can make the difference between making a profit and breaking even. Keep in mind that some amenities lead to higher returns than others.
6. Fly to Vs Drive to Destinations
Everyone desires to get away, but fuel costs mean that a 700-mile trip taken by a family for their annual holiday may have to be reduced to just 100 miles. But there is no reason for this to reduce your portfolio’s profitability, it simply means looking closer to home for revenue. Let’s consider the need to reduce our geographical scope and think closer to home.
You may have a marketing budget, which has a geographical focus of 100s if not 1000s of miles beyond your immediate geographical area. Think about the potential impact it could have to reduce this advertising to a more fuel economic radius to your portfolio. Many of us simply cannot afford to travel as far as we once would have, so let's facilitate and help the market by telling them we are here, waiting for them to book.
7. Manage Guest Expectations
Your guests are quite simply, on holiday! So anything you can do to help manage what is expected of them while staying can make a difference to your profit margins. There are some simple things you ask of your guests - they won’t all adhere to them - than can improve on your overheads. Consider asking small things like taking out the waste on the right day, turning off the lights when they leave, and fully loading the dishwasher before turning it on. It all helps
8. Bonus Point: New Opportunities for Growth
In the words of Winston Churchill: "never let a good crisis to go to waste", it's important to keep in mind that with inflation, more and more people will be looking to rent out their second home. The Beyond Insights tool not only allows you to make better pricing decisions but also to see fellow listings in your area. By checking nearby houses, the prices that they charge in relations to the amenities that they have, you'll be able to find new business expansion opportunities.
Beyond is Here to Help
It is important to communicate and demonstrate to your owners the value you bring to them and their properties. Using Beyond to help show market data, demand trends, and the other tactics you are implementing will strengthen the quality of your owner communications, and build trust. Get our best-in-class data at your fingertips today!