Vacation rental pricing tool providers in the industry have recently started to talk about the importance of length of stay pricing. So when it comes to incorporating this into your revenue management strategy, do the pros outweigh the cons?
Length of stay pricing is most commonly used to help hosts ease up on minimum stay restrictions and still have the opportunity to generate the same amount of revenue – not to be confused with length of stay discounting, which allows hosts to offer weekly or monthly stay discounts to encourage longer stay lengths. An example of length of stay pricing: A host previously required guests to book for 7 nights generating $700 for the week. With length of stay pricing, they now can lower their restrictions and allow guests to book for 2,3,4,5,6, or 7 nights and still generate the same $700 in revenue.
The Main Benefit of Length of Stay in Your Vacation Rental Pricing Strategy
The more lenient the minimum stay restrictions, the more searches you’ll show up in on the online travel agencies (OTAs), like Airbnb, VRBO, etc. Since length of stay pricing allows you to be more lenient, the biggest benefit is that more eyes will be on your listing – meaning that you will potentially score more bookings. With a 7-night minimum stay rule, for example, there are many markets where you’d be missing out on 50%+ of search traffic.
A Few Risks of Length of Stay Pricing
While using length of stay pricing to ease up on your minimum night stay restrictions would allow you to be bookable by more potential guests, it would also render your rates inflated and no longer competitive. In that same example above, this would mean a traveler looking for a 2-night stay would be paying $350/night vs the true market price of $100/night.
Assuming others in your market are intentionally setting dynamic prices based on the most common stay durations, you’d be unlikely to win that booking unless market occupancy reaches 80+% and there’s less competitive inventory available. Quotes for shorter stays can also already feel inflated as is due to the impact of fees being amortized over fewer nights.
With length of stay pricing, your conversion rate might lower. You would also be less likely to convert those views due to the artificially inflated pricing for shorter stays. This means you could also be impacting your page view to booking conversion rate, which helps the online travel agencies (OTAs) decide where to place your property in the search results.
With dateless searches accounting for around 45% of traffic on Vrbo, and likely slightly higher on Airbnb (especially due to their new unique category filters), it’s also important to consider the impact on how your average nightly price in search is calculated for those travelers who have yet to define their dates. On Vrbo, for example, the price is calculated based on the property’s rates and availability for the upcoming 4 months. It takes into account all possible stay lengths within that period and calculates the average nightly rate-skewing a bit to account for the most common stay durations such as 3, 4, and 7 nights. This means, with artificially inflated quotes for say lengths of 2-6 nights, your average nightly price for dateless searches on OTAs is also likely to be inflated, too.
Hosts and property managers - Do you agree or have you discovered a strategy to use length of stay pricing successfully? Let us know!
And for hosts and property managers who are new to revenue management and dynamic pricing, get in touch with us to see how Beyond can improve your business.
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