Over the last few years, the short-term rental market has grown by almost twenty-five percent. Other players in the vacation & travel industry, however, have seen not seen as much growth. Even before the pandemic hit, big chain hotels and airlines were struggling while the demand while the vacation rental industry kept growing and growing.
While the unique conditions of 2020 played a major role in this growth, we believe that the market for short-term rentals has fundamentally and permanently expanded. Millions of travelers tried short-term rentals for the first time, and for the most part, they seem to have liked it. That is not to say, however, that it will be all smooth sailing for this market. It is still a relatively small piece of the hospitality landscape that's dominated by multi-billion dollar hotel and hospitality organizations. They've been operating for decades using cutting-edge systems and technology – and short-term rental managers and hosts need access to the same tech and tools.
The best and most effective way short-term rental properties can compete for those precious traveler dollars is to have an effective revenue management strategy, and the key component to that strategy is dynamic pricing.
How Dynamic Pricing Works
Similar to other types of dynamic pricing that hotels and airlines utilize, dynamic pricing is the ability to automatically understand and respond to real-time supply and demand changes on a daily basis. At its simplest, it means being able to automatically charge higher rates when there is greater demand and charging lower rates when there is less demand. Without dynamic pricing software, you’re almost certainly leaving money on the table by not charging enough when the demand climbs, while at other times your occupancy rates are lower than they should be because you didn’t drop your prices quickly or low enough.
Source: Beyond Data
The chart above is an example of how big are the daily fluctuations in historical data, as well as the uneven spread in pacing we see in the future. As you can see, there is a lot of daily fluctuation.
A dynamic pricing tool allows your prices to immediately respond to these changes in supply and demand.
These incremental bookings lead to higher occupancy—about 12 points more on average—and ultimately, more revenue.
Dynamic Pricing Does the Heavy Lifting
Think of a dynamic pricing tool as the powerful beast of burden in your revenue management strategy arsenal. Once you set it, you’ve basically unleashed a smart, advanced animal that does about 95% of the heavy lifting for you. It’s built to find pockets of revenue in areas other tools can’t, therefore maximizing potential revenue.
Source: Beyond Data
This chart illustrates what those hidden pockets of revenue are—fluctuations in daily demand. Flat or seasonal pricing doesn't account for these changes. It also doesn't allow you to automatically go as high as you should when demand spikes, or as low as you should when demand softens. Flat and seasonal pricing is not tied to these demand trends and data, and these methods rely heavily on manual work.
On the contrary, Beyond's dynamic pricing tool is powered by an algorithm that automatically positions your properties to be booked at the best price at the right time. It utilizes several strains of complex logic, culminating in the correct daily price for each listing. During periods of high demand, the algorithm will adjust upwards from the Base Price. It will do the same during low-demand periods, reducing the price accordingly.
Dynamic Pricing Lets You Focus On Other Areas
Manually pricing, or trying to manage a less sophisticated pricing tool, is tedious and time-consuming. By trusting a dynamic pricing tool, you will have more time to do other important things, like focusing on problem listings, working closer with harder-to-please owners, and addressing guest issues in a more timely manner.
Dynamic pricing can also help improve owner relationships. Having a proactive revenue management strategy in place that is centered around dynamic pricing will not only save you time and increase your revenue, it’s also a sure-fire way to keep your owners happy. Take it from John Custer, part-owner and manager of Four Seasons Property Management Company in Ozarks, MO. Since incorporating Beyond in his pricing strategy, Four Seasons Property Management Company’s revenue is up 35%. John also feels more in control of his properties and their pricing, and he knows that he can deliver more value to his owners.
“You can’t argue with the numbers. My owners are ecstatic about the rates I’m able to get (by using Beyond). I can easily say we are getting double-digit higher percentages than before. You guys make me look like a freakin’ rock star!” John said.
Ready to see how you can implement dynamic pricing? We’d be happy to show you!