Those who are taking their first steps in the Breckenridge vacation rental industry might believe that setting nightly rates is a simple task. However, experienced Breckenridge vacation rental managers like ourselves understand that pricing revolves around many other elements.
The baseline nightly fee for your rental is mostly determined by its type, size, and the amenities it offers, but its competitiveness in the local market is also important. Moreover, each market shows different seasonal patterns which hosts need to pay attention to.
At Great Western Lodging, we see pricing as a continuous process, not a one-time task. Even after establishing a baseline fee, we don’t keep it fixed; being flexible is our strategy to increase revenues, and we count on a dedicated team of revenue optimization managers to continuously evaluate the market and adjust pricing for everyday of the calendar.
Curious about our revenue management strategy?
This blog will bring you our seven-step guide to boost your vacation rental revenues.
Revenue management is about setting the right price for the right guest at the right time — and doing so continually. Pictured: Saddlewood.
What is revenue management?
Revenue management means setting the right price for the right guest at the right time. This is more complex than it sounds and it involves consistently monitoring market conditions and adjusting fees to beat your competitors and ensure consistently high occupancy rates.
Embracing a mindset focused on revenue optimization and following the steps below can really boost your vacation rental business to new heights of success.
Step 1: Pick the right pricing tool
As we mentioned, setting the right price continuously for your vacation rental is complex, but the good news is that there are software solutions out there to help with both revenue management and dynamic pricing.
These automated tools collect historical and real-time data and analyze similar listings in your region to establish the best price at any given moment.
It's safe to say that they can take over a substantial part of the workload, about 70 or 80%, off your back.
Here's how they can help:
- Modifying prices according to demand fluctuations and occupancy levels.
- Identifying the most competitive rates for both peak and off-peak seasons.
- Finding the optimal duration of stay based on seasonal variations.
- Effectively handling days with no bookings.
- Spotting significant events in your area that may have escaped your attention.
- Managing sudden cancellations and rebookings on short notice to mitigate revenue loss.
Below you can see a summary of our three favorite tools:
- Beyond: formerly known as Beyond Pricing, this choice offers user-friendly features, suitable for those seeking a more automated approach. Still, we advise that you stay actively engaged with the system. Despite potential limitations in customization, Beyond still manages essential pricing adjustments very well.
- PriceLabs: this is an excellent choice that provides a lot of flexibility and customization, empowering you to optimize revenue with minimal time investment. PriceLabs seamlessly integrates with many systems, granting owners and property managers substantial control over their pricing strategy.
- Wheelhouse: sitting between the first two options, Wheelhouse is great for revenue optimization. Yet, it requires consistent monitoring and adjustments. Wheelhouse’s open-source approach to integration with other tools and platforms, however, is great for making things more efficient.
Regarding fees, for each of the tools above you can expect something around 10% of your earnings. But the benefits they bring really outweigh the cost.
Step 2: Know your competitors
As Breckenridge vacation rental managers, we can't emphasize enough the importance of constantly monitoring your competition. This involves pinpointing similar rentals in your market in terms of location, size, amenities, target audience, and overall positioning. The aim is to observe their performance and implement essential adjustments in your strategy to stay competitive.
To simplify the process, there are tools, like the ones we mentioned above, that offer real-time data for this task. However, it's still important that owners understand what aspects to focus on.
Here are a few factors to consider:
- Amenities: assess the amenities you offer and compare them with those of similar properties in your region.
- Size and guest capacity: evaluate the dimensions and guest capacity of your rental compared to other listings in your area.
- Location: study properties near yours to understand the dynamics of the local market.
- Performance: evaluate aspects such as revenue, average daily rate (ADR), and occupancy rate. The tools we mentioned above provide extensive performance data, including insights into your competitors.
- Quality: consider guest ratings and reviews for your property and comparable listings to measure guest satisfaction.
Gathering this sort of data into a comparative set enables you to make data-driven enhancements, improving both your property’s performance and your guest experience.
Step 3: Set your pricing metrics
Setting pricing metrics essentially means outlining the principles and criteria that will rule your nightly rates.
The first step is to establish your baseline price. To do so, calculate your expenses to find the minimum rate that guarantees you don’t make a loss. Now that you know your competitors, you can set your base price more strategically.
When establishing your metrics, keep in mind that your occupancy rates will vary across seasons. This is where the ideas of minimum and maximum pricing become important; you can set lower prices during slower periods and to fill last-minute gaps and enjoy higher rates during peak season.
Although it might be tempting to offer lower prices than competitors to secure bookings, you should exercise caution here. At Great Western Lodging, once we set a minimum rate, we never go below it.
Besides seasonality, pricing can be influenced by special events in your area, and weekdays may differ from weekends. Dynamic pricing tools are great for automatically considering these factors and automating rates across all your booking channels.
Step 4: Set specific rules
Now that you know the baseline price, and your minimum and maximum price, you can implement tailored rules for refining your revenue strategy.
Below are a few examples:
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Extend booking window prices: consider increasing prices for bookings that fall outside your usual booking time frame.
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Last-minute discounts: providing discounts for vacant slots with a short widow can bring in last-minute bookings and help fill those gaps between bookings.
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Orphan day discounts: you can lower rates for those gap days, often known as “orphan days,” in your rental calendar that appear sometimes between longer bookings.
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Minimum and maximum night stays: you can customize the optimal duration of stay based on the preferences of your target market.
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Weekday discounts: usually, demand for vacation rentals is lower on weekdays than on weekends. You can attract additional bookings during quieter periods by providing discounted prices for weekday stays.
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Discounts for longer stays: you can promote longer stays by offering discounts for a week or more. This not only helps fill vacancies but also decreases cleaning and operational costs.
Once you’ve applied these rules, it's important to evaluate their influence on your occupancy and overall revenue. By analyzing the data, you can refine your strategy again and again.
Keep in mind that the more rules you set, the more limitations your rental may pose for potential guests. Keeping things flexible to a certain extent is important to stay available to a broader range of guests.
Step 5: Pick your channels
In vacation rentals, everything happens online, so it's a good idea to list your rental on many platforms so you can have exposure to a wider audience.
Platforms such as Airbnb and Vrbo draw millions of daily visitors. So, if you list your rental on these platforms it will really enhance your visibility.
Here’s some information about them:
- Airbnb: known for its user-friendly interface, this platform takes care of various tasks such as payment processing and insurance. Airbnb serves as an excellent entry point and is commonly the preferred platform for many renters.
- Vrbo: In the United States, Vrbo stands out as a good alternative to Airbnb, particularly in conventional vacation rental markets. Listing on Vrbo also grants exposure on other platforms, such as Expedia and Hotels.com, offering a great advantage.
Remember: your rental listing is a virtual representation of your property, so, to avoid unhappy guests, make sure to incorporate all crucial details about your rental and its conditions.
Selecting and periodically monitoring your performance across booking channels is essential for maximizing your rental revenue. Picture: Village at Breckenridge.
Step 6: Track your performance and gain traction
After setting your metrics, your rules, and selecting your channels, it’s important to observe how your rental performs. Keep a keen eye on your booking activity in the early days and make the pricing adjustments you need.
In the beginning, a great strategy is to search for similar rentals in your area and establish your nightly rate slightly lower than theirs. To enhance your rental’s visibility from the outset, you can provide a 20% discount on the initial three bookings through Airbnb and Vrbo, as both platforms often give new listings a push to compensate for their lack of reviews.
Yet, refrain from maintaining low prices for long. After gathering some positive reviews and establishing a reputation, it’s better to reserve this strategy for off-peak seasons. Positive reviews will give you greater flexibility to experiment with price increases.
Step 7: Review your revenue management strategy regularly
To unlock the full potential of your Breckenridge short-term rental, it’s essential to continually monitor your performance, compare it with competitors, and make the necessary adjustments.
Here are some extra insights from our team:
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If your vacancy rate for 60/90 days is below the market average, consider lowering your base rate by 5-10%.
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On the flip side, if your vacancy rate for 60/90 days surpasses the market average by over 10%, you have the option to raise your base rate by 5-10%.
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If your vacancy rate for 60/90 days is acceptable but the rate for 30 days is too low, consider manually setting a discount for the upcoming month to fill those vacant dates.
Extra tip: boost your revenues by partnering with a property manager
By now it's probably clear that maximizing returns from your Breckenridge rental involves more than just adding a profit margin to your costs.
If you think that all this sounds too complicated or like too much work, you can always find the experts to do it all for you.
As long-time rental property managers in Breckenridge, we have a comprehensive understanding of pricing strategies and will work to enhance your earnings for every season, every month, and every day of the calendar.