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Data-Driven Pricing for Vacation Rentals: How to Use Data to Make Pricing Decisions

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Data-Driven Pricing for Vacation Rentals: How to Use Data to Make Pricing Decisions

  1. 1. Data-Driven Pricing: How to Use Data to Make Pricing Decisions Kam Bain, Director of Operations Beyond Pricing
  2. 2. ANTITRUST STATEMENT It is the policy of the Vacation Rental Managers Association (VRMA), and it is the responsibility of every VRMA member, to comply in all respects with antitrust laws. VRMA—and, in particular, VRMA meetings and other functions—shall not be used as a means of pursuing anti-competitive practices, including: a) Setting prices or other customer charges; b) Ensuring parallel contract terms and conditions; c) Agreeing not to compete, including allocation of territories or markets; and d) Refusing to do business with any supplier, vendor, or customer.
  3. 3. Learning Objectives • Discover new data sources to help you price • Understand the pros and cons of different pricing strategies • Learn how to improve your pricing
  4. 4. Some Quick Clarification • What is revenue management? • Selling to the right person at the right time for the right price • Can include: • Dynamic pricing • Cancellation fee policies • Length of stay adjustments • Channel management • Promotions • Marketing • Today we are going to focus on the first part of revenue management: pricing
  5. 5. What is Dynamic Pricing? Changing your price based on changes in supply and demand
  6. 6. Why is this important?
  7. 7. Demand Changes A Lot 2014 San Francisco Short-Term Rental Occupancy
  8. 8. As Demand Changes, So Do Prices Price Rooms Booked High Season Demand Low Season Demand $200 $150
  9. 9. Sometimes, Supply Changes, Too
  10. 10. Pope’s Visit to Philadelphia
  11. 11. What is Variable Pricing? Charging a different price for different nights of the year
  12. 12. All Managers (We Hope) Do Some Degree of Variable Pricing
  13. 13. Example Manager
  14. 14. Homewood, Tahoe Occupancy
  15. 15. Example Sophisticated Manager
  16. 16. Clearly, There is A Lot More We Can Do with Truly Dynamic Pricing
  17. 17. Two General Goals When Setting Prices • Setting initial static prices • Changing prices as demand changes
  18. 18. What Kind of Data Can You Use to Help Price? • Comparable properties • Occupancy of your own listings • Market occupancy • Other sources
  19. 19. Comparable Properties • Managers often use “comps” in a similar way to how real estate agents do: to find a similar property and copy its pricing • When trying to get a ballpark idea of a new listing’s value, this is the go-to method
  20. 20. Comparable Property Pitfalls to Avoid • Finding the “right” comps • Copying off of “D” students
  21. 21. Finding the “right” comps • 3 bedrooms, 1,000 sq ft • Older bungalow • 6 blocks from beach
  22. 22. Finding the “right” comps • 36 nearby 3 bedrooms • $249-$700 avg price • Which do I pick?
  23. 23. Finding the “right” comps • Nearest comp • Avg price: $467 • My avg price: $247 • My occupancy: much higher in low season
  24. 24. Finding the “right” comps • While comps can get you in the ballpark, every property is unique • At the end of the day, the market sets your average price, not comps
  25. 25. Copying off of “D” students • Using comps to set your different seasonal and event prices can help • But make sure to copy off of “A” students who know what they are doing
  26. 26. Copying off of “D” students • $450 weekday, $550 weekend in high season; • $450 weekday, $485 weekend in low season
  27. 27. Copying off of “D” students
  28. 28. Copying off of “D” studentsOccupancy AveragePrice
  29. 29. Copying off of “D” studentsOccupancy AveragePrice
  30. 30. Where to get the data? • Listing sites • Competitor websites • PMT Tools, Beyond Pricing, Airdna, VRM Market Data
  31. 31. Your Own Occupancy Data • Hotels have traditionally used data on how their rooms are “pacing” to determine if demand for a single day is higher or lower than expected and adjust pricing accordingly • Vacation rental manages can do this as well
  32. 32. Your Own Occupancy Data • Hotels use their inventory of, say, 200 rooms to see how quickly they are filling up vs. last year • This works for hotels because they are trying to optimize prices across the whole PORTFOLIO of rooms • So if they don’t realize until half of the rooms are booked that there is more demand than expected, they make it up on the second half • If you do this with vacation rentals, half of your owners will get booked at too low of a rate • However, it’s better than all of your owners getting booked at too low of a rate
  33. 33. What to look for • Year over year occupancy trends • Are certain days/weeks booking up slower or faster than last year? • Aberrations in forward-looking occupancy • Are certain days/weeks booking up slower or faster than the other days/weeks around them? • Segment data as much as possible (by bedrooms, by location, etc.)
  34. 34. Pitfalls of Using You Own Inventory to See Demand Changes • Hotel style occupancy matrices require you to decide when and by how much to change price • In our Tahoe example, the PM might have sold out 80% of their inventory before they raised prices • Better than not raising prices, but better to use market demand trends to see increased demand before your places get booked
  35. 35. Where to get the data? • Your own PMS • Ask your PMS if they have occupancy reports • If not, do an export of reservations and track occupancy by week (or day if possible) • Third-party software layers • Some third-parties can help you create a better dashboard of your data by connecting to your PMS
  36. 36. Market Occupancy Data • Market occupancy data (historical and forward-looking) can help you identify supply and demand trends
  37. 37. Historical Occupancy
  38. 38. Forward-Looking Occupancy
  39. 39. Where to get the data? • Listing sites (see following example) • Competitor websites • VRM Market Data, Destimetrics (historical), PMT Tools, Beyond Pricing, Airdna
  40. 40. Using Listings Sites to Track Market Occupancy Changes • In our Tahoe example, you can track the number of units available for a date range by simply querying HomeAway
  41. 41. Questions? Contact: kam@beyondpricing.com www.beyondpricing.com Twitter: @beyondpricing

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