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Evolution of Vacation Rental Revenue Management

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Evolution of Vacation Rental Revenue Management

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Presented at the 2017 VRM Intel Live conference in Portland, we describe how to price your vacation rental on Airbnb, VRBO, or any site. We look at trends in occupancy and pricing.

Presented at the 2017 VRM Intel Live conference in Portland, we describe how to price your vacation rental on Airbnb, VRBO, or any site. We look at trends in occupancy and pricing.

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Evolution of Vacation Rental Revenue Management

  1. 1. Evolution of Vacation Rentals: Revenue Management Ian McHenry, CEO Beyond Pricing
  2. 2. About Me Beyond Pricing • Est. 2013 • Over 100k listings using us • Over 700 markets worldwide • Connected to most PMS systems • $3.5m venture capital raised Ian McHenry • Est. 1983 • 12 years in travel • Previously helped major global airlines (and a bit of hotels) with pricing & loyalty at Oliver Wyman • Princeton University undergrad
  3. 3. Vacation Rentals Are Following Hotels… • Increased consolidation (Vacasa, Wyndham, Vacation Rental Pros, etc) • Emergence of franchises (Choice, iTrip, Teeming, Grand Welcome, etc) • Online booking, OTA dominance • Sophisticated pricing and revenue management (4 seasonal rates now turning into 20+ rates for most managers in most markets)
  4. 4. But They Are Also Innovating Ahead of Hotels • Personalized guest experiences and connection to local activities • Smart locks and automatic check-in • Welcome guides and apps • Optimizing prices on an individual unit level
  5. 5. Major Challenges for Independent Managers • Need to compete with multi-market large managers and franchises, whose combined resources aid in paid marketing & SEO, revenue management, and brand recognition • Emergence of “light-weight” managers like Evolve, Pillow, etc. handling bookings, guest communication, and coordinating cleaners
  6. 6. The Importance of Revenue Management • With all of the new competition and multi-market managers offering revenue guarantees to owners, it’s more important than ever to invest in revenue management to help owners (and managers) make more money • Managers who don’t focus on revenue management risk losing owners to more sophisticated companies who can show greater returns
  7. 7. What is Dynamic Pricing? Changing your price based on changes in supply and demand
  8. 8. Why is this important?
  9. 9. Demand Changes A Lot 2014 San Francisco Short-Term Rental Occupancy
  10. 10. As Demand Changes, So Do Prices Price Rooms Booked High Season Demand Low Season Demand $200 $150
  11. 11. Sometimes, Supply Changes, Too
  12. 12. Pope’s Visit to Philadelphia
  13. 13. What is Variable Pricing? Charging a different price for different nights of the year
  14. 14. All Managers (We Hope) Do Some Degree of Variable Pricing
  15. 15. Example Manager in Homewood, Lake Tahoe
  16. 16. Homewood, Lake Tahoe Occupancy
  17. 17. Example Sophisticated Manager
  18. 18. Clearly, There is A Lot More We Can Do with Truly Dynamic Pricing
  19. 19. Two General Goals When Setting Prices •Setting initial static prices •Changing prices as demand changes
  20. 20. What Kind of Data Can You Use to Help Price? •Comparable properties •Occupancy of your own listings •Market occupancy
  21. 21. 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
  22. 22. Comparable Property Pitfalls to Avoid •Finding the “right” comps •Copying off of “D” students
  23. 23. Finding the “right” comps • 3 bedrooms, 1,000 sq ft • Older bungalow • 6 blocks from beach
  24. 24. Finding the “right” comps • 36 nearby 3 bedrooms • $249-$700 avg price • Which do I pick?
  25. 25. Finding the “right” comps • Nearest comp • Avg price: $467 • My avg price: $247 • My occupancy: much higher in low season
  26. 26. 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
  27. 27. 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
  28. 28. Copying off of “D” students • $450 weekday, $550 weekend in high season; • $450 weekday, $485 weekend in low season
  29. 29. Copying off of “D” students
  30. 30. Copying off of “D” students Occupancy AveragePrice
  31. 31. Copying off of “D” studentsOccupancy AveragePrice
  32. 32. Where to get the data? •Listing sites •Competitor websites •VI Reports, Beyond Pricing
  33. 33. 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
  34. 34. 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
  35. 35. 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.)
  36. 36. 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
  37. 37. 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
  38. 38. Market Occupancy Data • Market occupancy data (historical and forward-looking) can help you identify supply and demand trends
  39. 39. Historical Occupancy
  40. 40. Forward-Looking Occupancy
  41. 41. Where to get the data? • Listing sites (see following example) • Competitor websites • VI Reports, Destimetrics (historical), Beyond Pricing
  42. 42. 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
  43. 43. Questions? Contact: ian@beyondpricing.com www.beyondpricing.com Twitter: @beyondpricing

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