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Intro to Dynamic Pricing & Yield Management for Vacation & Short-Term Rentals

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Intro to Dynamic Pricing & Yield Management for Vacation & Short-Term Rentals

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From our 2015 VRMA National panel talk.

This is the best starting point for learning about how to dynamically price your vacation rental or short-term rental and improve your yield.

From our 2015 VRMA National panel talk.

This is the best starting point for learning about how to dynamically price your vacation rental or short-term rental and improve your yield.

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Intro to Dynamic Pricing & Yield Management for Vacation & Short-Term Rentals

  1. 1. Intro to Dynamic Pricing & Yield Management 
 FOR VACATION & SHORT-TERM RENTALS
  2. 2. Panel • Ian McHenry, Co-Founder & President, Beyond Pricing • Scott Breon, Chief Revenue Officer, Vacasa • Ari Eryorulmaz, Owner, AE Hospitality • Emily Vandall, Director of Marketing, Beachwalker Rentals @beyondpricing beyondpricing.com
  3. 3. Some Quick Clarification • What is yield 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 • “Yield” was traditionally an airline term and hotels started calling it “revenue management”
  4. 4. What is Dynamic Pricing? Changing your price based on changes in supply and demand @beyondpricing beyondpricing.com
  5. 5. Why is this important?
  6. 6. Demand Changes A Lot 2014 San Francisco Short-Term Rental Occupancy 50%$ 55%$ 60%$ 65%$ 70%$ 75%$ 80%$ 85%$ 90%$ 95%$ 100%$ 1/1/14 2/1/14 3/1/14 4/1/14 5/1/14 6/1/14 7/1/14 8/1/14 9/1/14 10/1/14 11/1/14 12/1/14 1/1/15
  7. 7. As Demand Changes, So Do Prices Price Rooms Booked High Season
 Low Season $200 $150
  8. 8. Sometimes, Supply Changes, Too
  9. 9. Pope’s Visit to Philadelphia
  10. 10. What Happens When You Don’t Vary Your Prices Owner #3 !$100!! !$120!! !$140!! !$160!! !$180!! !$200!! !$220!! !$240!! Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Owner #2 Owner #1
  11. 11. What Happens When You Don’t Vary Your Prices • Owner #1 - $140/night – Chronic Under Pricer • She will be filled 95% of the time and excited about her high occupancy • Owner #2 - $180/night – Average Jane • She is excited because she is filled from March-October and thinks winters are just “slow” • Owner #3 - $220/night – Occasional Olivia • Her calendar is usually open, except for big events which are booked months in advance Beyond Pricing
  12. 12. But You Already Know This
  13. 13. Most Managers Already Vary Their Prices • Most managers will have at least: • High season • Low season • Weekend • Last-minute discounts
  14. 14. Question How many different rates does your average property have?
  15. 15. What is Variable Pricing? Charging a different price for different nights of the year
  16. 16. All Managers (We Hope) Do Some Degree of Variable Pricing
  17. 17. Example Owner
  18. 18. Homewood Occupancy
  19. 19. Example Sophisticated Manager
  20. 20. Clearly, There is A Lot More We Can Do with Truly Dynamic Pricing
  21. 21. Managers Are Losing Millions of Dollars by Using Flat (or Semi-Flat) Pricing $200 $100 $300 $400 Date Single Nightly Rate Optimized Rate Lost revenue Lost bookings • Money left on the table during periods of high demand • Units sitting empty during periods of low demand
  22. 22. Dynamic Pricing Helps in 2 Ways 1. By lowering your price when demand is low, you can increase your occupancy 2. By increasing your price when demand is high, you can increase your average nightly rate $200 $100 $300 $400 Date Additional $200 $100 $300 $400 Date Higher Nightly
  23. 23. 1. Seasonality 2. Day of Week 3. Events 3 Biggest Factors Driving Demand
  24. 24. Seasonality is Different in Every City ChangeinDemand -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% Jan$15' Feb$15' Mar$15' Apr$15' May$15' Jun$15' Jul$15' Aug$15' Sep$15' Oct$15' Nov$15' Dec$15' Jan$16' Miami' SF' San'Diego' NYC'
  25. 25. Seasonality is Different in Every CityChangeinDemand !30%% !20%% !10%% 0%% 10%% 20%% 30%% 1!Jan% 1!Feb% 1!Mar% 1!Apr% 1!May% 1!Jun% 1!Jul% 1!Aug% 1!Sep% 1!Oct% 1!Nov% 1!Dec% Kona% Des@n% Myrtle%Beach% Asheville,%NC% South%Lake%Tahoe%
  26. 26. Seasonality Also Differs in Neighborhoods of the Same City ChangeinDemand !20%% !15%% !10%% !5%% 0%% 5%% 10%% 15%% 20%% 25%% 30%% Jan!15% Feb!15% Mar!15% Apr!15% May!15% Jun!15% Jul!15% Aug!15% Sep!15% Oct!15% Nov!15% Dec!15% Jan!16% Lake%Tahoe:%King's%Beach% Lake%Tahoe:%%Kirkwood%/%Sierra!at!Tahoe%
  27. 27. Seasonality Also Differs in Neighborhoods of the Same CityChangeinDemand !10%% !5%% 0%% 5%% 10%% 15%% 20%% 25%% 30%% Jan!15% Feb!15%Mar!15% Apr!15% May!15% Jun!15% Jul!15% Aug!15% Sep!15% Oct!15% Nov!15% Dec!15% Jan!16% San%Diego:%%Gaslamp% San%Diego:%%Mission%Beach%
  28. 28. ChangeinDemand Day of Week Variations Are Different in Every City !20%% !15%% !10%% !5%% 0%% 5%% 10%% 15%% 20%% 25%% Sun% Mon% Tue% Wed% Thu% Fri% Sat% Madrid% SF% Mountain%View%
  29. 29. Events Can Have Big Impacts on Demand 40%$ 50%$ 60%$ 70%$ 80%$ 90%$ 100%$ 1/1/14$ 2/1/14$3/1/14$ 4/1/14$ 5/1/14$ 6/1/14$ 7/1/14$ 8/1/14$ 9/1/14$10/1/14$11/1/14$12/1/14$ JP M organ H ealthcare G D C C isco LIVE G oogle I/O O utsidelands D ream force O racle O penw orld AmericanSociety ofHematology Occupancy
  30. 30. Event Impact is Highly Local VS Event Location X Hotel CenterX
  31. 31. One More Important Question
  32. 32. Are You a Motel 6 or a Marriott? VS VS
  33. 33. 0 20 40 60 80 100 120 140 160 180 200 <$75 $75-100 $100-125 $125-150 $150-175 $175-$200 $200-225 $225-250 $250-300 $300+ Finding the Right Average Price for Your Place is Tough South Beach, Miami 1 Bedroom Prices NumberofListings Motel 6 Marriott Ritz? Avg=$140
  34. 34. Many Factors Contribute to How Much You Can Charge • Amenities • Number of Reviews • Average Star Rating • Quality of Pictures • Number of Pictures • Stainless Steel Appliances • Location • Response Time • Listing Site Search Ranking • Number of Bedrooms • Number of Bathrooms • Number of Beds • Extra Guest Fee • Cleaning Fee • Instant Book • Listing Title
  35. 35. What Matters is How Quickly You Book Versus the Average
  36. 36. You can then vary your average rate based on changes in demand $- $50 $100 $150 $200 $250 $300 Jan$14' Feb$14' Mar$14' Apr$14' May$14' Jun$14' Jul$14' Aug$14' Sep$14' Oct$14' Nov$14' Dec$14' Ritz Marriott Motel 6
  37. 37. Booking Curves Tell You How Far in Advance Are People Booking PercentofBookings Days Out 0%# 10%# 20%# 30%# 40%# 50%# 60%# 70%# 80%# 90%# 100%# 1# 31# 61# 91# 121# 151# 181# 211# 241# 271# 301# 331#
  38. 38. Two Implications of the Booking Curve 2. Tells You What Percent of Demand is Still Left Allows you to know whether and when to discount 1. Tells You Whether You’re Booking Up Too Quickly If you are, chances are you can increase your average nightly rate, or “Base Price”
  39. 39. What About My Competition? 1. Comps help you figure out your average price • However, keep an eye on how quickly your units book up relative to your booking curve. This is the best indicator of your “Goldilocks” average price 2. If you have smart neighbors (ahem, Vacasa), tracking the changes in their prices for events, seasonality, day of week, etc. can help • However, you never want to copy off of a ‘D’ student if you’re going to copy 3. In periods of low-demand / last-minute availability, making sure you are competitively priced can be important
  40. 40. Hotel Competition • Hotels can sometimes be a substitute for your vacation rental product. • In addition, some of them have incredibly sophisticated software to help them predict demand. • Tracking their prices for the next year will help you get an idea of when major events and seasons will be
  41. 41. What About Distressed Inventory? • Distressed inventory is any last-minute or hard to book nights that you need to fill • Don’t want to train guests to wait until the last minute because they know you are going to discount • Want to know how early to start discounting - some markets have a lot of bookings in the week before. • People use different strategies including opening inventory on channels with more last-minute bookers • Hotels use sites like Hotwire which mask their name so loyal customers can’t book the special rates • Any other channels people use?
  42. 42. This is All Great, But How Do I figure Out “Demand”?
  43. 43. 1. Historical Demand Curves • Lots of third parties offer data on occupancy rates throughout the year - start there • Your own historical data probably has some good insights
  44. 44. 2. Real-time Demand Changes • 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
  45. 45. 2. Real-time Demand Changes • Better is to look at the whole local market to see changes in supply and demand • You can use third-party services that are emerging to help you do this • You can build your own bots to track this • Or you can do it manually
  46. 46. Example
  47. 47. Advice on Getting Started • Scott Breon, Chief Revenue Officer, Vacasa • Ari Eryorulmaz, Owner, AE Hospitality • Emily Vandall, Director of Marketing, Beachwalker Rentals
  48. 48. Questions? Contact: ian@beyondpricing.com

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