5 Vacation Rental Pricing Mistakes You Might Be Making
Colorado Luxe Living 2018
Vacation rental pricing is a difficult skill to master.
Price too low and you risk losing money. Price too high and you risk losing bookings.
We’ve worked with many owners who hold tightly to the idea that the higher their rates, the more money they’ll make – even when their calendars are empty and they haven’t received a booking in weeks. We’ve worked with others who are reluctant to raise their rates when demand peaks – even if it means collecting less money than their neighbors.
Intuitively, we understand these impulses. We’re not just talking about any asset. Even if you purchased the property as an investment, it’s your home. It’s something personal, and when it’s something so close to the heart, it’s hard not to see the intangible value.
The last week in August might be worth more to you because that’s when your family usually gathers for a reunion. If the weekly price you set for July is what you’ve always charged, why change it now? It’s always covered your costs and the bills are always paid.
Changing the way you price your vacation home can feel risky – but it doesn’t have to BE risky. We’ve gathered research on over 7,500 vacation rentals and gotten to the bottom of what makes a pricing strategy work and what leaves money on the table.
From that research, we’ve put together the five major mistakes we see owners making when choosing their nightly rates and explained how each will hurt your ability to hit your annual income goals.
MISTAKE #1: THINKING SHORT-TERM
The most common reason for pricing high is thinking about the short-term wins rather than the long-term losses.
It’s easy to see how this happens. If we ask an owner if they would rather make $250 a night or $300 a night, there’s an obvious answer: Why would you make less when you could make more?
The problem is that there’s a difference between asking for more and getting more.
Properties that are priced higher than the competition make fewer bookings overall. Now, that doesn’t mean you’ll have a totally empty calendar. Your property may become the best option available after more competitively priced properties book up. Your home may have a particular feature that’s so important to one group of travelers that it will convince them to pay a premium.
You will make bookings. And in the short term, you could make more per booking than your competitors, which is great.
In the long term, however, you’ll make fewer bookings overall. Which isn’t as great.
It also means your competitors are likely to finish the year with a much higher rental income than you will – even though they made less on each individual booking – because they priced at a more competitive rate.
Ultimately, the choice is yours about how you want to set nightly rates. But it’s important to consider that that charging more per night doesn’t necessarily earn you more income.
More often than not, it’s the opposite. Look at the long-term goal rather than the short-term one, and you’ll earn substantially more overall.
MISTAKE #2: COMPETING WITH THE WRONG PROPERTIES
Another mistake owners often make is setting their prices based on the competition – without having a clear understanding of whether that competition is really on a level playing field.
When you’re doing market research to determine appropriate nightly rates for your neighborhood, it’s essential that you make sure you’re looking at homes that are actually equivalent to yours.
A neighbor with a similar sized property, or even a unit that’s identical to yours might have very different amenities inside. They might have granite countertops while your house has formica. They may have a pool table and steam shower, while you have a cozy living room and the standard features the property came with.
Because of discrepancies like these, the other property might charge $50 more than you per night. And if you raise your nightly rate to ‘compete’ with them, you might just end up losing bookings because your properties are actually very different.
That’s not to say that one property is “better” or “worse” than the other by any means. While some travelers are willing to pay a premium to stay in properties that have been outfitted with updated appliances and nicer amenities, others are not.
Many travelers would prefer to stay in a comfortable home that doesn’t have all the bells and whistles.
By positioning yourself as the more affordable option in the neighborhood, you can capture bookings that the place down the street has priced themselves out of. But if you raise your rates only because you see someone down the street has upped theirs, you’ll be alienating a large group of guests who need a place just like yours for their vacation.
That’s why you need to dig deeper when doing market research to determine prices. Looking at your neighbors’ listings is a good starting point, but it doesn’t tell the full story.
MISTAKE #3: YOU’RE PRICING BASED ON PERSONAL VALUE
You value your vacation home a lot. And why wouldn’t you? You fell in love with it, you bought it, you furnished it, you enjoy staying there as often as you can.
So when you decided on a nightly rate, you might have thought about what you’d need to earn per night to make it worth your while to share this special space with others. If you decide you couldn’t possibly do it for less than $500 a night, then you know that’s the lowest you’re willing to go.
But if you’re wondering why you’re not getting bookings at that price, it’s probably because the rate you settled on isn’t fair market value. That is, you might have priced yourself out of the running for travelers who are looking for a place to stay.
If that’s the case, you have a decision to make:
1. You can lower your pricing enough to compete for bookings
2. You can decide it’s really not worth it for you to price lower, and accept the fact that you’ll get fewer bookings over the course of the year
You may be comfortable making only three bookings a year at a very high rate if those bookings cover the cost of the property taxes and maintenance.
But if you’d rather make a real profit on your property, you may have to start looking at it with the critical eye of a budget-conscious traveler and adjust your rates accordingly.
MISTAKE #4: NOT FOLLOWING MARKET VALUE
We’ve known owners who tell us that they want to charge an extra $100 a night because their property has a particular amenity, such as a hot tub or a 3-car garage.
“I’d pay $100 a night for that!” they tell us.
That may well be true. But if the majority of travelers wouldn’t pay a premium for that particular amenity, it is going to cost you in bookings.
You can do a fairly accurate assessment of the amount of money travelers are willing to pay for a particular amenity by using the filters on a listing site. Narrow down the search to properties similar to yours, with all the amenities you have, including the one you’re thinking about charging extra for.
Look at the pricing for the top 10 results, and figure out an average. Now un-select that special amenity, and look at only the first ten properties that DON’T have it. (If you un-select “pool”, for example, you might still see some results with pools, so look for the ones without that amenity.)
Get a new average of properties similar to yours that don’t have that special amenity, and compare to the average nightly rate for properties that do have that amenity.
The difference between those two averages will be a fairly accurate gauge of how much travelers value that particular amenity. You may be willing to pay more – but your average traveler is not.
If you want to make bookings, you need to price according to what travelers are willing to pay – not what you are.
MISTAKE #5 NOT USING DYNAMIC PRICING
Dynamic pricing is charging more during times when guests are willing to pay more.
If you have two different prices for high and low season, you’re already using dynamic pricing to a certain degree.
You charge more during the high season because travelers are willing to pay more during that period of time, and you charge less throughout the shoulder season because your area gets fewer visitors at that time, and people who do visit are looking for a good deal.
But it gets much more sophisticated than that. Dynamic pricing takes into account daily and even hourly fluctuations in demand, as well as historical trends. With dynamic pricing, your rates adjust up or down depending on how quickly other properties in your area are booking up, or whether there’s a surplus of properties sitting empty.
So if your pricing strategy begins and ends with the difference between high and low season, chances are you’re leaving money on the table.
At Colorado Luxe Living, we set different rates not only based on high and low seasons for a given area, but also holidays, local events, and the most popular weeks based on historical data. In out popular ski destination,for example, we have different rates for different periods, all of them optimized to compete specifically for that place and time.
In our experience, owners who put a little more strategic thought and effort into pricing than the competition are consistently the best option for travelers – and their calendars fill up accordingly.
A FINAL NOTE ON PRICING STRATEGY
We won’t lie – pricing strategies are complicated. There’s a lot to consider. There are a lot of ways you can go wrong. There’s a lot riding on your ability to get it right and be competitive.
Competitive pricing is a balancing act.
You price as high as you possibly can while still being low enough that the traveler chooses you over the competition.
Hitting that sweet spot is not easy, but it’s incredibly profitable.
For owners and property managers who are willing to put in the effort, it’s well worth it.
Colorado Luxe Living wants to make vacation rental easy and profitable for our owners.
The Luxe Team
Saturday, August 25, 2018
NOW HIRING LEASING AGENTS
Summit and Denver Counties
Commission Based + $13-$15 hour
We are looking for a highly-motivated Leasing Agents to join our ever-expanding Summit and Denver teams. We are working on being among the Top-Leaders in property management, focusing on single-family homes, condos and town homes. It’s a great time to be in the leasing business, as more and more people are seeing the value in acquiring cash flow and wealth through rental properties!
Colorado Luxe Living will help you generate leads and provide business through our award-winning marketing and advertising efforts. Leasing Agents are encouraged to and compensated for generating their own business for the company as well. No leasing experience required, we are willing to train the right candidate. Please review our requirements and submit your resume to start your career in the exciting and growing industry of Residential Property Management and Leasing.
DUTIES OF A LEASING AGENT
The Company, as of now, consists of a small group of Leasing Agents and a Managing Broker. The scope of work includes assisting agents with showings, conducting property move-in and move-out inspections, contacting the HOA to obtain pool keys or other pertinent information, managing high volume of calls and emails from prospective tenants and owners, arranging owner and realtor access to homes, filing, and providing general assistance to the Managing Broker and or helping the Leasing Agents as we are team focused and driven.
- If licensed as a Realtor in Colorado you will have to hang your license with Colorado Luxe Living. Which will give you the additional incentives the ever growing-company has to offer.
PRINCIPLE DUTIES AND RESPONSIBILITIES
Ensure prompt and effective communication with Landlords, Tenants, Prospective Tenants, and Co-Workers.
Maintain appropriate documentation of communication with Customers.
Assist agents with showings, adding or removing lock boxes, handling move-out inspections and quarterly inspections.
Contact HOA for pool keys, dish approval, researching parking spaces or mail box numbers.
Advise new tenants of move-in instructions and coordinate move-in.
Advise tenants and owners of move-out protocol.
Perform other special assignments as determined by Managing Brokers.
Effective verbal and written communication skills.
Proactive communication who responds with urgency.
Exemplifies problem solving skills and innovative thinking.
Flexibility and exceptional multi-tasking abilities.
Supports the needs of co-workers and other departments.
Ability to effectively communicate.
Ability to multi-task.
Ability to calculate figures and amounts such as discounts, prorates, and percentages.
Must have a valid driver's license and clean driving record.
Certificates, Licenses, Registrations
Must be licensed as a Colorado Real Estate Agent if assisting with any negotiations. If not currently licensed, must be willing to obtain license.
Comply with Federal Fair Housing Laws, Statutes and Regulations, as well as local laws and ordinances.
Physical and Mental Demands
Ability to sit for extended periods of time.
Basic math capabilities.
Ability to learn internet-based software/apps.
Experience with Microsoft Office Suite- Work, Outlook, and Excel.
Moderate noise within company office and offsite job sites (examples:business office with computers, printers, and light traffic).
This job description is not meant to be an all-inclusive statement of every duty and
responsibility that will ever be required of an employee in this job. You get paid every time you get a lease signed and collect money from the tenant.
The following commission base fee is for you finding the rental and tenants for
the rental. Our structured pay out fee is as follows:
Colorado Luxe Living will be Paid $99.00
Flat Fee of $625 for rental rates under $2,000/month. Leasing Agent $526
Flat Fee of $850 for rental rates at or above $2,001/month. Leasing Agent $751
Flat Fee of $1,200 for rental rates at or above $3,000/month. Leasing Agent $1,101
Flat Fee of $1,500 for rental rates at or above $4,000/month. Leasing Agent $1,401
Hours: As an independent contractor, you control your time off and hours. However, the successful agent is available Monday to Sunday.
Sorry, No Health Benefits. As an Independent contractor, you are responsible for your own health care, vision, and dental insurances.
HOW TO APPLY
Email resume, along with at least two references to: firstname.lastname@example.org.
*We are an equal opportunity employer and does not unlawfully discriminate against employees or applicants for employment on the basis of an individual's race, creed, gender, sex, color, religion, national origin, age, disability, marital status, veteran status or any other status protected by applicable law. This policy applies to all terms, conditions and privileges of employment, including recruitment, hiring, placement, compensation, promotion, discipline and termination. This company is committed to complying with all applicable provisions of the Americans with Disabilities Act (ADA). It is our policy not to discriminate against any qualified employee or applicant with regard to any terms or conditions of employment because of such individual's.
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Wendy White, REALTOR