HotSpot Hot Shot Gary K shares his tips on "Pricing":

How to Structure Your Vacation Rental Pricing 

In the “Information Age” that we live in today, it is much easier to price your vacation rental property than it would have been years ago.  Here’s why…The internet has many web sites that list vacation properties all over the world. So, when attempting to ascertain a fair market value for your vacation rental, I suggest the following steps  –
 

1. Find at least 3 web sites that list vacation rentals. VRBO.com, Homeaway.com, and Vacationhomerentals.com are 3 that I use, but there are many others. A good way to find the best 3 web sites for your area is to use a search engine like Google. Type in your neighborhood/area/state and then add the words “Vacation Rentals”. As an example, type in “Florida Vacation Rentals”, “Orlando Vacation Rentals”, or whatever name your neighborhood is best known for to the “global” market. I stress the word global because when using the Internet you are reaching a global audience.

2. Make a list with the following headers across the top of your page – 
   VR Name│ Daily Rent │ Weekly Rent │ Monthly Rent │ Sec Deposit │ Clean Fee
    
3. To fill in this list, start with all the Vacation Rentals in your area that you found using the previously mentioned websites. Next, start sorting the properties by saving the vacation rentals that are most similar to yours and eliminating rentals that do not mirror your property’s features. Put another way, you want to do an “apples-apples” comparison by selecting the properties that have – 
    
1. The same location
2. The location characteristics (i.e. – oceanfront, major attractions, etc.)
3. The same property type (i.e. – house, condo, etc.)
4. The same number of bedrooms
5. The same property features (i.e. - swimming pool, hot tub, etc.)

Once you complete this list, you are on your way to determining how best to price your vacation rental property to be competitive in your local vacation rental market. 

Other Pricing Considerations –  

Seasonal Rates
As you do more research on those web sites, you will notice that your competition probably has different rates throughout the course of a year. These are known as “seasonal rates”. Examples – High Season/Low Season, Holiday Season (Christmas/New Year’s), Summer Season, Spring Break Season, etc. Each part of the world has its own seasonal difference and pattern. To determine the seasonal rates for your area, I suggest that you use the same exercise I listed above, for setting your initial rate. This time, focus on the each of the seasons for your market. 

Special Amenities
In the course of doing your research on the web, you will notice that certain properties are booked heavily due to certain amenities that people are drawn to.  Swimming pools, game rooms for kids, and better furnishings are just a few of what they could be. Once you determine the amenities that your market offers, you can determine your own strategy in light of the amenities that you want to provide with your vacation rental. 

There are 2 strategies to consider. (1) Provide the same amenities as your competition to insure your occupancy, or (2) Do not provide them, but price your vacation property accordingly.       

THE COMPETITION
I capitalize this section for good reason. For many areas like Florida, Hawaii, Mexico and other popular vacation spots, the competition in the vacation rental business has increased tremendously in the past ten years. So, after comparing all of the rates of the other properties in your area, I suggest you take one more very important step in your research of these web sites…Review the rental calendars of your competition.  

In many cases you will see that some properties are booked heavily, others that are hardly booked at all, and some in the middle. If you pay close attention to those that are booked heavily you may notice things that will help you in the final pricing of your property. In some areas you will notice that the lowest price is booked the most. BUT, this will not always be the case. 

In some cases, it has to do with the effort put into the web site listings. As an example, the house with the best pictures on the web site will be booked the most. In other cases, it will be the house with the most/best amenities. So, the lesson to take from this is two fold…………….           

1.       DO YOUR HOMEWORK!
2.       PUT EXTRA EFFORT INTO YOUR WEB LISTINGS, ESPECIALLY THE PICTURES! 

Both efforts will pay off for you..

. 

When to INCREASE Your Rates? 

As often as possible, right? Just kidding, but not totally! 

After you have a year of experience under your belt of booking your vacation rental, you will start to learn many things. You will determine – 

There are certain times of the year that you could rent your property many times over. In some parts of Florida, the first 3 months of the year are as popular as any. With “Snow Birds” flocking to Florida for extended visits, even the least desirable vacation rentals are booked during this time of year.  This is an example of when you might be able to raise your rental rates.  Special events throughout the state like Bike Week in Daytona Beach, is another example of when the demand for vacation rentals is high and visitors are willing to pay a premium for their stay. 

The list I outlined earlier to determine your “initial pricing” should be repeated annually to look for opportunities to raise, or in some cases lower your pricing. This will keep you from being surprised by a slow season. This exercise also keeps you up to date with the competition in your area. By doing this regularly, it will help you maintain or increase your occupancy rate from year to year. 

I raise my rates during the year when I know I will be easily booked.  I lower my rates for the 2 months of the year when I am the slowest. The results speak for themselves. I am achieving a higher annual occupancy rate, and more importantly, I am generating more annual revenue by maximizing the highs and lows of my vacation rental market. 

By now, you may be asking, “What about my expenses?”, and “Shouldn’t that have something to do with how I price my vacation rental property”. The honest straightforward answer is “No”. The person renting your property does not care about your expenses.  What they care about is that they are getting nice clean accommodations, in the location they desire, at a fair market price.  

If you are in the Vacation Rental business to make money, you need to get “heads in your beds”.  The best way to have a full house and maximize your revenue is make sure that your vacation rental property is competitive in the marketplace. So, if you want to rent your place on a year round basis, you must be priced for the market. Hope this helps you.  

Happy renting - gk

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