Friday, December 28, 2007

Pricing your Vacation Rental By Owner for Profit

Pricing any type of real estate in the long run can spell victory of defeat.

There are so many factors that go into "how to sell" or "how to rent" real estate or vacation rentals. In this blog we will concentrate on PRICING!
Pricing is king! Anyway you look at it, pricing in almost any industry drives the market. So how does this effect us in the vacation rental business.

That is easy! Supply and Demand. If there are plenty of 3 bedroom condos for rent at $1000 per week and you are priced at $750, you will be 100% occupied but also you will be missing out on real income.
On the other hand, if you are priced at $1200 a week, you may not be getting bookings due to your pricing being too high. You may get some left overs, as the other units get booked up, the SUPPLY goes down and the last minute guests are only left to book your higher priced condo.

So some owners mistake some bookings as "they will pay my price" but they are really missing out on the majority of the market. The idea is to be almost 100% booked. With 90-95% occupancy you are running at optimal pricing. Any less and you may be too high, any higher you may be too low. Again, this is taking into consideration JUST pricing!
Now this does get a little harder to figure out as you have different units. Condos are easy to price as they are really close to being the same. Look online at comparable units. If you have a 3 bedroom home near the beach, do not comp it out with homes ON the beach. Be realistic. One mistake owners make is thinking their unit is "the best" one on the market. Chances are it is not. Be honest and realize that there are MANY nice homes/condos just like yours. Now comp them out to see what they are getting in rent. Comp out the market and see what everyone else is doing and come in AT the market! It does no one any good to UNDERCUT the market.

Here is why. If everyone is at $1000 a week, price yours at $1000 a week. If you go to $900, the next guy goes to $850 and so on. Now you may all be giving away income! If the market will pay $1000, stay there. Then your job is to "out market" and "out service" the competition. If you are using the online booking software,, you will have a big advantage on the competition already. You can take a booking in 30 seconds, and your competition will take 10 days to get a lease back with a check. Who do you think the guest wants to book with? The owner who accepts credit cards and has an online booking system. Also make sure you have your photo albums set up on your listings. Example: SLIDE SHOW

Now that you are priced at the market, and you are out performing your competition, you should be running at an optimal level. That is the whole concept. Keep your prices at the market, but work harder than the market to get MORE than your share. It works! Try it!

SPECIALS. Running specials or offering discounts is totally different than low ball pricing. Once you have researched your market, found your optimal pricing structure, stick to it and market your vacation rental. As time goes by, you will get the business you need to keep your unit booked. Then if a week does not book, as they sometimes will not, or if you get a last minute cancellation, you can offer a SPECIAL or DISCOUNT to try to get that time booked.

The online booking system has a COUPON system in place to handle this situation. Many listing sites have "specials" you can run to get the word out quickly that you have a "offer to good to pass up". The idea is to offer something to entice the guest to find you!

Give them $100 off, save 20%, anything that makes you stand out. The concept is your month is 3/4 booked, you have one week left that has not booked, you run specials or discounts for that week and the guest responds to those ads. Now you are 100% booked that month. With proper , marketing and placing ads or changing your "titles" on the ad portals, this is a great system of marketing to employ. Here is an example of a "title" I would run on say, VRBO, to help book a last minute cancellation: " Oct 7-14 now OPEN, save $150, Call today".

This targets a guest that needs that week, then they see the special and they click on your unit instead of the other 100 on that page. Now they view your spectacular photo album, you provide online booking and credit card processing and you get the business. That is how it works. Fast clean and easy!

Try this concept. You will enjoy the results! Remember to have your "system" in place to take the booking, then market, advertise and bring in the prospects. Pricing is one of the most important parts of the puzzle. Do your research and price your unit RIGHT!

Good Luck!

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