Let’s face it: Renting any property is about generating revenue. We all want our guests to have a great time, so we spend lots of money and time ensuring our vacation homes are in great shape and easy to live in. But if we are not making money from our rentals, why do it?
With that in mind, pricing is your best friend. Pricing is the key to how often and how much — and from whom — you make on your rental property. So take your time, do your research, get some help and do it right. I’m going to talk about some of the key concepts you should know, but trust me: Pricing is hard. As the owner of Summit Mountain Rentals, I have a fulltime marketing staff of three (the largest in the area) that constantly analyzes our pricing and keeps an eye on the competition as well.
The good news is: If you have any questions about pricing your vacation rental, feel free to call me! (See contact info below.)
First, here are a couple of red flags to look out for:
- Overbooking: This may seem counterintuitive, but having every date in July 2016 sold by the end of August 2015 the previous year is not “great.” It means your pricing is WAY TOO LOW. Not only have you sold your property too early for too little and lost out on lots of revenue, you have probably rented to the cheapest and least respectful renters.
- Underbooking: The reverse is true for not having July 4 booked by June 15 the same year. In this case, your pricing is probably WAY TOO HIGH. Demand on major holidays like this is high, and if you have a nice rental that isn’t booking, you should look at your pricing ASAP.
The bottom line is: It is imperative to watch the way your bookings come in (or don't come in). Then, DO SOMETHING. If your bookings are coming in too early, raise your price. If they are not coming in at all, lower your price. Responding quickly is the easiest way to ensure good rental and good guests.
Vacation rentals are like food
OK, what the heck does that mean? Well, there is a term in marketing called “perishable product” — and it is most easily understood with food. Once food goes bad, it can’t be sold, unlike a T-shirt or a toy that can always be sold at a later date. Well, lodging is a perishable product, too. Once a night has passed with your property not rented, that money is lost forever. It can’t be recovered. Think about it: You can’t sell a night that has passed the next day! So it is important to sell nights before it’s too late.
You need to sell your property, but you don’t want to give it away. The trick is research and paying attention. Do a Google search of the vacation homes in your area that are similar to yours (number of bedrooms/bathrooms, guest occupancy, etc.). How are they priced?
Now decide if you want to:
- Sell your home sooner than them? Then price yours slightly lower.
OR
- Sell your home after them? Then price yours slightly higher.
Then, pay attention. If your home is selling too fast, raise the price. If it is selling slowly, lower the price.
Pricing a vacation rental is a bit "art" as well as science. And just like any art, practice makes you better. So work on it. Pay attention to what is happening, then act and make adjustments.
Remember: Pricing is your best friend — and the most important tool you have for making money on your rental. Of course, a good property management company will be familiar with all of this and be able to help you every step of the way. But if you’re doing it yourself, we’re happy to help! You can call me directly for advice at no charge:
Mark Waldman, Owner, Summit Mountain Rentals, 970-423-7382, or email me at mark@summitrentals.com.
If you have questions or tips on vacation rental pricing, you can also enter them in the “Comments” section below.