How to price your
Pricing your vacation rental correctly is a balancing act. Your nightly rate needs to be high enough to cover your fixed and variable costs, while still being attractive for your market and earning you enough revenue to make sharing your vacation home worth it.
Finding that sweet spot takes time and practice. It can be tempting to guesstimate rates based on that popular rental down the block. But, you risk losing more bookings because you might be comparing apples to vacation homes.
The right vacation rental pricing strategy will maximize your bookings and your rental income. There are steps you can follow to do it yourself, and there are tools and software that will take it off your hands. Whichever approach you prefer, the most important thing is that you reach your financial goals.
If you want to handle the pricing process yourself, from market research to listing updates, here’s what you need to do.
1. Know your minimum nightly rate
When you transition your vacation home to a vacation rental, you’re effectively running a business. Knowing what you need to keep the lights on, so to speak, and keep your vacation home guest-ready will help you determine your minimum nightly rate.
Ensure all of your fixed and variable costs are accounted for—such as your mortgage payment, taxes, and utilities. Additionally, plan in case your home needs a professional deep clean or repairs. It can get expensive, but well-kept homes get better reviews, which means more bookings and a higher earning potential overall.
2. Look up similar rentals in your area
Your competition is full of vacation rental pricing strategy insights. Search for your city or town on major listing sites like Airbnb, Vrbo, and Booking.com, and take a look at the top results. These listing sites use algorithms to display the most popular rentals first. Owners at the top are doing something right.
Make sure you’re comparing apples to apples. Use the search filters to display vacation rentals that have the same amenities and number of rooms as yours. Pricing against a rental with extra bedrooms will price out guests looking to book a home just like yours.
The flip side is that you can raise your nightly rates by investing in premium services. For example, Valibera homeowners make 20% to 50% more annual rental revenue when they have a pool.
3. Check competitor rates for peak season and slow season
Guests know a good deal when they see one. Your nightly rate should match the current demand, or you risk losing bookings (and income) to more competitively priced homes. Most vacation rental owners have the two prices set for peak season and slow season, which you can find by looking ahead on their Airbnb calendar.
4. Research upcoming local events and holidays
Experienced vacation rental owners know that demand changes more frequently than seasons. It’s affected by weekly, even daily, factors ranging from weather to events and holidays. Adjusting your rates frequently will help you fill your calendar and maximize earnings on individual nights.
5. Plan for vacancies
While the goal is to book every night, it’s highly unlikely, even in locations with a year-round booking season. According to Mashvisor, projected occupancy rates for U.S. Airbnb rentals in 2019 ranged from 21% to 75% across 30 major cities.
A strong vacation rental pricing strategy can reduce vacancies, but you need to keep a finger on the pulse of your market. The more competitively—yet profitably—you can price your vacation home every night, the more bookings and rental income you’ll generate overall.
software and tools
Crafting a strong vacation rental pricing strategy takes time and due diligence. But that can take time away from attending to your guests. Vacation rental pricing software and tools help fix that.
Deciding which is right for you depends on the level of control you prefer to have. Some serve primarily as dashboards, with market research and demand data in one place to help you make more informed pricing decisions. Others handle everything automatically. Here are a few options to consider.
Imagine Full-Service Property Management with
Dynamic Pricing for Vacation Rentals
Even with a vacation rental pricing software, you risk having a situation where the right hand doesn’t know what the left is doing. Having more parties are involved in pricing and managing your vacation rental means more room for error.
Full-service property management with Valibera allows you to have the best of both worlds while generating significantly more bookings and rental income. As a Valibera homeowner, you get industry-leading dynamic pricing software, 24/7 guest support, and local market expertise on your side.
Our demand-driven dynamic pricing algorithm for vacation rentals automatically adjusts your rates for local market conditions in real time. And thanks to powerful machine-learning technology, it gets smarter and more accurate every day.
Plus, our partnerships with top booking channels like Airbnb, Vrbo, and Google make it easier than ever for guests to find and book your vacation home.
How dynamic pricing works
At Valibera, we’ve spent many years perfecting vacation rental pricing so our homeowners can make the most out of their investment. Our proprietary dynamic pricing technology—combined with the expertise of regionally focused revenue analysts—has enabled us to consistently deliver higher profits for vacation homeowners and become the leading vacation rental management company in Naples.
But we don’t leave it all up to machine learning. We pair our industry-leading technology with regionally focused analysts, so you benefit from the best of both worlds. Your dedicated regional analyst monitors your home’s performance and fine-tunes the algorithm for optimal impact. This one-two punch of technology and human expertise helps us deliver vacation homeowners around the world the best return on investment—especially during more volatile times.
Optimal moments optimize revenue
We don’t just look at what’s happening in the moment to set rates—instead, we look at the big picture. We analyze the booking pace of your market, then compare that to the current and historic pace of your home and its competition, slowly adjusting rates to deliver the best return. Through this system, we can deliver you the optimal rate by booking your home at the optimal moment.
Sometimes, optimizing your revenue means shortening the booking window (how far in advance guests book). For example, you may be used to seeing your peak season calendar fill up months in advance but have low nightly rates at the same time. That’s convenient for property managers who have to manually book out their homes and don’t have the experience and the right technology to set the right prices., but it can leave money on the table.
Imagine for a minute that your bookings are retail products. Early bookings for peak season are a bit like discounted retail products at a Black Friday sale. Your bookings may fly off the shelves, but your product is selling at a sub-par price point. By waiting for the availability of homes to shrink, and possibly decreasing your booking window alongside it, we’re able to hold out for the optimum rate and drive more revenue for your home.
The first 90 days
Your first bookings position your home for long-term success. They’re crucial for two reasons: Getting your home prominently featured on booking sites like Airbnb and VRBO, and getting positive reviews.
Many of our major booking partners have a ramp-up period during which they judge how desirable your listing is for guests—and how highly it deserves to be ranked on the site’s platform. We build a perfect listing with eye-catching copy and images to meet these sites’ extensive criteria, but we also need to show early conversions (bookings) to demonstrate guests’ interest in your home. Our system can help entice last-minute reservations by gently lowering rates on upcoming available days. So, while you may notice lower rates when your home first goes live with Valibera, this strategy of promoting last-minute bookings is key to helping us capture those first guests (and reviews) early on.
As your home’s listing ranks higher on booking sites and your number of positive reviews increases, we are able to attract guests at a peak market rate. More reviews lead to more bookings, improving your conversion score and, as a result, your ranking and ability to command higher prices, too. It creates a positive feedback loop—and we call that a win-win.
Avoid setting minimum rates that limit dynamic pricing and block your ability to maximize booking activity.
Homeowners who have never experienced dynamic pricing may be hesitant to embrace a pricing strategy that involves variable rates. We understand it’s a new approach for many. But our data shows that the best way to deliver more revenue is by dynamically adjusting rates.
Our system is all about specifics and can adjust one nightly rate to optimize your overall revenue. For example, if we see most people booking three-day weekends (checking in on Thursday and checking out on Sunday), we may drop the nightly rate on Wednesday so guests are encouraged to book four nights instead of three. While the average daily rate (ADR) is lower for the four-night trip, incentivizing the extra night ultimately results in more revenue for your home.
Though the difference seems small for one reservation, the more competitive ADR benefits revenue in the long run. We know through experience that having competitive pricing for a home in the off-season adds up and, in turn, increases conversion to put your home in a stronger position when peak season hits.
Our dynamic pricing technology is designed to help you win the long game, earning higher annual revenue. We might not advertise the highest rate every night—but we charge the smartest rate (remember the pricing feedback loop?) to get you the best return overall.
Though it may take lowering the rate on an individual night, the benefit of turning a three-night stay into a five-night stay, or raising occupancy by an extra 10 percent during the off-season, really adds up over time—especially as your review count increases. If you’re not already one of our valued homeowners, let’s talk. We’re confident we can earn you more money with our dynamic pricing system, which you now know all about.
Our rates are based on a number of variables, including seasonal weather patterns, holidays, location-specific events, competitor pricing, demand elasticity for your home, occupancy rates, booking window trends, current sales and promotions, regional demand trends, proximity to local landmarks, seasonal demand curves, changes in demand, and much more.
Here are some of our top tips:
- Sleeping capacity is a major factor that drives revenue, so consider increasing your home’s bed count by turning your den into a bedroom.
- Popular amenities such as a pool will also set your home apart and allow for premium pricing. Some of our homeowners have increased their revenue by 30–50% by adding a pool—and Valibera can even help you install one!
- Allowing pets at your home can also increase revenue by 10–20%.
- Lastly, it’s smart to regularly review your reservation calendar. If you have dates blocked off for your personal stays, make sure you unblock days as needed if your plans change so your home is available for guests to book and enjoy.
Dynamic pricing is the best way to optimize your vacation rental’s profits and performance. It analyzes real-time market data like day of the week, competition, seasonality, current demand, and upcoming local events to adjust your rates accordingly. Your rental rates are updated daily to reflect all the fluctuations in data. The result: Get booked at the best price, for the right time.
Airbnb hosts can create their own prices or opt into Airbnb’s pricing tool, which features many dynamic pricing functions. Their tool, Smart Pricing, can be turned on or off whenever you’d like. It analyzes data like local demand, average number of people who view your property, average review scores, and quality of your amenities. Then, it automatically updates your listing price to match the demand, but only within a minimum and maximum price that you set.
There are several ways to determine your nightly rental rate. These include understanding your operation costs, looking at your competitors’ rates (not to duplicate, but to gauge the market), researching upcoming holidays and local events that could possibly boost demand, and preparing for inevitable vacancies. If you’re willing to invest in vacation rental pricing software, some options include RateIntelligence and MarketMaker.
At Valibera, we use dynamic pricing (leveraging proprietary technology and regional experts and analysts) to set the optimal rate for each of our homes. Changes in demand can happen in real time. So, your rates are updated daily to reflect the current demand for your home.