Red Adair famously once said, “If you think it’s expensive to hire a professional to do the job, wait till you hire an amateur”. If you own a short-term rental, a team of revenue management experts can beat market pricing by up to 100%, bringing you higher returns and reducing your risk.
Professional short-term rental companies like The Stay Hub utilise a hands-on approach to revenue management with industry-leading technologies. On a daily basis, experts work in tandem with advanced technology to determine the price point of each property around factors such as geography, market insights, and competitive sets.
This can be managed up to 18 months into the future, with the right systems capable of calibrating a forecast of demand based on a myriad of components, including historical data, future events, seasonal changes, holidays, and booking trends.
When it comes to short-term rentals, events are major drivers for bookings. While there may be core demographics who favour this accommodation type over others, unless an event is well-known, it can easily go unnoticed for long periods of time. Even more so in big cities like Auckland, where something is happening every other week of the year.
Expedia has also reported in their latest research that one in three consumers are planning an upcoming business trip, while one in two are likely to or will travel internationally within the next year.
System generated research is instrumental in pricing optimisation and driving higher average daily rates. It can identify key events before they are widely known and determine the exact dates that have spikes of activity well in advance.
At least twice a day, systems will recalibrate price points and automate distribution to the online travel platforms you market on.
Automation & Reach
While self-managing a property without the capacity or expertise to take advantage of such systems would limit the practicality of listing in large volumes, professional management will see your property being pushed out to all major rental platforms, with the ability to automate data sends to hundreds of websites at any given time. This drastically increases your marketing exposure and conversions.
In addition to revenue management software, another central consideration to success is having experienced revenue experts behind the tools. If you do not know what to do with the data, there is only so far you can go. A revenue management team will review price points constantly throughout the day, monitoring traction and reservations. Their knowledge of the area, market, and properties they manage paired with technological insights will ensure pricing is adjusted accordingly, events and seasonal variations are maximised, and other decisive elements such as booking pace and minimum night stays reduce gaps in your calendar and work for demand, not against it.
Setting the right length of stay is particularly important. Longer restriction periods during peak seasons can optimise occupancy and revenue, but a minimum stay that isn’t on par with the market can impact everything from search visibility to the number of orphan days throughout the week. Rather than relying entirely on pricing algorithms, using technology as a complementary tool in your revenue management strategy also means any unpredictable or last minute booking influences are easily catered to. No revenue management technology could have possibly forecasted such events as the recent Auckland flash floods or the first onslaught of Covid-19.
Elasticity of Demand
Mastering the elasticity of demand is key to optimising pricing and can take years of practice. While a range of formulae for this exists on the internet, a revenue management system can easily make advanced calculations for a pricing expert to dissect. It is safe to say many people would assume an increase in price would result in a decrease in demand and vice versa. In many circumstances, this is not the case. What happens when a large portion of people then perceive the service or product as lower in value? Pricing that is seen as too cheap can also foster distrust, with many people wary of being scammed. For short-term rentals, a similar sentiment can be said when booking surges occur because of local events. Geographic demand can outstrip supply and regardless of price, if you are travelling, you will need accommodation.
For more advice, contact us at The Stay Hub. Our experts can talk you through the ins and outs of marketing short-term rentals. To find out what your property could earn in the market, reach out to a short-term rental management company for a FREE appraisal service and expert advice.
This article was originally published in the New Zealand Property Investor Magazine.