5 Ways Data Can Help You Grow Your Short-Term Rental Business
Data provides vacation rental property managers with competitive insight into their listings and markets, and the opportunity to earn more revenue on their inventory. Through tracking and analyzing the right information, we can make informed decisions on pricing, distribution, operations, strategy and investment, to maximize growth.
Where to find data and how to apply it
Though your own reservations data is easy to access and can offer a great deal of insight into parameters that can impact your business, it is crucial to look at market data, which is based on a sample much larger than your clientele base and can help you track greater and more unpredictable market trends.
As trends are unlikely to remain static from season to season, maintaining an awareness of changes in supply and demand and proactively identifying issues is a must. Fortunately, collecting market data can be as simple as searching various OTAs, competitor sites and a data source such as Transparent’s dashboard, which aggregates and manipulates forward-looking worldwide data.
Easy enough, right? So what’s in it for you? The practical ramifications of properly analysing your business and the market at large are enormous and can lead you to the adjustments and improvements your company needs to thrive.
5 Ways Data Can Help You Grow Your Business
- Maximizing Rates
Data helps property managers strike a balance between pricing their properties competitively and maximizing profit. By monitoring the market and your competition, you can ensure that your rates are optimized and aligned with market pricing and occupancy trends.
With insight into how your pricing compares to the market and your competitive set, you will be able to make proactive rate adjustments to ensure you aren’t losing out on revenue or pricing yourself out of occupancy. See the following example displayed through Transparent’s PM dashboard:
Example A shows a property manager’s daily rates against the market in San Diego, California (14-20 July 2019), alongside the demand each date is experiencing.
Example B shows the same view but filtered to show data for two-bedroom properties and the prices of one specific competitor. This is also useful for tracking the price adjustments competitors in the area are making in advance of holidays or local events.
In addition to monitoring the activities of others hosts, property managers should also be keeping their hands on the pulse of the traveler community, by examining occupancy trends. If spikes in occupancy occur around the same dates every year, it’s a good indication that you should boost your prices for those periods.
- Optimizing Occupancy
In addition to monitoring the activities of others hosts (aka, the supply), property managers should also be keeping their hands on the pulse of the traveler community by examining occupancy trends (the demand).
If spikes in occupancy occur around the same dates every year, it’s a good indication that you should boost your prices for those periods, whereas annual luls in bookings should be met with reduced rates to encourage occupancy.
By looking at events and analyzing occupancy rates (see the graph below) or the pick-up (see the graph above), you can understand the demand of your market at any given time.
Here you can see occupancy for a PM in New York, alongside occupancy for the market.
Maximizing revenue can’t be broken down into either average daily rate or occupancy rate. True profit optimization requires a balance of both. It requires comparing your occupancy rates and ADR with those of the market.
If your ADR is similar to the market average, having a high relative occupancy is a sign of good management strategy. Higher occupancy rates than the market average are also great, but only if your ADRs are comparable to the market’s as well. If, as in this example, the ADR is consistently lower than your competitive set (see the graph below), the PM should evaluate whether increased rates could optimize revenue.
Another means of increasing occupancy – and therefore, revenue – is adjusting your minimum night requirements to encourage more bookings or longer stays. Insight into the market’s minimum stay settings can be helpful here:
- Developing and Distributing Inventory
Many vacation rental managers will take on as much stock as they’re offered and distribute indiscriminately. This isn’t unreasonable, as it generates revenue. For those subject to onboarding constraints or buying/leasing their portfolio, however, certain types of stock and distribution should be prioritized.
Data on rates, occupancy and supply can provide insight into which type of property is king in a given market. They can tell you what type of properties are booked most often or earn the highest return.
The graph below shows that larger properties in Madrid are more profitable, while the return for a one bedroom property is relatively low (0-bedroom studios are priced higher than one-bedrooms). There is also minimal difference between a studio and two-bedroom property.
Mapping out supply attributes, like the supply of bedroom count per channel, for example, can help inform you on your stock choice and distribution strategy and prevent oversupply, which can result in counterproductive competitiveness, particularly in low season.
Here we can see the variation of the supply by bedroom count and platform in Lisbon.
We can even use data to analyse which locations or features are most desired. All of this can help in selecting the most profitable stock and distributing and marketing your listing most strategically. Beyond inventory and channel combination, these kinds of data can also help you improve your initial pricing strategy, putting your listing in a strong starting position.
- Building Informed Strategies
It is important to be aware of your performance and build forecasts and plans based on projections. By tracking certain metrics, you can identify where improvements can be made for future strategies and in real-time. These forecasts can shape budgets and strategy, allowing you to make well-founded, constructive decisions and pave the way for business growth.
- Earning Investment and Stakeholder Support
Utilizing key metrics to form business strategies will set you up for success, but there are additional benefits to working with data.
Stakeholders expect a supply of information to justify business decisions, while potential investors will rely on to performance and growth analytics when deciding whether or not to invest.
Data is the foundation of these endeavors; it demonstrates professionalism and a sound understanding of your business and strategy, and it illustrates your successes and approaches. If you record and take care of key metrics, they will take care of you.
A Catalyst for Growth
Without data, property managers would have to base their decisions on estimates and indirect, irrelevant information. Data provides property managers with critical insights into their performance as well as that of their competition and the market as a whole, allowing you to maximize revenue by aligning strategy with reality. It allows you to proactively make adjustments to optimize your strategy through fluctuating market conditions.
Not only does it empower revenue management, but it also informs your wider business plans, and in doing so, provides information for both existing and prospective stakeholders. Data is a catalyst for success and growth.
About the author
Transparent is a leader in business intelligence for the short-term rental industry. Through a combination of proprietary data aggregation and data science, they develop insights on market conditions, such as supply, growth, demand patterns, pricing changes, and property manager activities. This data- powered product enables hosts and property managers to make smarter, fact-based decisions in the short-term rental industry.