Pricing Strategies for Mid-Term and Flexible Rentals
This is a guest post by Alex Shartsis, Founder & CEO of dynamic pricing company Perfect Price
Many short-term and vacation rental companies are exploring new areas of demand and experimenting with flexible pricing and rental models. Thanks to COVID-19 and uncertainty around travel, mid-term (rentals lasting 2-12 months) and flexible inventory have become much more popular. What are the best pricing strategies in this new environment? Here are 5 considerations that Alex Shartsis, Co-Founder & CEO of dynamic pricing company Perfect Price, says are key for property managers to adopt.
Know your minimums
Costs are a factor in pricing regardless of how long you are renting for. Make sure that any variable or hard costs are considered in your pricing. If someone is living in the unit full time, they’ll cause more wear and tear than a vacationer who spends all day everyday sightseeing. For example, if the standard in your market is to repaint and make minor repairs after a 6-month rental, make sure your pricing covers not only the carrying cost of the unit but also these expected incremental costs. The same is true for mid-term rentals on platforms like Airbnb: they still charge fees! Make sure your pricing is adjusted to account for these fees.
Mind the gaps
Just like regular short-term rentals, gap nights can cost a fortune in lost revenue. A gap night is a night between two other bookings, where frequently the minimum stay is higher than the nights available – making it unbookable. It’s especially detrimental because your unit wouldn’t even appear on Airbnb or VRBO in a search, so someone searching couldn’t even consider it. Prevent gaps by either staying vigilant or using dynamic pricing software like Perfect Price to automatically adjust the minimum stays for gap nights, to ensure that they are bookable.
Margin is still in short-term
The margin remains in your short-term rental pricing models, so for months or units that are rented short-term, making sure you are dynamically pricing, and maximizing your returns, are critical to the overall return for the property and (if you’re a property manager) for your overall business. Florida snowbirds who rent for months at a time in the winter pay a fraction of summer high season rates. Nothing you can do will change that fundamental demand pattern – there is simply more inventory in the winter than there is demand for it, so prices will be depressed.
Know your booking window – even for mid-term
Just because it is a longer stay doesn’t mean that there aren’t peak times when people are looking. Generally, mid-term stays require more advanced planning, as hosts may be planning to rent out their primary residence and thus must vacate and relocate. Earlier in the booking window, there may be a greater premium for nicer units; these are your planners, who are usually willing to pay a premium for a nicer place. Later in the booking window, it’s frequently better to lower your price to get a booking – otherwise, your place will sit empty or you’ll have to try the short term market. Knowing your booking window is essential when implementing dynamic pricing strategies for your Airbnb or short-term rental.
Be clear about pricing for extensions
In many markets, you can charge a premium for staying longer. That off-season mid-term stay of 6 months wants to extend to May or June – why would you give them February pricing? Make sure your pricing for any extensions, or mid-term stays at high season, reflect higher demand.
These are just a few of the best rental strategies on how to price for mid-term and flexible rentals. For more information on pricing strategies to utilize to maintain business stability amid COVID-19, visit Guesty’s Coronavirus Infocenter or check out weekly webinars offered by Perfect Price.
About Perfect Price Perfect Price is the leading provider of AI-powered Dynamic Pricing for Vacation Rentals. Seamlessly integrated with Guesty, Perfect Price gives property managers enterprise-grade intelligence, transparency, and control over their pricing.