Mastering Pricing Strategies for Your Short-Term Rental Property
If you're looking to optimize your pricing strategy and stay competitive, this post is for you.
As an experienced short-term rental owner, you already know that success isn’t just about providing a great space for guests—it’s about smart pricing strategies that maximize your revenue. While you likely have a solid understanding of how to run your rental, keeping up with ever-changing market trends and guest expectations is crucial to remaining competitive and profitable.
In this post, we’ll dive into pricing strategies that help you optimize your short-term rental’s revenue while keeping occupancy high. Whether you’re fine-tuning your pricing, adjusting for seasonality, or exploring new pricing tools, these tips are designed to help you refine your approach and boost your bottom line.
1. Know Your Market Inside and Out
Pricing is never a “one-size-fits-all” approach. As investors and owners ourselves, we deeply understand the markets we operate in - such as Atlantic City - a market we’ve been in for over three years. Understanding your local market is essential to create competitive and strategic pricing.
Look at Comparable Listings: Use booking websites such as Airbnb or VRBO to look up rental properties in your area with similar size, location and location, and amenities. What are other hosts charging during peak seasons and low-demand times? Consider factors such as property type (e.g., studio, condo, or entire house), proximity to local attractions, and additional amenities such as parking.
Track Seasonal Trends: Demand varies throughout the year. Peak seasons (holidays, local events, etc.) warrant higher pricing, while off-seasons may require price adjustments to maintain occupancy. Monitor local events, festivals, conferences and tourism trends to adjust your prices accordingly.
2. Use Dynamic Pricing Tools
Gone are the days of manually adjusting prices for your short-term rental. Today’s best practices involve using dynamic pricing tools that take the guesswork out of setting rates. These tools adjust your pricing based on various factors such as demand, competitor pricing, and upcoming local events.
Platforms like Airbnb and Vrbo offer built-in dynamic pricing options, but third-party services such as PriceLabs, Beyond Pricing, and Wheelhouse offer even more robust options. These tools analyze data to suggest optimal pricing for each night and adjust based on real-time demand.
How Dynamic Pricing Helps: These tools will increase your rates during high-demand periods (like weekends, holidays, or special local events) and lower them during quieter times. They also consider factors like your property’s location, size, and amenities, ensuring that your rates align with market trends.
Customization is Key: While dynamic pricing tools are incredibly helpful, it’s important to set your own limits. Establish a minimum price that covers your costs and ensure the maximum price stays competitive within your market.
3. Factor in All Operational Costs
As you fine-tune your pricing strategy, make sure you're considering all operational costs. It’s easy to focus on nightly rates, but other costs—like cleaning, maintenance, utilities, and platform fees—must be factored into your pricing structure to ensure you’re maintaining profitability.
Cleaning Fees: Decide if you want to add a separate cleaning fee or include it in the nightly rate. A separate cleaning fee can make your base rate appear more attractive, but it’s essential to be transparent with guests.
Maintenance and Repairs: Factor in ongoing maintenance costs, whether it’s fixing appliances, doing small repairs, or upgrading amenities. Budget for these expenses to prevent them from cutting into your profits.
Utilities and Expenses: Consider how much you’re spending on utilities like electricity, water, Wi-Fi, and cable. While these may fluctuate, it’s essential to have a baseline understanding of how these costs affect your margins.
Platform Fees: Both Airbnb and Vrbo charge service fees (usually 3-5% for hosts). Be sure to account for these fees when setting your rates to ensure they don’t eat into your profits.
4. Adjust for Length of Stay
When it comes to pricing, not all stays are created equal. For longer stays, guests may be willing to pay less per night but commit to a longer booking. For shorter stays, you can often charge a premium to account for higher turnover and cleaning costs.
Offer Discounts for Longer Stays: Offering weekly or monthly discounts can be a great way to keep your calendar filled. Guests who book for longer periods provide more stable income and reduce the turnover costs associated with frequent short stays.
Set Minimum Stay Requirements: During high-demand seasons, you can increase your nightly rate by implementing a minimum stay requirement (e.g., 3 or 7 nights). This prevents your property from sitting empty between short stays, which can reduce your overall revenue.
5. Be Mindful of Special Offers and Promotions
As an experienced owner, you’ve likely seen the benefits of promotions and special offers in driving bookings. While it’s important to maintain consistent pricing, well-timed discounts can help fill gaps in your calendar and attract new guests.
Last-Minute Discounts: If you have availability in the final days leading up to a particular date, offering a last-minute discount can help you secure a booking. This is especially effective if demand for your area is lower than expected.
Early Bird Discounts: Encourage guests to book in advance by offering an early bird discount for stays made well ahead of time. This helps you secure bookings during off-peak seasons and ensures you’re not scrambling to fill your calendar.
Custom Offers: Consider offering a custom deal for repeat guests, long-term bookings, or special requests. These personalized discounts help build loyalty and encourage longer stays.
6. Monitor Guest Feedback and Adapt
Pricing isn’t just about numbers—it’s also about guest perception. Regularly review guest feedback to see if guests believe they are getting good value for their stay. Positive reviews often indicate that your property is priced well, while complaints about value may suggest that it’s time for a pricing adjustment.
Look for Patterns: If you notice that guests consistently praise your property’s value, you might be underpricing your rental. Similarly, if guests feel the price doesn’t align with the experience, you might need to adjust your rates downward or add more value (e.g., offering new amenities or improving the property).
Reassess After Major Changes: If you’ve recently renovated, added new amenities, or upgraded the property in any way, consider adjusting your pricing to reflect the added value.
7. Consider Local Regulations and Taxes
Make sure to stay informed about any local regulations or tax requirements that could impact your pricing. Some cities or regions require short-term rental owners to charge and collect taxes on their bookings, while others may have additional permits or fees associated with operating a rental property.
Be sure to include these costs in your pricing strategy to avoid being caught off guard by hidden expenses.
Conclusion
Pricing your short-term rental property is an ongoing process that requires a blend of data analysis, market research, and strategy. By leveraging dynamic pricing tools, adjusting your rates based on demand, and factoring in all operational costs, you can optimize your pricing strategy for maximum profitability.
At localSTR, we specialize in helping experienced short-term rental owners make smart pricing decisions. If you’re ready to take your rental business to the next level, don’t hesitate to reach out. We’re here to help you elevate your property’s performance and ensure it remains a top choice for travelers.
