Vacation Rental Pricing Strategy: How to Set Your Nightly Rates

Have you ever had empty properties during peak season? Perhaps you are worried that you're selling yourself short for the accommodation standards you offer. If your nightly rates resemble gambling, it's time to hit pause. Let's talk about setting the perfect vacation rental pricing.

Simply put, you risk losing bookings and leaving money on the table without a solid pricing strategy. As you can imagine, setting nightly prices for vacation rentals is no walk in the park. Several factors go into play, and in this article, we'll share our bulletproof method to set you up for rental success. Let's dive in!

Tips for Vacation Rental Pricing

1. Assess Your Property's Unique Features

First things first, before writing random numbers in your vacation rental listing, consider your property's value proposition. In other words, what sets you apart from the competition so that guests will book with you, not the neighbor. Here are a few ways your vacation rental stands out:

• Interior design: does your property have chic decor, an elegant design, or an eccentric gothic vibe? How you decorate your short-term rentals is crucial to your pricing strategy. A high-end villa with avant-garde furniture can support higher prices than a classic city condo with basic amenities.
• Location: say your rental has a view, is in the heart of downtown, or offers direct access to the ocean. Your location is a valuable asset that, depending on your target audience, can determine your vacation rental pricing.
• Amenities: apart from basic amenities, if your property offers extras like a large swimming pool, a home theatre, or an outside BBQ area, you should advertise it and include it in higher nightly rates.
• Niches: If your short-term rental business targets specific audiences, such as digital nomads, vegans, or pet fans, you might be able to charge more for it. Niching down means offering a specialized service to a specific target group willing to pay more.

2. Define Your Pricing Goals

Not every homeowner has the same objectives when pricing their vacation rentals, and that's okay. Some prioritize maximum occupancy, others care for optimal revenue, and some strive to hit the golden ratio. For example, property managers who prioritize occupancy might be willing to lower prices during the low season. So, define your pricing goals before setting your rates.

Create a vacation rental pricing strategy with dynamic pricing software

3. Research Your Competitors

The best indicator when determining your pricing strategy is your competition. Use Airbnb or Booking.com to check nightly rates for rentals with similar sizes, locations, and amenities. If competitors charge way more than you do and maintain high demand, this is your sign to raise your prices.

On the other hand, if your competitors' vacation rentals drop their prices, lower them too, since travelers are unlikely to book your home above theirs. However, keep in mind that you shouldn't compete with properties that offer a different experience than yours. If you're an apartment downtown, don't compare it with a luxury beachfront villa.

4. Consider Your Expenses and Taxes

As a property manager, you have monthly fixed and variable expenses. You'll need to account for those in your dynamic pricing, from taxes and mortgages to cleaning fees and bills. And let's not forget the OTAs' steady fees per booking.

Some, like VRBO, will even collect and remit taxes on your behalf. However, if you run your own book-direct business, you'll need to remit them yourself. There's also the cost of insurance, as well as occasional maintenance and repair costs.

5. Decide on a Minimum Nightly Rate

When first starting in the vacation rental industry, it can be tempting to lower prices. However, a miscalculation could cause you not even to cover your basic expenses for welcoming visitors. Our top tip for dynamic pricing is setting a base price and committing never to go below it.

Even during quiet seasons, stick to your minimum price and never cut rates more than you can afford. Take into account your fixed and variable expenses, and always allow a safety cushion for a rainy day.

Use a dynamic pricing tool to gather market data

6. Consider Seasonality and Local Events

Christmas, Easter, and summer are the peak season in the travel and hospitality industry, with prices tending to increase. Don't miss the opportunity to make extra bucks by raising your rates. Similarly, if there's an upcoming event like a music festival or a local celebration where visitors flock to your city, increase your prices for those days.

You should also consider your target audience. For example, if your rental is in Greece but you welcome mostly English tourists, consider their national holidays to set your prices accordingly.

7. Harness the Power of Dynamic Pricing Tools

Constantly checking on competitors, worrying about market changes, and making calculations can take up a significant amount of your precious time. It gets even trickier with multiple properties in different locations. Here's where dynamic pricing tools come in handy.

A dynamic pricing tool uses machine learning to analyze factors like competition, market, location, and seasonality to advise you on your prices. This gives you the opportunity to rent your property for a vacant weekend due to cancellation that wouldn't otherwise get booked. For that purpose, many vacation rental software can help you, such as PriceLabs or Hostaway.

8. Monitor and Adjust Prices With Flexibility

Once you've set your nightly rate, it's time to monitor and evaluate it. Analyze guests' feedback, booking patterns, and revenue metrics and adjust prices accordingly. If you notice a dip in bookings, perhaps you should lower your prices. On the other hand, if you maintain constant high occupancy rates and receive positive reviews, gradually raise your prices to increase revenue.

Pricing vacation rentals: vacation rental pricing tools

Your Turn to Determine Your Vacation Rental Pricing

To sum up, determining your dynamic pricing strategy is no picnic, but with the right software, you can always stay relevant and on top of the competition. Hopefully, these tips will give you a good starting point for increasing profits and achieving constant bookings.

If you want to save more money on your vacation rental business, create a book-direct website to receive commission-free bookings. At Houfy, we support transparency and independence in the property management industry and give hosts the opportunity to skip the large OTAs.

Join a community of over 68,000 hosts and guests who book directly without fees and take your business into your own hands. Get started today!