Vacation rental pricing strategy: own your prices every day

Most short-term rental hosts set up a pricing tool, choose a few settings and then let it run. A vacation rental pricing strategy that actually maximizes revenue asks for more than that: someone who owns the numbers, looks at the market every day and adjusts prices with a plan instead of a gut feeling. This article explains what that daily routine looks like, why discounting an empty weekend is not a strategy, and how to tell whether your current approach is leaving money on the table.

The lessons come from Eric Moeller, Founder and CEO of Freewyld, a company that builds design-forward short stay cabins and also runs a revenue management service for other operators. His team runs free revenue audits for businesses doing a million dollars or more, and in his words they have run hundreds of them with companies all over the world. The pattern he describes applies to short-term rental listings and, as he puts it, to boutique hotels as well.

Why a pricing tool is not a vacation rental pricing strategy

A pricing tool is the basic first step. Moeller calls it the number one thing to have in place, whatever the size of your portfolio. The problem starts after the setup. Many hosts go into the tool, set up the basics and then check it once or twice a week, or even once or twice a month. In his experience the tool will do a good job of running within the guidelines you set, but it will never maximize your revenue on its own.

The cost of that gap is not small. According to Moeller, when the CEO or someone on the team only checks the tool a few times a week or a month, the business is leaving 10 to 30 percent of revenue on the table. In the audits his team runs, he says they have never failed to find missing money in a portfolio.

“The biggest factor is being in your pricing tool daily and making adjustments based on what the market is doing.”

Eric Moeller, 2:02

The daily routine behind good pricing

Being in the tool daily only helps if you know what to look at. Moeller's starting point is pacing: understanding when people are booking and what is happening in your market. Then you look outward, at your competitors and where they are booking. A related article explains hotel forecasting for independent hotels.

A practical daily check, based on what he describes, covers these points:

• Pacing: how fast your upcoming dates are filling up.
• The market: what is happening in your area right now.
• Competitors: which comparable listings are booked, and at what level.
• Prices: where an adjustment is needed based on all of the above.
• Length of stay: whether your length of stay settings for specific dates still fit.

Decide who owns revenue in your business

The first step, in Moeller's view, is deciding who is going to own revenue in your company. If nobody owns it, the tool owns it, and that is exactly the situation the audits keep finding. He compares it to bookkeeping. Most business owners do not do their own accounting or file their own taxes. They hire bookkeepers and accountants and make sure those people do the job well and in the owner's best interest. A related article looks at payment risk and the travel merchant account.

“If you're not obsessed with revenue management, you have to either hire someone in-house or you have to find a company like ours that would take it over and you have to lead that success.”

Eric Moeller, 15:30

That leaves three realistic options for any operator:

• Develop your own skills as a revenue manager, through training and daily practice.
• Hire a revenue manager in-house who is in the tool every day.
• Outsource revenue management to a specialist and stay in charge of the results.

Respond to the market instead of reacting to empty nights

The most common mistake Moeller sees, also in a low season, is relying on the pricing tool to make the decisions and then panicking when the calendar looks empty. In nearly every audit his team runs, the operator has a tool and somewhat of a strategy. But when they see too many open nights while the market or competitors are booked, they slash prices. When a weekend is still empty, they drop prices even further, down to the bottom.

In his view that is not a strategy. It is a decision made on emotion: reacting to what happens instead of responding to it. A sound vacation rental pricing strategy rests on three things he names together: you understand the tool, you understand your market, and you have a plan that responds to what is happening rather than one that cuts prices out of fear.

How to tell whether your strategy works

The audits offer a useful test. The only time Moeller's team tells an operator that their strategy is working well is when two things are true. First, someone in the business focuses on revenue management every single day. Second, there is a real strategy for how to adjust prices and length of stay dates. On top of that, he recommends comparing apples to apples: how are your one bedrooms performing against comparable one bedrooms in your market, and where do you sit? A related article covers hotel market segmentation.

Pricing cannot fix a product that disappoints

Even the best vacation rental pricing strategy hits a ceiling when the stay does not match the promise. Moeller shares an example from a revenue management client with many listings in a popular US vacation rental market. One property was marketed with a jungle theme, but the theme was little more than a picture of a jungle on the wall. The revenue manager reported doing everything possible on pricing, yet could not keep up with the disappointed reviews.

His advice is to market with integrity what you sell. If you create a theme, create an actual theme. Put intention and character into the design instead of cheap, forgettable furniture, offer what he calls unreasonable hospitality, and make the property known for something instead of being just another listing. In his experience that investment pays back in five star reviews and in content you can keep using.

“If you're not obsessed with revenue, don't do revenue, hire somebody. If you're not obsessed with design and details, hire somebody.”

Eric Moeller, 25:03

The common thread is ownership. Whether it is rates or the guest experience, someone has to care about it every day. To hear Moeller explain his approach in his own words, watch the full conversation.

Frequently asked questions

What is a good vacation rental pricing strategy?

According to Eric Moeller, a good strategy combines a pricing tool with a person who owns revenue and works in that tool every day. That person watches pacing, the market and competitors, adjusts prices and length of stay settings, and responds to demand instead of slashing prices whenever nights are empty. Without that daily attention, he says, operators leave 10 to 30 percent of revenue on the table.

How often should I check my pricing tool?

Every day, in Moeller's view. Hosts who check their tool once or twice a week, or once or twice a month, let it run within old guidelines. The tool will do a reasonable job, but it will not maximize revenue on its own. Daily checks let you adjust to what the market and your competitors are doing right now.

Should I lower my prices when my calendar is empty?

Not by reflex. Moeller sees operators cut prices as soon as they have too many open nights while competitors are booked, and then cut again when a weekend stays empty. He calls that reacting on emotion rather than responding to the market. Look at your pacing and at comparable listings first, then adjust with a plan.

Should I manage revenue myself or outsource it?

That depends on whether you are genuinely obsessed with it. Moeller sees three options: build your own skills as a revenue manager, hire someone in-house, or outsource to a specialist company. Whichever you choose, you still lead it, just as you would check that your bookkeeper or accountant works in your best interest.