Appropriately pricing your holiday home can often seem an overwhelming task! What rate is too high to attract sufficient bookings? What rate is too low, leaving potential profit on the table? Fortunately there are several strategies and tools that you can use to help navigate this tricky aspect of holiday home management.
Static Prices
‘The moment you make a mistake in pricing, you're eating into your reputation or your profits.’ ~ Katharine Paine
Classic static pricing is the most basic method for pricing your holiday home’s stays. This approach is mostly used still by smaller agencies working in specific locations or by individuals who are holiday letting their second home independently. This strategy is often employed for properties with restrictions on the length of stays they offer: for example, 3 or 4 day stays with fixed changeover days each week.
Prices are typically pre-agreed with property owners for the upcoming period, based on a date curve. While prices are usually more expensive in summer or holiday periods when anticipated demand is higher, nightly prices remain static within these parameters. Because the set pricing is not frequently monitored, it cannot adjust for unanticipated market changes; this results in either under-booking or underpricing of the property. Although this pricing strategy is simple, the lack of flexibility in price and stay options usually results in bookings for only approximately 15 weeks per year.
Dynamic Pricing Tools
‘To innovate, you have to let go of the static and tune into the frequency of change.’ ~Unknown
There are two different categories of dynamic pricing tools: those created for in-house use of holiday home management firms, and those independently available from specialist companies. These tools have become particularly useful with the emergence of new platforms such as Airbnb, which facilitate more last-minute bookings.
In-house dynamic pricing tools were the first evolution from classic pricing. Built off the back of the wider hospitality industry, larger agencies began applying hotel pricing methods to holiday homes. These in-house tools are typically used by large national holiday letting firms.
Similarly to static pricing, these in-house tools rely on curves for anticipated booking demand and are often tied to fixed day changeover patterns. However, these tools are more efficient than classic pricing methods because they can respond to market changes and facilitate price reductions to increase bookings.
Typically, the in-house pricing tools cannot deviate above or below pricing bands agreed with the property owner. It is important to note that, while these agreed pricing bands may initially appear attractive to the owner, they usually result in lower than optimal occupancy. Another limitation of these in-house tools is that they rely on internal data; this makes it difficult to distinguish whether underperformance of properties is due to the market or an issue with the firm’s pricing.
Independent Dynamic Pricing Tools are now available through firms such as Pricelabs and Beyond Pricing. Some property channel managers (which facilitate bookings across multiple platforms like Airbnb or booking.com) also offer dynamic pricing. For example, well-funded start-ups such as Hostaway and Guesty offer services which claim to auto-adjust market prices.
These types of dynamic tools base pricing on localized demand, making them quite reactive. They also have access to a larger database of properties to perform pricing analysis than in-house tools. However, as with all dynamic tools, the concern is that the properties included in the analysis may not be fully comparable; for example, some properties may have limitation on stays.
In general, dynamic pricing can save time versus performing market analysis and pricing updates manually. These tools price your property more efficiently than static pricing, as they responds to booking trends. This method usually results in increased occupancy compared to static pricing: averaging about 18 weeks per year per property. However, it is important to remember that dynamic pricing tools do have limitations; even if based on the right principles, these tools cannot account for local experience.
The Travel Fox Pricing
‘In the world of business, the only constant is change.’ – Stephen Covey
Unlike other dynamic pricing tools, which use generalised comparisons to determine nightly prices, The Travel Fox develops a bespoke pricing model for each property. The benefit of this is that it discounts “bad data”; it allows us to exclude properties which are not actually similar enough to the holiday home in question to make a valid comparison. For example, including properties with fixed turnover days when analysing a property which allows more flexible check-in and check-out options could skew pricing. By excluding dissimilar properties which other dynamic tools might include, The Travel Fox can offer prices that reflect your property’s potential!
Since The Travel Fox offers flexible bookings for any length of stay, it shifts nightly prices to allow a property to reach its netted total aim for each week. Initially, The Travel Fox treats every night like a primary date, gradually reducing the prices as the check-in date approaches. Once the property meets its weekly target, last minute reductions are used to further boost occupancy.
Unlike other agencies, The Travel Fox offers one night stays, albeit at a premium price. However, because few properties are available for one night stays, this price is still competitive. This price must be higher, as the single night stay reduces property availability, and in turn the likelihood of other bookings that week. Prices are then reduced for the remaining days that week to attract further bookings. Because the single night stay is offered at a premium rate, the property is still able to meet its netted aim for the week despite the lower price on other days.
Ultimately, this full flexibility of check in days and stay length combinations is possible because The Travel Fox manages each property’s cleaning service. Since holiday homes can be turned-over on any day, there is increased opportunity for individualised pricing manipulation. This results in much higher booking rates than competing pricing models; the holiday homes we manage average over 40 weeks per year of bookings!
In short, The Travel Fox pricing strategy creates individualised pricing models appropriate for each property. Nightly prices with then vary depending on the day of the week, length of stay, existing bookings, and the proximity of booking to check-in. This helps keep your holiday home fully booked without underpricing; ultimately maximising your profit as the property owner! While this requires more effort from The Travel Fox versus using dynamic pricing tools, this attention to detail maximises your home’s revenue, at no additional cost to you compared to competing holiday home management firms. In fact, because our methodology generates more income per property, we’re able to charge lower commissions than large national chains and local operators alike!
If you want to hear more about The Travel Fox and its pricing strategy, please contact the team at 0800 808 5559 or info@thetravelfox.co.uk.