By The Hospitable Team
Setting nightly rates for your vacation rental is complicated. Sure, you know you should charge more when demand is high, and drop prices during quiet periods. But many more factors can influence what you charge. Time of year, local events, public holidays, market trends and even world events can affect demand for your vacation rental.
Most property managers don’t have time or energy to closely monitor all this and update their prices, across all channels, on a regular basis.
That’s where dynamic pricing comes in.
With a dynamic pricing tool like PriceLabs, you can automatically optimize your rental prices to maximize income and increase occupancy. Using an automation tool to calculate rates takes the effort out of pricing, and it’s a simple way to increase your profits.
Host Linda H. says that PriceLabs saves her “a ton of time over manually adjusting pricing and availability.”
She explains that PriceLabs factors in all kinds of local events and festivals when setting prices, including ones that she doesn’t even know about, to set ideal prices for her business.
That all sounds great. But, hosts on budget are probably wondering whether they’ll get their money’s worth from a dynamic pricing tool. We’re about to give you the lowdown on dynamic pricing, so you can decide whether a tool like PriceLabs is a smart investment for your business.
Dynamic pricing is… What is it?
Dynamic pricing is when a business adjusts their prices in real-time to fit swiftly changing demand.
The airline industry has perfected the art of dynamic pricing. The same flight can vary widely in price depending on the day of the week, time of day, the season, and even how many people have been browsing similar flights.
In the world of short-term rentals, property managers use smart pricing to increase prices during high season, at weekends, or when local events or holidays cause a surge in demand.
Dynamic pricing tools for vacation rentals like PriceLabs automatically increase or decrease your nightly rate based on what’s happening in the market. These tools use artificial intelligence, historical data, and real-time market information to set the best possible nightly rate.
PriceLabs can also adjust your prices based on how far out people want to book, and how well your property is performing.
Why should hosts care?
If you’re wondering whether to invest in a dynamic pricing tool for your vacation rental business, here are some of the benefits.
With a dynamic pricing tool, you won’t have to spend hours researching the ideal rate for any given night.
Instead of analyzing market trends, checking event calendars, and benchmarking against properties in your area, you can let the tool do it all for you. Plus, when combined with a channel manager like Hospitable, a dynamic pricing tool will update your rates across all channels at once.
When we spoke to PriceLabs co-founder Anurag Verma, he said, although you know your high and low seasons, “do you know exactly how much higher or lower you can go with your prices?”
He gave us the following example of a host’s dilemma:
“Let’s say you usually sell for 200 a night during high season. Your property always gets booked up, so you decide to increase your price to 250 for next year. However, now people aren’t booking. So what do you do? Cut the price back to 200, or try 220 first and see what happens?”
Dynamic pricing tools solve this problem by using large sets of data to help you avoid under or over-charging.
Most property managers are not data analysts and don’t have the inclination to go that deep into market data to figure out the exact price they should be charging. With a pricing tool, you don’t have to rely on guesswork and trial and error.
If you keep your rates too low when demand skyrockets, you’ll be leaving money on the table. On the other hand, if you don’t cut prices in quiet times, guests will choose cheaper rentals in your area.
If you’ve simply been price-matching against competitors, you could be selling yourself short.
“You should not price-match against competitors, because every property is unique,” said Anurag.
You’ll earn more money overall when your rentals are priced correctly, and dynamic pricing tools help you hit the sweet spot of maximizing both profits and occupancy.
“You might think you can increase the price of a holiday by 10% during the busy season,” Anurag told us. “We see plenty of times that you can bump up the rate as much as three times, and there’s still enough demand to get booked.
Improve property performance
PriceLabs’ dynamic pricing tool can even help turn things around for a struggling property.
“Maybe one of your properties received a bad review, and starts falling short in bookings. We will automatically recognize that and apply automation.”
The algorithm will make adjustments to the price to encourage bookings and help get the property back on track.
Improve performance in all channels
Avoid gap days
As well as dynamic pricing, PriceLabs can do revenue management and gap management. This means they help you automatically adjust your minimum stay settings to maximize occupancy and avoid gaps in your calendar.
“One of the best features is the ability to set customized availability as well as pricing. I can set a 2 night minimum for the near future but then a 30-day minimum farther out if I would rather find a longer term guest. Orphan day availability is great – I can allow a 1 night stay only if it is in between other bookings and the software automates all of this where I used to have to do it manually.” – Linda H., Host and Capterra reviewer
By letting the algorithm adjust minimum stays depending on your booking calendar, you can earn more profit for less work, and avoid gap days.
It sounds complicated and overwhelming—but here’s why it’s NOT
Many hosts are understandably skeptical about pricing tools, so let’s clear up some of the most common doubts.
Dynamic pricing doesn’t mean you lose control over your rates
We get it – the thought of giving an algorithm control of your pricing is scary.
But even with a dynamic pricing tool you’ll still have the last say on your rates.
Anurag assures hosts that,
“Any dynamic pricing tool will give you the option to take over if you know something about your property or your area that the algorithm doesn’t.”
In PriceLabs, you can set rules, limits and choose your base rate. For example, you can create a rule to decrease your price if occupancy falls below a certain amount. You can set limits to ensure that prices never go above or below your chosen threshold.
At any time you can step in and tweak prices according to your own knowledge of the market.
Any host can benefit from dynamic pricing
If you’re just starting out and have no idea how to calculate rates, dynamic pricing tools can be a lifesaver.
However, experienced hosts who know their market inside out still stand to benefit from dynamic pricing. The tool will give you access to a wealth of high-quality data, and you can save yourself the work of changing prices manually.
You don’t have to be an astrophysicist to start using a dynamic pricing tool
Dynamic pricing tools shouldn’t be difficult to use.
PriceLabs is a user-friendly tool that you can set up and start using in just a few minutes. When you sign up, you’ll receive training and support so you can start setting up your rules, limits, and minimum/maximum prices.
You decide how much customization you want, and using the tool will help you learn more about pricing and understand your market.
Reviewer Charles S. calls PriceLabs an “excellent product worth every penny,” and emphasizes “how easy it is to set-up and sync with my properties.”
How do you know the time has come to start using a dynamic pricing tool?
If any of these situations sound familiar, it might be time to invest in a pricing tool.
When you accidentally leave a bunch of money on the table
Have you ever forgotten to raise prices during a holiday season? Maybe a local event pushed up demand, and guests would have happily paid much more. But you didn’t hear about it in time to cash in.
With PriceLabs this won’t happen. You’ll always factor in any upcoming event that could affect pricing. The cost of the tool is low when stacked up against the revenue you stand to make from setting the optimum prices.
When a turn of events takes you by surprise
There’s nothing much predictable about the world these days. Life can be turned upside, and businesses struggle to keep up. So what do you do when things that you’re used to seeing happen, aren’t happening any more?
If peak season is fast approaching and you’ve got many more unbooked days compared to the same time last year, your dynamic pricing tool can help. By analyzing real-time booking data, the tool can drop your rates just enough to attract bookings, without going too cheap.
When you scale your STR business
Even if you consider yourself an expert on pricing, spending time doing it yourself could be stifling your business’s growth.
Your time could be much better spent on acquiring properties and scaling your business. As your portfolio grows, your need for pricing automation will be even greater.
OK but… surely dynamic pricing doesn’t work in such unpredictable times?
Dynamic pricing uses historical data to make calculations. But in unpredictable times, even seasonality can change. During the pandemic, most markets saw underperformance even in the high season. When restrictions eased, markets saw an uptick in bookings even in the midst of the low season.
Historical data can’t always predict what will happen in the future. So PriceLabs takes real-time data into account as well.
Anurag explained that PriceLabs uses historical data to learn about seasonality, but it also looks at current data to see how fast properties are booking up for future months, and how that compares to bookings from the same time last year.
“For example, let’s say you’re in April and looking three months ahead to July. Maybe there are much fewer bookings for July than there were in April last year.”
If this is the case, the algorithm can then start recommending price adjustments to counter this decreased demand.
And now, go connect your Hospitable.com account with PriceLabs!
Hospitable.com integrates with PriceLabs so that you can ensure you always have the best price for all your properties and these prices are updated across all channels that you list on.
This is important as you wouldn’t want your homes to be listed at different prices on different booking sites.
You already use Hospitable.com, right?
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In addition to dynamic pricing, PriceLabs has a few other great features:
- Portfolio analytics helps you analyze booking data to spot trends, show performance data, and check if you are hitting KPIs.
- Market dashboards give you metrics and insights into the property market, so you can track vacation rental and Airbnb data anywhere in the world. See the bigger picture of what’s going on in the STR industry and spot rising trends that can help when you are considering whether to acquire a property.
Earn more and get booked up with dynamic pricing
To maximize your short-term rental income through pricing, you need to know the market inside out, and strategically change your pricing based on fluctuations in demand.
Without a tool to calculate pricing for you, you could be losing out on profit.”
Pricing tools automate the hard work , but you always have the final say. It’s up to you how much power you give the algorithm, you can set your limits so that prices never go above or below a certain amount.
Whether you’re a rookie or an experienced property manager, a dynamic pricing tool such as PriceLabs will save you a ton of work and boost your profits.
7 Ways to Make More Money from Short-Term Rentals
Making more money from your short-term rental Airbnb or Vrbo isn’t just about upping your nightly rate. As part of our research, we’ve asked professional STR hosts for their recommendations, so you can be sure this goes beyond theory—these tips really do work in practice.
Hospitable Tip: How to Integrate Your Hospitable Account with PriceLabs
If you have a PriceLabs account, you can take advantage of our integration between hospitable and PriceLabs. All you have to do is integrate your hospitable account with PriceLabs.
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When starting your STR business you have to decide on pricing strategy. In the back of your mind, you realize this could have a huge impact on how much money you make. But where do you start?
Start right here! This blog post will lay out how to set up a great pricing strategy that will make you the most money you can and give you peace of mind that you’re doing perfectly.