If you own a vacation rental in Navarre Beach, you probably have heard that adopting a dynamic pricing strategy is one of the best ways to thrive and give a boost to your rental revenues.
Prices should never be static in this business; there are many elements that influence what owners can charge for a nightly fee, such as your rental type and size, the amenities you offer, and how everything relates to your competition.
To complicate things further, hosts also need to pay attention to seasonal patterns, day-to-day variations in demand, and special events to adjust their prices accordingly.
As long-time rental property managers in Navarre Beach, FL, we understand that pricing is a continuous and dynamic process. However, we also recognize that there is still a lot of confusion about what dynamic pricing really is.
Not only that, but many owners in our area seem to struggle with the right way to build their revenue optimization strategy.
At Navarre Beach Properties, we strive to make the most of every day of the calendar for all our properties, getting more heads in beds and optimizing prices as much as possible.
Based on our successful, proven strategies, this blog will bring you seven steps to implement a successful dynamic pricing strategy for your vacation rental in Navarre Beach.
But first, let's get one thing clear...
What is dynamic pricing?
Implementing a dynamic pricing strategy is about setting the right price for the right guest at the right time. It requires consistently monitoring demand, guest's willingness to pay, and how your competitors perform. The goal is to maximize occupancy and rental revenues every day of the year.
Airlines and large hotel chains already use dynamic pricing successfully, and it's safe to say that this proven method can enhance success in any hospitality-related venture. But how do you begin?
Let's go over step by step...
Step 1: Select a dynamic pricing tool.
By now, you're probably thinking that dynamic pricing requires a lot of work. And we won't lie to you; it does. It's a continuous process that demands attention and a good understanding of the market. Besides, the need to react swiftly to shifts in demand makes it challenging to ever take a break from it.
But we live in a high-tech age, with several software solutions and dynamic pricing tools available to assist you in this task. These tools collect historical and real-time data, analyze similar listings in your region, and determine the best price at any given moment.
Here's a breakdown of how they help:
They adjust prices based on real-time demand and occupancy levels.
They calculate competitive rates for all seasons.
They establish the optimal duration of stay based on seasonal variations.
They handle gap days – those small slots with no bookings that stand between longer bookings.
They anticipate significant events in your area and adjust prices accordingly.
They manage last-minute cancellations and work to get you rebooked, sometimes earning you more money.
These wonderful tools can take roughly 70 to 80% of the workload off your back, so we highly recommend you pick one to kick off your dynamic pricing strategy.
Here are our favorite ones:
Very user-friendly, and a good option for owners seeking a more automated approach. Despite limitations in customization, Beyond manages essential pricing adjustments fairly well.
A flexible option that helps optimize revenue with minimal time investment. Good for integration with other systems and keeping substantial control over your pricing strategy.
Sitting somewhere between the first two in terms of automation, this option requires consistent monitoring and adjustments. Still, it offers an open-source approach to integration with other tools and platforms.
With each of the three tools mentioned, you can estimate a cost of around 10% of your earnings. The good news, though, is that this number is quickly offset by the benefits they bring.
Keep in mind that, no matter which tool you pick, we never suggest you take a "set it and forget it" approach; keeping an eye on your stats and performance and making necessary adjustments is crucial. You need a human brain behind the strategy!
A "set-it-and-forget-it" approach is not ideal to thrive in our vacation rental segment. A dynamic market calls for a dynamic pricing strategy.
Step 2: Size up the competition.
It's crucial for vacation rentals in Navarre Beach, or anywhere else, to closely monitor their competitors. This concern should be integral to any business strategy, including revenue management.
In our industry, we like to create a competitive set, also known as a "comp set." This involves identifying other rentals in our area that are direct competitors, considering factors like location, size, amenities, target audience, and overall positioning. Once we know who they are, we monitor their performance closely and react promptly to their changes to stay competitive.
It might sound complex, but the tools mentioned above are a great helping hand when it comes to collecting real-time data and adjusting pricing.
In any case, we still recommend that owners know the parameters for comparison in a comp set. Here are some that we find particularly important:
Amenities
Size and guest capacity
Location
Performance
Reviews and quality
These parameters will be very useful for you to make data-driven improvements and adjustments to your strategy with the aim of outperforming your competition.
Hey, you know what they say: competition is the heartbeat of improvement!
Step 3: Set specific metrics to kick-start your pricing strategy.
When delving into the actual numbers, it's crucial to define the governing principles and criteria for your nightly rates and price adjustments.
Here are some basics to have in mind:
Baseline price
Begin by establishing your main reference point: your baseline price. This is the starting point from which adjustments can be made. To determine it, calculate all your expenses to identify the minimum rate that ensures you don't incur a loss. Consider your competitors and your value proposition in this calculation.
Minimum and maximum pricing
When refining your metrics, acknowledge that occupancy rates vary across seasons, days of the week, and events in your location. With that in mind, you can establish minimum and maximum pricing. Lower prices can be employed during slower periods and to fill last-minute gaps, while higher rates can be set during peak seasons, holidays, and popular local events.
Once these metrics are set, dynamic pricing tools will consider them to automate rates across all your booking channels.
Step 4: Fine-tune your strategy with specific rules.
Now that you already know your baseline price and your minimum and maximum prices, you can fine-tune your dynamic pricing strategy with specific rules to your preference.
Here are the main ones:
Booking windows: your booking window is the timeframe between when a guest makes a reservation online and the actual date they arrive. Once you can identify your regular booking window, you can increase prices for bookings that fall outside this window timeframe because you'll still have time to catch up on bookings if you don't get a booking for the higher price.
Last-minute discounts: with an inverted logic, you can offer discounts when your booking window has passed since you have fewer chances of getting booked.
Orphan day discounts: speaking of discounts, it's a common practice to lower nightly fees for gap days, those days that can fall between longer bookings, even during your normal booking window. The idea is to give them a boost since they are harder to fill anyway.
Weekday discounts: remember that demand for vacation rentals is lower on weekdays than on weekends, so it's a good idea to attract additional bookings during quieter weekdays by providing discounts.
Discounts for longer stays: you can also promote longer stays by offering discounts for a week or more. This strategy boosts your occupancy rates and even decreases cleaning and operational costs since there's less turnover.
Minimum and maximum night stays: speaking of the length of stay, you can also experiment with the optimal length of stay for your rental. But make sure to do so based on data showing the preferences of your target market.
Once your rules are in place, try noticing how they unfold and how they impact your revenue. It's all about keeping a dynamic mindset to refine your strategy.
Disclaimer: rules are indeed great for fine-tuning your strategy, but they can also play against your interests. The more restrictions you implement, the more exclusive you are toward certain groups of guests.
At Navarre Beach Properties, we think it's always a smart strategy to keep things flexible, especially during the slowest seasons.
Step 5: Choose the right OTAs to list your rental.
In the current landscape where most bookings happen online, it's essential to establish a strong online presence by listing your rental on major Online Travel Agencies (OTAs).
At Navarre Beach Properties, we prefer to list our properties on well-known platforms, including Airbnb, Vrbo, Booking.com, and Expedia.
Regardless of where you choose to list your Navarre Beach rental, treat your listing page as a virtual representation of your property. To enhance guest satisfaction, ensure you provide all pertinent details about your rental and its current conditions. Anticipating and addressing potential questions beforehand can also save time later on.
Pro tip: use a Channel Manager to prevent double bookings and streamline the process of updating your rates across multiple platforms.
Listing your rental on major OTAs will undoubtedly boost your visibility and potentially lead to more bookings.
Step 6: Use discounts to build momentum.
We've already covered how you can leverage discounts to enhance your occupancy during the low season and fill in the orphan days. The same strategy can be applied to gain momentum right after your property is listed.
Many owners and property managers in Navarre Beach, FL, choose to lower their prices at the beginning, positioning them below the competition to compensate for the lack of reviews. Major OTA platforms, such as Airbnb and Vrbo, even facilitate this by allowing discounts of up to 20% for initial bookings.
However, we strongly advise against keeping your rates low for too long. This can potentially backfire and convey the wrong message to guests. Once your reputation is established, save this strategy for low seasons and gap days.
Step 7: Review everything regularly.
It seems that we've covered everything to get your strategy on track. Still, that doesn't mean our work is over. Pricing is an ongoing process. Remember, it's called a "dynamic strategy" for a reason.
To reach your rental's full potential, it's essential that you keep a close eye on your performance, evaluate it, and make adjustments when needed — always with your competitors in mind.
The secret to succeeding in short-term rentals is reacting the right way to market demands. The more you do it, the more you gain the hang of it, and the more revenues you will generate.
Extra tip: NAVARRE BEACH rental managers can really help with dynamic pricing.
Do you think all this sounds too time-consuming and complex? Don't worry; we're here to help.
As long-time property managers in Navarre Beach, we have gathered a comprehensive understanding of how everything works, and today we can safely say that we handle it all with ease.
Feel free to reach out anytime if you want to discuss opportunities in joining our owners' portfolio — and for more amazing tips read more on how to run your vacation rental in Navarre Beach. There are many more juicy write-ups in our blog for you with lots of info!
