How To Set A Rental Rate
When a potential guest looks at your listing they are very likely to be viewing numerous other properties across many platforms. They will be comparing locations, amenities, the look of the furniture and furnishings and of course, the rates.
Deciding what you will charge for your rental is not a task to take lightly nor is it one to do without considerable research. And that research does not mean talking to a neighbor who heard about the brother of a friend who is charging $2000 per week for a cabin in the woods with a holding tank and a mouse problem.
Today’s rental guests are savvy and know what constitutes value for money. Charging too little may scare them away as they will be concerned there are some hidden secrets you are not sharing. Putting too high a price on the property may yield some bookings but if the amenities and features don’t match the price point, guests are likely to show their dissatisfaction.
Will it rent?
This is a common question and the answer is typically the same:
If the property presents well, is in an attractive location, and is priced competitively, it should achieve good occupancy. Well that sounds simple doesn’t it? In fact there is a lot more to creating high occupancy and it’s not always a matter of being lower-priced than your neighbor.
When a realtor values a property, that figure is generally derived from the sales of comparable properties in the area. So if a 3 bedroom 2 bathroom duplex sold 3 months before at a certain price, then a similar one is likely to fetch the same. While vacation rental properties are a different type of real estate, we use a similar method to find a competitive rental value. Look at what else is being offered in the area of a similar standard and size and see what they are charging.
You’ll need to go a bit beyond the realty model though, as there are othe criteria that vacationers will use to make their decision that general home buyers would not consider as important. The perceived value of a vacation home rental can depend on a number of factors.
The more ‘fully-loaded’ your property is seen to be, the more attractive it is to potential guests. The following amenities are seen as high value:
- Hot tub and/or sauna
- Pool table or table tennis
- High Speed Internet
- Large flat screen TV with cable or satellite
- Upgraded kitchen (granite countertops/stainless steel appliances)
- King and Queen beds (not doubles)
The addition of these items doesn’t necessarily add much to the rental rate but it will stand the property out from the competition.
A property that can accommodate 10 people is going to command a higher value that the same size and standard of property that only permits 6 occupants. Of course, it is entirely up to you how you limit your occupancy, but if you make the property accessible to a two-family or multi-generation group who will split the cost, it can usually stand a higher price being placed on it.
If you are not sure of the seasons, check out what the rental agencies are doing. These guys have been in the rental business for a long time and have serious knowledge on how it works, and when prices should go up for high season and back down again at the end. Look at their seasonal start and end dates and match yours with them. Remember that travellers searching for a vacation will look at many different sites and different listings and if you seasons don’t match up you won’t get the bookings if your rates are higher than everywhere else.
Weekends and Short Breaks
In some areas, weekly rentals in high season are just about all that is on offer. If you like to use your place occasionally, then think about offering Friday – Friday or Monday to Monday for weekly rentals. This makes taking a weekend yourself, or even selling the shorter periods, an option. Because of the high demand for short breaks and weekends, this can often be a more lucrative method of renting, however you need to consider the variable expenses associated with this method – cleaning/caretaking/supplies etc.
Low Season Pricing
As soon as the high season is over, the market flip-flops from being a sellers’ market to a buyers’ market. There will be hundreds of properties vying for the smaller pot of low season rental guests, so you need to compete strategically.
Once again, take a look at the agencies and what they are charging for similar sized properties in the shoulder and low seasons. Just like you, they are looking to increase their market share and they have done the research – so piggy back on that by matching your low season rates to theirs.
Discounts & Special Deals
In locations with high-demand high season periods, discounting may never be required because of the scarcity factor. This means there is so little availability that travellers will take whatever they can find, often at an increased rate.
When the market becomes more competitive it’s time to start thinking about ways to capture attention with creative deals. This should be more than just lowering the price – you will need to offer something different to get a booking. This could be including theatre tickets, a discount for a local restaurant, a seasonal hamper of local goodies – anything that will inspire your listing visitors to click through to your full listing.