Smart Host Blog
Return to Smart Host

News, stories, and insights from within the vacation rental industry.

Tweets


Dynamic Pricing For Vacation Rentals

Nick PersicoNick Persico

A few days ago, we celebrated the six month anniversary of Smart Host. Since that early morning aboard the StartupBus, we've learned quite a bit about the challenges and complexities of predicting the market value of vacation rentals. Unlike hotel rooms and airline seats, which are comparable commodities, no vacation rental is quite the same.

You'll also find the same relative experience across different hotel and airline brands, which causes booking decisions to be mostly about price. In fact, 11% of online hotel bookings are made through an "opaque website", where the traveler does not know which hotel brand they are staying with until after purchase.

Online travel websites and aggregators have turned their offerings into commodities, touting the best price as their bait to lure travelers. Hotels and airlines don't use dynamic pricing to be savvy, they use it to survive.

The Rise of Instant Booking

Online marketplaces like Airbnb, HomeAway, and Flipkey are striving to make booking a vacation rental as easy as booking a hotel room.

Airbnb launched "Instant Book" in 2010, allowing guests to book a stay in one click without the need for communication between the two parties. HomeAway and Flipkey have also launched instant booking features for their travelers and hosts.

As more bookings happen with a single click, the pre-booking conversations between guest and host will go away. This change puts price and listing quality at the center of every booking decision. Hosts will need to have their listing constantly updated to win. Pricing for each day will need to be market value. And calendars will need to be up to date.

Hosts will no longer be able to use the conversation that takes place before a traveler decides to book a vacation rental as a way to adjust the rate. The traveler will expect to have all of the information they need on the listing.

Hotel vs. Vacation Rental Pricing

Any traveler knows that hotel prices vary wildly depending on the night you want to stay. But by how much? To get a better sense of how much hotel room prices fluctuate, we looked at the average nightly rate of a hotel room in New York City over the course of a sixty day period.

We found a 124% change between the lowest and highest nightly price:

Then we looked at the price fluctuation for vacation rentals over the same period of time in New York City. Because of the wide variety of vacation rentals, we just looked at one bedroom apartments in Manhattan. These type of rentals are the most prevalent, as well as the most similar to a typical hotel room.

The results were shocking. Only an 18% change between the lowest and highest prices.

What’s the effect of hosts not raising and lowering prices to reflect market conditions? They miss out on additional revenue and higher occupancy rates. Lower occupancy rates, means fewer guests are staying in short-term rentals. It’s a lose-lose scenario.

Smart Host is automating dynamic pricing for vacation rental hosts. Are you a host? Sign up and let’s get work.

Nick Persico
Author

Nick Persico

Nick is one of the co-founders of Smart Host. He's responsible for sales, customer support, and business development.

Comments