Displaying the right price for your vacation rental listing can almost be an exact science that thankfully does not require huge effort if you have the right format and tools. Here we look at how dynamic pricing can help hosts avoid low occupancy and “increase revenue by as much as 40%”.
What is Dynamic Pricing Software?
Dynamic pricing software powers smart pricing tools that analyze historical figures, industry trends or competitor data allowing businesses to interpret price accuracy to set price flexibility in response to market demand.
Fast-paced technology adoption has allowed dynamic pricing to become a standard technique across many sectors. For example, Airbnb or short-term rental pricing might vary according to seasonality, day-to-day trends and even actual sales.
Data-intensive pricing can overpower emotions and ambitions within the business, and it’s the ideal pricing strategy for hosts who want to grow and scale their business.
But first, let’s briefly discuss some of the benefits.
Benefits of Dynamic Pricing
Dynamic price software offers many advantages. It can save you time as you tap into a revenue management solution, avoid the low-season vacancy risk and see a significant improvement in outperforming your competitors. These are just some of the multiple factors used in machine learning and artificial intelligence to improve your pricing recommendations.
Increase Your Overall Revenue
Adjusting your nightly rate to optimize your overall revenue, in the long run, is critical to set pricing rules. For example, if market trends in your calendar show that 3-day weekend bookings are popular, it makes sense to adjust your price on Wednesdays to encourage longer stays.
For pricing adjustments to work, they need to be tweaked consistently to increase your revenue-earning potential over time ultimately.
Save Time Through Automation
Hosts certainly understand that dynamic pricing work can be time-consuming and that data scientists can come at a cost. However, pricing tools eliminate the cost or need to employ one, while removing the guesswork of offering competitive vacation rentals, freeing you to focus on other aspects of growing your business.
Maximize Occupancy and Length of Stay
The key objective of dynamic pricing for short-term rental businesses is to secure as many bookings as possible at the best rates possible.
Dynamic pricing addresses occupancy and creates the right pricing appeal to encourage longer stays. As your vacation rental’s listed prices adjust based on your booking data-driven pricing, so will your forecast revenue management.
Outperform Your Competitors
You already have a distinct advantage if your competitors are not using dynamic pricing. Take your property management to the next level by understanding every aspect of your business through critical data-driven insights to shape your prices and beat out competitors with fixed costs that do nothing for their bookings.
Risks of Dynamic Pricing
Besides the advantages of having dynamic pricing, you also want to know the risks. Fortunately, there are not many of them. It would be best if you weighed the cost of adding it to your software stack.
And while it seems like you are giving up control of your pricing strategies to another person, it’s partially so – as it’s offset with result-driven returns.
Lastly, you can always still set a rule for your minimum ( and maximum) prices benchmark, so you have no risk of dropping your price below that.
Factors That Influence Dynamic Pricing
Short-Term Rental Seasonality
Seasonality is one of the main reasons hosts make any price changes. Dynamic pricing tools automatically do this within your calendar. However, it does it together with analyzing other market data to make your minimum and maximum price as fruitful as possible, irrespective of the season.
Day of Week Trends
Similarly, your location can influence any price adjustments you make. For example, if your short-term rental is geared towards a leisure stay, price recommendations for these part-business travelers would be higher on the weekdays.
However, if your rental attracts more vacationers, your automated rate tool should adjust your weekend pricing to suit the higher-priced days. The dynamic pricing tool pays attention to historical data of the types of travelers booking with you and your competitor pricing to account for these changes.
Market Supply and demand
Dynamic pricing will ensure your display prices always meet the demand for vacation rental homes in your category. If the demand is high, the tool will boost your price so that you can maximize revenue. Conversely, the tool will drop prices as part of your customizable data-driven pricing if demand is low.
Special or significant events can occur throughout the year or at random, unexpected times. Your dynamic pricing tool looks out for these events using real-time market data and adjusts your pricing options accordingly.
Number of Days Left to Book
You will be able to pull in bookings when you have a few immediate openings, as the pricing tool will recommend lower rates to pull in last-minute guests while ensuring inquiries for dates further out will be optimally priced to earn you the best returns.
Competitor Prices and Occupancy
Any successful vacation rental pricing strategy needs to consider what other properties in your area are doing and charging.
When adjusting your rate manually, you probably paid some attention to competitor rates. However, dynamic pricing tools pay attention to what is happening in your competitor’s rentals and constantly adjust it.
For example, if competitor occupancy is full and potential guests are searching for a place to stay, the tool can boost your rates to pull in bookings from them.
The different amenities your rental offers will also impact the pricing recommendations made by your tool, improving your smart pricing options for your vacation rental business.
The Vacation rental industry thrives on reviews. And your rental is no different. Your dynamic pricing software factors in your number of top-rated reviews, enabling it to add a higher nightly rate and earn more revenue.
Why do you need dynamic pricing tools?
Technology has greatly improved property management’s lives with the use of specific data points and historical trends. Now hosts can avoid fewer bookings in the low season, using dynamic price generators to automatically adjust and recommend pricing.
Dynamic prices eliminate any possible human errors from a pricing plan. In addition, your portfolio analytics improves thanks to your dynamic pricing applications. And choosing the right tool makes smart pricing easier than ever to achieve.
How to choose the best dynamic pricing tool for Your Short Term Rentals?
Almost all these tools have similar features, factoring in unique pricing models and interface features that eliminate the need for manual setting or maintenance of price rules. As a result, property managers can easily manage all aspects of their vacation rental by automating the pricing system.
Best Vacation Rental Smart Pricing Tools
iGMS customers can enhance their PMS experience with the following pricing tool integrations.
Not yet a client – start your free trial today to gain an advantage over the competition, especially during peak season, using real-time demand and machine learning in setting prices.
Top Vacation Rental Pricing Tools for Property Managers
Integrated with iGMS, Beyond is perfect for managing your short-term rentals’ prices and availability based on data-driven insight, automation rules, and customization. The software also assigns a pricing Health Score to your properties to make sure you’re always aware of opportunities for optimization.
PriceLabs offers customizable data-driven pricing to help boost your vacation rental revenue. Their price recommendations take into account market supply and demand, seasonal and day-of-week trends, special events/holidays, and lead time.
The integration with PriceLabs, a dynamic pricing software, allows you to apply suggested pricing strategies and min stay rules across all the connected channels: Airbnb, HomeAway, Vrbo, and Booking.com. Before you go to the PriceLabs platform and enable the connection with iGMS, make sure that the iGMS properties have the correct geographical location. PriceLabs will use this information to manage your properties’ pricing and availability.
They pinpoint dates that are in high demand by looking at data from nearby listings and hotels, track seasonality based on historical data, and analyze your listings’ performance to suggest pricing tweaks. Customization options include setting dynamic minimum stays, enabling occupancy-based adjustments, and more. PriceLabs connects directly to over 30 PMSs and Channel Managers, including iGMS.
Wheelhouse helps Airbnb hosts, vacation rental owners, and property managers run their businesses more efficiently with tools like dynamic pricing, powerful data insights, and a personalized revenue management strategy. They help you stay competitive throughout the year with more than 240 unique rates per year.
Wheelhouse’s team of Ph.D. Data Scientists has built a software solution that can help you harness the power of real-time data insights to understand pricing once and for all. Advanced settings help you control how aggressive you want your pricing strategy to be and align it with your overall business goals.
Wheelhouse integrates with several popular PMS providers, including iGMS.
DPGO is a dynamic pricing tool for hosts, vacation rental owners, and short-term rental managers. Their AI-driven software analyzes over 200 market data parameters and has the potential to “increase your occupancy rates by up to 90%”, for a single listing or an entire portfolio with integrated metrics.
Manage prices and availability rates easily with data-driven insights and extensive knowledge of your target market with features that include daily market insights, expand AI recommendations for your own personal strategy, flexible adjustments for seasonal and weekend price adjustments and yield management.
If you have any questions about these pricing integration tools with iGMS, please contact our Customer Care Team via email. To see the iGMS functionality in action and learn how your hosting business can benefit from it, join our weekly live webinars.
First published at https://www.igms.com/dynamic-pricing/