Who doesn’t love a sale?
Offering a discount on your vacation rental during the slow season may seem like a great idea, especially when you see your competition trumpeting “Low Fall Rates!” in their headlines. But various studies suggest that while offering discounts can result in more bookings, it might actually cost your business in reputation, reviews, and inconvenience to you as an owner.
Here’s how the costs of discounts break down for vacation rentals.
Competitive Pricing Is Better Than Discounts
You may have heard you should use dynamic pricing to determine the most competitive rates for your vacation rentals given a number of factors: the location and quality of the property, the price of surrounding lodging options, holidays and local events, and so on. Even if you don’t use professional dynamic pricing, you likely have a good idea of when it’s better to offer a lower rate in your area.
You may be tempted to present that lower rate as a “discount” to travelers – but ironically, offering a sale doesn’t necessarily mean you’ll make a sale.
A competitive nightly rate speaks for itself. If your vacation rental is priced lower than comparable rentals in the area, and your listing is better-presented, you’ll make a sale whether or not you actually use the word “discount” or “sale.”
The traveler is perfectly capable of seeing that your price is competitive. Adding the word “sale” or “discount” is superfluous – and can actually cause more harm than good.
Consumers Love Sales – But They’re Suspicious of Them
The word “sale” immediately brings a small amount of suspicion into every consumer’s mind. For consistent goods, like breakfast cereal, they’re pretty confident they know what they’re getting even if it’s 20% off.
But for a vacation rental – especially one they’ve never seen before – travelers worry a steep discount might mean there’s a good reason that the owner feels their property won’t rent on its own merits.
That’s not necessarily a fair assumption, but studies have showed that consumers unconsciously associate sales and discounts with lower quality . Their concerns that your sale is disguising a flaw in your property may well cost you a booking.
Price-conscious travelers might decide to book even if they’re suspicious, but they will still be subconsciously inclined to be hypercritical of anything they purchase for a sale price. These guests may be overly critical of your rental, and ultimately result in a less-than-stellar review. Considering how heavily bad reviews weigh on your ability to make future bookings, the bookings you make by offering a discount incentive may well cost you more in the long run than you earn from the sale.
Discounts Set a Bad Precedent
When travelers see the word “sale” or “discount” in your headline during low season, they learn something about you: this owner is willing to offer a discount. The fact that it’s a seasonal discount is irrelevant to them; they now believe they’re missing out on a deal if they purchase a week’s rental from you at your usual price.
You’re more likely to have travelers ask you for a discount when you’ve shown them you’re someone who is willing to offer one.
Couple this knowledge with the dynamic pricing point above, and you see why it’s far better to simply make your rate competitive without explicitly stating it’s a sale. You’re much less likely to get travelers pestering you to offer sales at other times of the year.
How Discounts Work Best
So is “discount” a dirty word? Not necessarily. There are ways to provide this incentive while avoiding the fallout.
While consumers thought less of products and services bought through sales, they didn’t have the same negative feelings about coupon codes they acquired through third parties or that were offered “exclusively” to a set group of people, such as a Members-Only list.
Why the shift in attitude for the exclusive discount? Consumers feel they’re getting a special price that’s only offered to them. With coupon codes, they feel they’ve found a way around the real price with their superior shopping savvy. In either case, they’re no longer worried about being shown an inferior product, since it’s still being offered at full price.
Instead they feel special, because they’re getting a better price than everyone else.
If you want to fill up your calendar during a difficult-to-book season, try offering a discount exclusively to your previous guests. Be sure to make them feel special by telling them you loved having them stay previously, and you wanted to offer an exclusive price just to them so they could visit again.
A few of our owners have tried this strategy with great results, and we’d love to hear how it works for you!
Evolve creates dynamic rates for every listing in our network to help our owners get the most bookings at the best possible rates – and we’d love to take the hassle of figuring out competitive pricing off your plate. Click here to learn about all the strategies Evolve uses to help you make more rental income.