The Dos and Don’ts of a Vacation Rental Pricing Strategy

The Evolve Team
The Evolve Team
April 17, 2023

In a constantly changing market, learning how to price your vacation rental can be a difficult skill to master. Price too low at any time of the year, and you risk losing money. Price too high, and you may miss out on bookings. 

The best vacation rental pricing strategy helps you maximize income in every season. And to build that, you need to put all the right practices in place.

From the data points you evaluate to how frequently you adjust rates, every step is important along the way. Here are the dos and don’ts of vacation rental pricing to help guide you toward revenue success.

Evolve’s holistic revenue strategy handles rate-setting for tens of thousands of vacation rentals — helping owners earn more in markets across North America.

In This Article: 
Do: Plan for Long-Term Success
Don’t: Think Short Term
Do: Use Dynamic Pricing
Don’t: Charge the Same Rate Year-Round
Do: Research Your Competition
Don’t: Compete with the Wrong Properties
Do: Follow Market Value
Don’t: Price Based on Personal Value

Do: Plan for Long-Term Success

A long-term vacation rental pricing strategy works best when competitive prices are set early on, so you can land bookings at higher rates later.

Here’s where it starts: vacation rental sites like Vrbo and Airbnb want guests to have good experiences when booking. That’s why they use a few different factors to decide which listings to put higher in search results. Positive reviews are a major part of this. They tell the site that your property has market credibility, so the algorithm puts it in front of more people.

When your listing is new, you won’t have many reviews to build your home’s reputation — but you still have to compete with established, well-reviewed listings. By offering competitive pricing, you help encourage those site algorithms to show your home to potential guests — even without a robust set of reviews. 

From there, high-quality listing details (like professional photos and a clear description) encourage bookings and help start guests down the path of a positive experience they’re willing to write a five-star review about.

Over time, those reviews can help secure bookings at higher prices, as research shows customers are willing to spend an average of 31% more when businesses have positive reviews. And, they can tell the algorithms your listing has market credibility worthy of a higher ranking.

Don’t: Think Short Term

Short-term vacation rental pricing strategies typically focus on charging high rates out of the gate as owners try to earn top dollar right away. But if similar, neighboring properties are priced more competitively — or if they’re priced the same and have positive reviews that you don’t — they’re more likely to be surfaced by vacation rental site algorithms. If this happens, potential guests may not even see that your home is an option for them to book. 

Missing these opportunities causes you to lose out on bookings (and revenue). It can also draw out how long it might take your home to gain that market credibility, in turn prolonging how long you may have to wait before you can consistently nab bookings at higher rates.

So, while a high rate in the short-term could mean you make more with the bookings that do come through, it also means you could see fewer bookings overall — and potentially end up with less income long-term.

Our team of experts uses a comprehensive pricing strategy that helps you ramp up right — so you can maximize your revenue potential from day one.

Do: Use Dynamic Pricing

Dynamic revenue management is a common approach in today’s travel landscape. It allows businesses — like airlines, car rentals, and accommodation options — to secure higher prices when there’s demand and encourage bookings with lower prices when things are slow.

But this vacation rental pricing strategy requires access to a lot of data. It takes into account historical patterns as well as daily — even hourly — changes in demand. So, to price dynamically, you need to:

  • Constantly analyze your competition: By monitoring similar, local rentals regularly and throughout the year, you get a better picture of how to outperform them
  • Keep up with changing market data: Your rates should adjust up or down depending on how quickly homes in your competitive set are booking up — or staying empty
  • Target historical trends for your area: Demand fluctuates around holidays, travel seasons, local events, and even less-obvious weekends, and your pricing should adjust based on data to get the most revenue

Additional tools or professional teams can help provide these much-needed insights to guide your vacation rental pricing strategy — and potentially save time so you can focus on other key parts of your business.

Our revenue pros can help keep you dynamic. Paired with our exclusive pricing technology, we evaluate billions of real-time data points and adjust your rates so you can earn more all year.

Don’t: Charge the Same Rate Year-Round

Put simply, static pricing doesn’t account for any demand changes in your area. If you charge the same rate all year, you could leave money on the table when guest demand is high and lose out to more competitively-priced properties when fewer people are booking.

Same goes for a set-it-and-forget-it approach by season. These pricing models typically charge more during peak seasons (think summer in Daytona Beach) and less when travel slows. But there’s still fluctuation within seasons — like Palm Springs demand surging in early spring thanks to Coachella. If you don’t understand how your area’s unique seasonality, market trends, and event timelines affect what guests are willing to pay at any given time, then you’re missing key pieces to help your decide how to price your short term rental.

Do: Research Your Competition

Your listing is likely to compete for bookings against multiple properties in your area. Before you can truly go head-to-head, you need to understand what they’re charging and use that as another point of intel to inform your vacation rental pricing strategy.

Here’s how:

  • Find results that match your property size, bedroom count, amenities, proximity to local attractions, and even internal decor
  • For each listing, plug in a variety of date ranges in every season, and note rate structures and patterns as you go

Combing for these insights is a labor-intensive process (and one you don’t have to do if you work with a company like Evolve), but it’s one you should repeat at least a few times a year to identify shifts in market trends.

Don’t: Compete with the Wrong Properties

During market research, it can be easy to get distracted by properties that look the same on the outside when, in reality, they offer completely unique experiences — and should therefore be priced differently. 

When compared side-by-side, even multiple one-bedroom condos in the same town can offer different sleeping arrangements, in-home amenities, and neighborhoods. So, when creating your competitive set, be sure to note:

These details can help you more closely compare the value your property provides against the competition — giving you real insight into how your home should be priced to perform in the local market.

Did you know? Homes with bad reviews get booked less often and can even get deprioritized in search results. Learn how to make yours five stars.

Do: Follow Market Value

Market value is what guests are willing to pay for certain homes and features. This is an important distinction as you analyze competition in the area — or as you consider investing in amenities.

To determine the value of what your home offers and how you can charge for it, there are a few steps to follow:

  • Use search filters on a listing site to narrow results to homes that are similar to yours, including the amenity you want to charge more for
  • Calculate an average nightly rate for the top 10 results
  • Remove the filter for that amenity
  • Calculate a new average for the top 10 results
  • Determine the difference

To get the most accurate estimate of an amenity’s value, you should follow this process across multiple sites at different times of the year. And recruiting the help of a professional team or tool can help you get even more precise.

Don’t: Price Based on Personal Value

Operating your vacation rental business with an emotionally-driven mindset puts you at risk of placing an inflated value on it. This can lead to a pricing strategy that’s above market value and discourages potential bookers. 

On the flip side, a business-minded approach helps keep your rate-setting objective and competitive, so you can increase revenue opportunities across the board. 

Instead of making decisions based on how much you love your home, keep focused on the “dos” in your vacation rental pricing strategy that can help paint an accurate picture of your home value and the rates you should set day-to-day.

Competitive Vacation Rental Pricing Is a Balancing Act

Knowing how to price your vacation rental requires a lot of knowledge — and keeping track of many moving parts. What’s more, data points and market trends can change every day. So the right strategy should be able to flex along with them. Luckily, there are experts like us who can help.

If you’re looking for more vacation rental tips, download our free guide to get the biggest secrets to success. Inside, you’ll find insights like:

  • How to create a listing that convinces travelers to book
  • What you can do to maximize income across vacation rental sites
  • Which types of rental policies work best — and why 

From pricing strategy to guest communication, starting with the right resources can help you earn more from a strong business foundation.

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