Revenue Management or Yield Management has become a buzz word within the travel and hospitality industry. First with low cost airlines, then with hotels taking on new pricing concepts to stimulate early bookings and maximize their potential revenue.
In reality revenue management can be applied to any product or service that has a finite availability. Thus, it can also be applied to vacation rentals (or holiday lettings) without hiring revenue gurus. In revenue management one needs to take care of the following 3 steps:
1. Competition
Check your pricing versus that of similar properties in your area. See that you are not over- or under-priced. Check critical dates in your calendar such as holidays and long weekends. These usually tend to get booked first.
2. Do not undercut
If your pricing is slightly higher than that of your competitors, do not be tempted to price lower. You might be losing money, and even worse, starting a price war. This is never a good thing in any marketplace. As an alternative try to package your offer in such a way that it differs from that of your competitors and gives added value to your guests.
3. Price in stages
Create a grid of at least 3 pricing steps versus occupancy levels. The higher the occupancy, the higher the price. Make sure you are aware of your break-even point and you do not thread lower than that.
It is critical to shift the existing paradigm from one that focuses on high occupancy levels, to that of high revenue. It is more profitable to maximize your revenue whilst minimizing your occupancy. Remember that there is no hard-and-fast rule for your pricing grid, and that you will need to revisit it often, tweaking and adjusting it to match your revenue goals.
Finally, the most important data you have is your own! Collate data from previous years to better visualise your level of occupancy and revenue, then analyze the trends. Keep a record of how certain periods attract early bookings whilst others are filled on the last minute.
Then price accordingly.