Setting a price
So you’ve decided to rent out your home. You’ve decorated, created profiles, it’s now time to set a pricing strategy. So how exactly can you find that price range that will bring you the highest income, keep your expenses low and attract the right customers?
The more you sell, the more you make? Nope.
The first and most important to understand when in the hospitality industry is that you have a limited amount of “products”. You have only one room night each day, so overall you have 365 room nights a year. Same as competition. So if both of you have a full house all year long – a dream come true – one of you will still have made more money. In some cases, especially with high competition, thinking about quality instead of quantity will actually yield more results.
The higher you charge, the more you make? Wrong again.
So we’ve established you don’t necessarily need to sell all you have. So why not charge the highest? Well, you might not sell at all, or sell very low. You need to find the right balance and this actually can take a while. The best practice when first trying to set this magical price range is to look at your competition. How much do same type, same quality accommodations in the region charge?
The more bookings, the more you make? Well..
When you need to make a judgement call if you accept a booking or not, try to consider if accepting that one extra reservation will actually be worth it after you’ve deducted your own costs? In most cases, your expenses such as cleaning between each booking are unaffected by the length of stay. You might have a gap of two nights between your already booked periods that you could sell for a very tempting room night price. It’s only two nights though and cleaning charges are the same as for a two week stay.
The lower the costs, the more you make? Sorry to keep doing this but, no.
As said, you need to find that balance between overcharging and basically giving away your room nights for free. This also goes for your expenses. Whether you clean the apartments yourself or pay a company to do it, that is your expense. If you don’t allocate enough time and energy to it, it will be sloppy and you might get complaints and bad ratings. If you pay too much attention to it, you won’t make a penny. Try to match the needs of your target client group instead of your own.
When experimenting with what exactly to charge, another factor can be the customer base you’re aiming for. Students backpacking across Europe will have lower needs thus your expenses will stay low. However you won’t be charging as much either. If you’d like to attract exclusive customers, you’ll need to invest in designing, high value cleaning, maintenance and insurance. Your prices should reflect this decision so both your and your guests expectations match.
Seasonal changes and events
So you’ve finally figured out that thin line of what to charge. Bad news: this is subject to change. Most destinations have high and low season. You shouldn’t expect your apartment on the beach to sell for the same booming price in a shivering winter. However you should make use of a world cup being organized in your city by increasing your prices for that period.
Remember, your prices are not set in stone. You can change them whenever you wish, play around by increasing and decreasing rates as time goes by – it is always a good idea to keep track of how many of your competitors are still available for those dates. This is a time and energy consuming tactic with a lot of potential. In case you’re thinking of contracting an Agency to rent out your property for you, this is something you could expect them to take care of for you.