Effective pricing is one of the most important business aspects a vacation rental manager has available to them to impact their bottom line. Pricing is complicated and the marketplace is volatile. Meaning, having the “right price at the right time” determines whether our ADR is optimized as well as how your occupancy compares.
Further complicating this is the perception of value and sentimentality attached to the asset itself. How often have we heard “my property is worth X” when we know the market moves through X, Y, and Z rates throughout the year?
What is Dynamic Pricing?
Dynamic Pricing is a pricing strategy in which “businesses set flexible prices for products or services based on current market demands.”
In the Vacation Rental/STR space this may mean having pricing specific to seasonality, day of week trends, and even actual sales in the market. Some of us do this better than others. (Learn about the Wheelhouse Engine to see who does it best!)
At its root, dynamic pricing means to “set the right price, at the right time, for the right customer” and to have that price reflect and react to changing market conditions to produce the highest revenue for your product. It does not mean the product is worth less but specifically that time and demand have a varying, direct impact on the value of the product throughout the year.
These principles shouldn’t be a surprise to us and many owners will recognize where dynamic pricing has become so ingrained that we may not even notice it.