VRMA Administrator
Sponsored by Expedia Group
By Jordan Locke
2021 saw an explosion of the vacation rental industry as changes in traveler behavior due to the pandemic introduced many first-time vacation rental guests to a new way of travel. Investments flew into the space as rates, occupancy, and revenue reached new heights. 2021 truly was a historic year.
However, this supercharged growth has brought with it some fundamental changes in vacation rental trends and how property managers adapt to these. One vital area that has seen wholesale change is revenue management. Patterns seen in 2021 teach us that pre-pandemic ways of maximizing revenue through data analysis and predictive analytics have had to evolve, as external factors have turned expected traveler behavior on its head. So, as we enter 2022, what can we learn from 2021 to upgrade our revenue performance strategy?
The New Normal Is No Normal
One thing from 2021 that will continue into 2022 is that we can expect continued fluctuation. The almost inevitability of ongoing changes to travel restrictions and an ever-adapting traveler will continue to pose a challenge to vacation rental managers.
In the new world of vacation rental revenue performance, historical data no longer has the same value if used on its own. Relying on 2020 or 2021 historical data in isolation to predict traveler behavior in a given booking window in 2022 would be a mistake given the huge array of other factors that have disrupted the normal pattern of demand and supply behavior.
On the upside, the industry has more post-pandemic experience under its belt. With more data to draw conclusions from, we can use 2021 as a blueprint to implement more successful revenue strategies to overcome similar curveballs thrown at us in 2022. The new normal is that there is no normal, and as the world changes, our revenue strategies need to change with it.
Set the Right Expectations
2022 is likely to see continued vacation rental growth, but this growth could still be volatile. When making financial projections and setting budgets, we should remain agile. This requires businesses to regularly review changes in guest behaviors, adapting to new demands and testing new price sensitivities. Revenue performance technology, which provides data-driven insights, leverages forward-looking data, and is powered by a combination of predictive and prescriptive analytics, is one of the best allies to help identify and adapt to new demand trends and generate incremental revenue.
Dynamic Environments Require Dynamic Pricing
The days of “set it and forget it” are long gone. If a property only used 2019 performance to set 2020 rates—or 2020 to set 2021 rates for that matter—they missed out on a lot of revenue. The only way to maximize revenue in a dynamic environment is with dynamic pricing.
To do this effectively, property managers must stay up to date on relevant news and consistently monitor the market. They must draw upon a wide range of data points including real-time supply and demand; competitive rates of booked and unbooked properties; local events affecting the area; average rates of similar properties; and search data to proactively optimize their revenue performance and adapt to a rapidly fluctuating marketplace.
However, historicals aren’t history. We can use patterns from 2021 to anticipate effects of new developments in 2022 and adjust our rate strategy accordingly. In an ever-fluctuating world, many different factors can impact pricing strategy. Booking lead times may from time to time shrink, in which case holding rates longer could raise a property’s top line. If new travel restrictions materialize, then demand is likely to drop, so competitively positioning rates to get stays on the books early could help minimize any risk. Market supply might shrink as owners utilize their own properties, or supply could balloon as more investment floods the space. A property manager has to be prepared for all these scenarios.
Using Technology to Stay Ahead of the Market
In a world where there is no normal, property managers have to stay informed in order to stay ahead. One way to do this is utilizing technology to help surface insights and simplify your rate-setting process. The vast amount of additional data sets that should be analyzed as part of an effective revenue management strategy means it is simply not possible to stay ahead of the market without the use of automated technology.
A good example is MarketMaker, a revenue performance solution from Vrbo, part of Expedia Group. Hosts that used MarketMaker generated in total over $255 million in incremental revenue over the past 12 months. Properties were able to dynamically adjust their rates in the constantly changing environment of 2021 by utilizing insights from leading indicators and market signals such as forecasted occupancy, search demand, and booked/unbooked property rates. Additionally, MarketMaker is able to ingest this data on a continuous basis and simplify the rate-setting process by serving up rate opportunities as they become available in real time.
Whether it is MarketMaker or another revenue performance solution, technology can help any property do more with less. Consolidating data, surfacing insights, and dynamically recommending rates removes a lot of additional leg work. In 2022, when being dynamic is non-negotiable, neither is technology. Using technology to help set the right expectations for 2022 with data, stay on top of surprises in the new normal of no normal, and dynamically adjust rates sets any property manager up for better revenue performance in the new year.
The businesses that understand how to leverage technology to constantly adapt their revenue performance strategy will be the ones that have the most success from vacation rentals in 2022.
Jordan Locke is a partner revenue performance manager for vacation rentals at Expedia Group.
