Wolfgang Pagl
Revenue management has been an important part of the hospitality industry for more than 30 years, yet adoption of revenue management technology has been slow. Most property managers today are not using technology and data consistently to make revenue management decisions. On the one hand, a lack of valuable insights on competitors, market demand and other external factors that impact revenue strategy can put them at a competitive disadvantage. On the other, too much data from multiple sources can result in very little real actionable insight, causing more confusion than solutions. In addition to this, the often fragmented and complex nature of the vacation rental industry’s ecosystem means that it can be hard for property managers to keep track of the rates across multiple property listings and different platforms. Managing multiple small properties with limited availability adds significant additional complexity and manual workload for often already stretched staff.
Property managers often tell us that they think their prices should be aligned with properties that are an apples-to-apples comparison to theirs – i.e., "I have a three bed, three bath property, so I should only be compared to other three bed, three bath properties," however traveler searches have taught us that this isn't always the way that travelers shop. In different markets or different seasons, there may be certain amenities that are more important to travelers, and they're willing to sacrifice things like the number of beds and baths. For example, if a family is booking a property for a summer vacation, they may prioritize properties with a pool while being flexible on number of bedrooms. These type of factors should influence how a property manager thinks about pricing their property.
Expedia Group insights also have told us that revenue management in the vacation rental industry can differ from the wider travel industry. Typically, revenue management as a practice is about matching the right demand to the right supply, usually with a goal to maximize revenue and profitability; however, for the vacation rental industry and for our lodging partners, many have different goals:
- Some may want to make the most money possible over the course of the year.
- Some may be willing to sacrifice revenue in order to get more bookings so that they can build up their reviews, so setting a rate that optimizes bookings is preferable.
- Some may only want to rent out their property if they can get a high price for it, thus maximizing the amount they make for a set of dates, but possibly sacrificing revenue throughout the year.
Historically, property managers have too often used incomplete data sets that don’t include useful data, leading to an inability to track the market and know when to make changes. The foundation of any good revenue management tool is great data. Our teams leverage data science and machine learning to deliver insights based on consumer demand behavior and traditional supply data. Both Vrbo’s MarketMaker™ tool and Expedia Group’s Rev+ tool use complete datasets that track the market.
Seven Top Tips for Optimizing Your Revenue
Here are my top tips on how you can optimize your revenue today.
- Plan ahead: This is essential to ensure a watertight revenue management strategy. Most good quality revenue management tools on the market offer a 365-day view that gives you a more holistic overview of your rates for the next year, and compares it at a glance with your competitive set in real time.
- Be informed and stay on top of changing market conditions: Revenue management systems are essential, but help yourself even more by staying on top of market changes independently. Many of the major revenue management software providers have an option of sending weekly emails that highlight competitive set price changes, market demand changes or price optimization opportunities.
- Stay well connected: Managing limited availability for multiple small properties increases the need for reliable channel management software to optimize availability and thereby conversion on every site, and to avoid costly overbooking and relocations. Automating as much as possible will help you stay focused on optimizing your strategy and polishing details rather than making manual updates and solving issues.
Show up in as many traveler searches as possible:
This is important if you want to maximize your bookings and can be done a few ways:
- Enable instant booking which can lead to an increase in total conversion.
- Select all the amenities your property offers and talk about them in your property description.
- Lower your minimum number of nights so as not to miss out on shorter stays, particularly when you have availability gaps between two existing bookings.
- Once your listing is published, check that it is pinned to the correct location on the map.
Page views lead to bookings, so make the view a great one: Travelers love reading reviews for a listing so try to solicit them and be sure to include lots of professional, well-lit photos with clear captions. Bonus: integrate a virtual tour! Emphasize authenticity by tying your headline directly to a nice thumbnail photo. Other tricks include providing distances to the best local attractions and set prices competitively for your local market. If your portfolio is too large to go into full level of detail with all properties, compare sales of similar ones and apply your market knowledge to identify those that need some extra care to reach their full potential.
Get travelers to act after seeing your property: Try to respond to inquiries in less than 24 hours — 57 percent of vacation-rental seekers will look elsewhere if they don’t hear back within a day.[1] Use traveler questions as a guide for what to highlight in your property description.
Last but not least, convert, convert, convert: to get the most bookings you possibly can. Be clear about your house rules and feature easy-to-read rental agreements and try to avoid cancellations unless absolutely necessary.
Looking ahead, where does the future of revenue management in this industry lie? Our own tools already use machine learning to provide real-time, on-demand data insights and the AI space is an area that will continue to evolve. It allows us to predict market behavior and to provide both lodging partners and travelers the insights they need to be successful in our marketplace, and it’s creating a more seamless site experience with little to no disruption to the user – watch this space.
Overall, using a data-driven approach to revenue management that combines predictive analytics with people-driven strategies is so important in order to accurately forecast demand, increase direct bookings, deliver precision pricing and maximize profit opportunities that might otherwise be lost. Overall, with innovations in AI speeding up, this will be an interesting space for property managers to watch as they seek to optimize revenues and maximize bookings.
Wolfgang Pagl is director of vacation rentals at Expedia Group. He is responsible for leading the global vacation rentals account management team who onboard new property managers onto the Expedia Group platform and work with existing partners to help drive demand to their business. Wolfgang has been at Expedia Group for over 15 years, previously leading the group’s Eastern Europe account management team, managing relationships with our lodging partners in 27 countries in the region.
[1] 2 Based on a March 2014 survey to 414 travelers who inquired on Vrbo.
