Property ManagementVacation Rental Tech 6 mins read

Benefits of Dynamic Pricing For Vacation Rental Hosts

By August 16, 2021 No Comments

The following is a guest post from our integration partners at DPGO. DPGO operates an advanced dynamic pricing engine and they offer boosted revenue and occupancy rates for their users. The DPGO pricing engine harvests data from across the world of short-term rentals and uses it to arrive at the perfect price for your listing in the given market environment at the time.

Short-term rental hosts across the world are realizing the potential benefits of dynamic pricing. Hosts stand a better chance of making more money for every booking they accept. They also open themselves up to better, more stable revenue streams and more consistent occupancy figures. But there’s still a lot of misconceptions when it comes to dynamic pricing, so in this article, we have popular pricing tool provider DPGO explain exactly how hosts can gain an advantage with this type of software.

The benefits of dynamic pricing 

This article will go in-depth on the benefits of dynamic pricing. But as a host or multi-property manager, you also have to be aware that there are some downsides (though not many) to dynamic pricing. For one, it’s an added cost to your software stack. And second, you’re relinquishing some control of your pricing strategy to a third party. On that last point, it’s important to note that most pricing tools still give you a minimum and maximum price (amongst many other variables) so you’ll never run the risk of taking a loss. And that’s it for downsides! Now onto what you’ll gain as a host.

The obvious one: Enjoy increased profits

This first benefit goes without saying, but dynamic pricing boosts your overall profit. By making use of smart pricing engines, your pricing will be kept competitive 24/7. Unlike the Airbnb smart pricing tool that you may already be familiar with, most reputable pricing tools use advanced AI systems that collect and analyze short-term rental data specific to your local market. That data is then used to find the right price for your listing at the right time for the right guest. 

In a nutshell, dynamic pricing engines analyze the market environment, as well as a large range of other variables including booking pace, average price, date popularity, and more to achieve the highest possible price. Some of the more advanced pricing tools also learn as they generate more pricing recommendations. They will build a profile of the prices that work and the prices that don’t, as well as the times of year that certain pricing strategies work best for your listing. 

Get the benefits of increased occupancy

Dynamic pricing assists in your occupancy rate because your pricing engine aims to secure as many bookings for the highest price possible. While some would argue that optimized earnings are the primary aim of dynamic pricing tools, a secondary aim, or even byproduct, would have to be increased occupancy at your property listing. 

Increased occupancy and increased profits go hand in hand. This boost in occupancy creates a shortage in supply of your listing which could create greater demand. Listings that are often booked become more popular as their reputation spreads. Strangely, the fewer days you have open on your calendar, the more buzz your property will create. 

Unlike manual pricing strategies, dynamic pricing considers all the vacation rental analytics variable. Remember that decreasing occupancy without considering analytics can actually cost you. A smart pricing tool won’t have that effect since it also takes into account minimum pricing that you set, and balances it all with potential income generation.

Place higher in Airbnb, Vrbo and Booking.com search ranking

Airbnb considers multiple factors when they determine search ranking results. While the company hasn’t revealed the exact formula, we do know that reviews, popularity, whether Instant Book is enabled or not, pricing and Superhost status all affect how well your listing ranks in their search results. One of the variables that can affect ranking is how often the host or manager is active on the Airbnb platform. That includes how quickly you respond to requests and messages, and of course how often you set your rates. So with dynamic pricing, your pricing will change regularly which will give Airbnb the signal that you’re actively managing your properties as opposed to simply listing your place as a “side hustle”.

It’s a similar concept on the other platforms, albeit a bit different. For example, Booking.com says “The number of bookings you receive is vital to your ranking because conversion—the number of guest searches you turn into solid bookings—is the main indicator of how well your property performs on our website.” So by having your pricing optimized for occupancy and income, you’ll convert more visitors into reservation. Booking.com will detect that “buzz” and boost you in the search rankings.

Pricing right for your typical customer profile

Dynamic pricing engines learn with each price recommendation that they make. The engines themselves build a profile of the guests that you attract, the placement of your listing within your market of competitors, the prices that have historically worked in your local area, the season in which your listing earns the highest financial returns, and the amenities your property offers (this reference document shows you which ones will be popular for your area). This “profile” of your normal guest will help you optimize your listing to attract higher volumes of that same type of guest. This property specialization will likely result in higher booking rates from your target guest. 

Gain an edge over your competition

Dynamic pricing gives you a one up on your competitors. Their prices will most likely be based on best guesses, cyclic pricing patterns, rough competitor analysis, and perhaps even inflation percentage increases. 

A competitive edge doesn’t just mean a price advantage. Dynamic pricing gives insight into nearly every aspect of your business. Being able to access these critical data sets and using them to optimize your listing means that dynamic pricing goes far beyond simply arriving at a price figure. 

Never miss out on a sudden spike in demand

If you live in an area that’s susceptible to price changes due to seasonality, it can be difficult to come up with the right pricing strategy. If you charge a fixed price, you’re leaving money on the table. The problem is, researching events or staying on top of surges in demand takes a lot of time.

Dynamic pricing makes short work of all that. The software monitors regional prices constantly. So if there’s an uptick in activity, the price increases automatically.

Conclusion

Dynamic pricing is one of those “turn on and forget it” tools. If you’re looking for a dynamic pricing engine that won’t break the bank, consider DPGO. Also note that DPGO is a Hostfully integration partner. So if you have multiple properties across different platforms, Hostfully will distribute pricing updates pushed by DPGO to all those platforms. Check out DPGO now!