4.5 years of data, 3 pricing strategies, surprising results!
My name is Josh Sedivy and I’m the CEO of Nightpricer. First off, I do understand that writing a case study of my own experiences as a vacation rental manager is a bit atypical, and may even be frowned upon in some circles, but the Nightpricer Team has encouraged me to share the ABODEbucks story, so here goes!
A bit about me…
In 2014, my wife and I started our vacation rental journey with three of our own rentals, while primarily listing on Airbnb. We set up a small team to assist, but we quickly realized that it was difficult finding extra help when needed, with local companies not understanding what we needed, or were just unwilling to help. Recognizing this void as an opportunity, we founded a vacation rental property management company, calling it ABODEbucks, and opened doors for business in November of 2015.
We were right!
Well, things started slowly, but by the end of our first year, we grew to eight properties. As word got out and our reputation began to proceed us, ABODEbucks’ portfolio began growing rapidly at a rate of 100%+ per year and by the end of 2019, we were managing nearly 70 listings!!
Anyone who has been involved in the short-term rental industry understands that it comes along with a 24/7/365 set of customer surprises, issues, and problems. And all the property managers reading this know that you actually have two sets of customers: Guests and Property Owners
As we dialed in our daily processes to satisfy the “two-headed dragon” at the highest possible levels, it became increasingly clear that in order to keep our property owners around for the long term, they needed to see results. Hundreds (thousands?) of conversations all pointed to the same conclusion: The property owner success identifiers are Average Nightly Rate, Occupancy %, and ultimately, Revenue.
On to the case study already! 🙂
So if you’re still reading along, thanks for hanging in there! The juicy stuff is just below. First, just a bit more background…
As much as we wish ABODEbucks could have known the correct strategy to deliver the highest possible nightly rates, occupancy %, and revenues to our property owners from day one, the answers only began to reveal themselves through several years of experimentation and plenty of client feedback.
So with 4.5 years of data from over 100 properties testing three distinct pricing strategies, we crunched the numbers, and here’s what we’ve found:
I think most folks start right here. It costs nothing to set your own prices, plus Airbnb gives recommended prices to start you off, and you can even use the Airbnb Smart Pricing tool for free. And when reservations start coming in right away, it feels like you must be priced correctly.
In retrospect, ABODEbucks probably used this technique for much too long. We only started looking elsewhere when property owners started objecting to low holiday rates. Of course, we could adjust to higher rates, but there’s no doubt some nights went unbooked because we overpriced them.
As you can see, our occupancy % was way too low during our manual pricing period:
We started testing some of the dynamic pricing leaders in early 2018, and ultimately chose Beyond Pricing because the platform was very flexible, allowing us to develop our own pricing strategy on top of BP recommendations.
Initially, we let Beyond Pricing handle all rates for us, but we started noticing a dip in booking revenues and ended up in a cycle of constant manual work to make sure events and weekends were properly priced. We developed a process that seemed to work better, but the extra work was seriously labor-intensive.
As you can see in the illustrations, our occupancy increased significantly during our Beyond Pricing period, but the nightly rates also dipped dramatically:
As ABODEbucks developed workarounds for Beyond Pricing, we recognized that automating the process would save a ton of time and allow us to focus our energies on other important processes.
In 2019, We were put in touch with Denis Angell, owner of app development company Samy and told him exactly what we needed:
* The ability to select the peak, mid, and low seasons so that prices would automatically increase/decrease at the proper points of the year.
* Base and Minimum prices that automatically increase/decrease based on booking frequency
* An algorithm that identifies the value of each date, including seasons, weekends, and holidays to increase/decrease prices accordingly
* Locked Holiday/Event pricing that locks high nightly rates throughout the year but discounts substantially if remaining unbooked with 30 days.
Nightpricer went live for ABODEbucks in July of 2020, and we’ve been blown away by the results! We now have the perfect combination of high average nightly rates and occupancy %, which of course equates to a substantial increase in average monthly revenue:
Ready to start nightpricing?
So that’s my story. We have been thrilled with our Nightpricer results, so we’ve decided to share it with the world. If you’re looking for the ultimate low-cost, hands-off nightly pricing solution, we might have just the thing for you.
As the first step of our launch, Guesty, Hostfully, and Hostaway PMS users can try Nightpricer free for one month, with more integrations coming soon.
Which PMS should we add next???
Let’s go nightpricing!
Director of Operations, ABODEbucks
*originally posted 7/19/2021