According to the 2013 “HomeAway® Vacation Rental Report: Owner Edition,” the average “summer” weekly rental rate is $1,778 ($254 per night), a 19 percent increase over the same time period in 2012.
A nineteen percent increase?! Am I leaving that much on the table? Although this report lists the hottest markets where renter demand is on the rise, they do not give average weekly rental rate increases by market.
This is great information, but what we all want to figure out as homeowners is ‘how do you find the optimal balance between raising rates and filling your calendar?’
The first question to ask is “Are you sure you need to raise rates?” If you are like me, the prospect of leaving money on the table creates anxiety. The flip-side, of course, is you could easily price yourself too high for certain weeks and it could actually lower your annual income – creating more anxiety. So, how do you determine the optimal rates from year to year so you can attract the maximum number of renters, while keeping pace with inflation and the cost of providing attractive amenities?
The truth is that many “rent by owners” are not equipped with the tools that the professional property management companies have to run historical reports, current market analyses and trend reports. But there is some really good information available on-line and, with the proper motivation, owners can do a good job of this themselves.
Regardless of whether you rent on your own or use a professional, the following is a list of six things you can do to make sure your rates are appropriate:
1. Do a comparable search on the listing site where you get most of your leads. Sounds like the most obvious thing to do – and it is. When setting rates, most people either rely on the advice of an “expert” or don’t take the time to do this. Take the time to do this and pay close attention to the seasonal “cutoff” dates when rates increase or decline. See how your rate groups and dates compare with other homes close by. Savvy renters know when these dates occur and time their vacations to get the best value. If your dates are significantly different than the market, your rates may be as well. It is also a good idea to search on competitive sites to see how they are pricing certain seasons to get a different perspective.
2. At least keep pace with the rate of inflation. The current US rate of inflation (according to the Bureau of Labor Statistics) is 2%. Pretty low right now, but according to some economists, this measurement is worth keeping a close eye on. For easy reference, you may want to bookmark this url http://www.bls.gov/cpi/
3. Know your expenses! Whether you use a spreadsheet or Bright Sites’ Ownerware solution to track this, you have to know what costs you are trying to cover and how fast they are increasing.
4. Check with the local Board of Realtors or Chamber of Commerce. In some markets, the BOR provides statistical information that may be helpful in determining how your rates compare.
5. When in doubt, ask a professional property manager. If you currently rent-by-owner and you just can’t seem to keep pace with occupancy rates of other rentals in the area, despite your best marketing efforts, there is a local PM anxiously waiting for your call.
6. Get a copy of the “HomeAway® Vacation Rental Report: Owner Edition” every year. Love them or not, Homeaway is the industry giant and very good at providing useful statistical data and trends. A summary of the most recent 2013 “Summer report” can be found here: http://www.homeaway.com/info/media-center/press-releases/2013/vacation-rental-performance-rema
We are always looking for information that we can post on this blog that helps owners and managers. If you have found or created information that you feel would be helpful in setting rates, please post it in a response on this blog.
Mike
