What’s different this year
As we slowly emerge from the global pandemic, its impact is still being felt across the STR industry. The historic demand for vacation rental homes has dissipated somewhat but is still stronger than pre-pandemic years. Inventory levels, which had decreased due to both the then-new lodging tax and the outbreak of Covid, have grown, avoiding the frenzy of vacationer demand we saw in 2020 and 2021.
But even with an increase in inventory, rental rates have soared due to the continued demand.
Another result is that vacationers these days are a little different than they were a few years ago. Many are willing to pay more, but, in turn, they have higher expectations than ever before. (For more information, read our recent post “Who is Today’s Vacationer?”)
Tips to keep in mind for 2023
First, do NOT base your rates on how much your expenses have risen. Vacationer demand dictates rates, not owner expenses. We know your energy costs in particular have increased dramatically, as have labor and materials. But those alone do not justify your raising your rent.
Keep in mind that, even though your costs to maintain your home have risen, so, too, have rental rates across the region – dramatically. From pre-pandemic 2018 to 2023, the average rental rate for a 3-bedroom home increased 52% on the Cape, a whopping 73% on the Vineyard, and 55% on Nantucket!
And of course, the lodging tax has added between nearly 10-15% on top of every rental since 2019. That’s a huge increase for vacationers to absorb.
One down side to pricing your home on the high side is that doing so can result in your having very discerning, demanding, and even resentful guests. Everything had better be perfect! With increased rates and vacationers new to the STR market from the hotel one, expectations are very high. Homeowners have noted an increase in their guests seeming to be more “entitled” than in the past – undoubtedly a result, in part, from having to pay so much.
Transparent pricing: be sure to make it abundantly clear what’s included in your rental and what’s not. If you charge less because you don’t offer a 5-star experience, that’s fine, just be very clear about why you are charging less. Don’t hide any fees on your listing and then surprise them with the fees in the lease.
In short, be sure not to over sell and under deliver.
Also, be aware of the most popular amenities, and, if possible, try to at least provide those that most other rentals do (e.g., AC, even it’s just window units, washer/dryer, Wifi, an outdoor shower, cable or smart TV, dishwasher).
The chart below ranks the 12 most-searched amenities on our site, and the column on the right indicates the percentage of rental homes that offer those amenities.
Timeless pricing tips
For general advice about pricing your home, we provided some basic guidelines to pricing your short-term rental home in a previous post. In it, the following tips are included:
- Get comps, know your competition and how your home compares
- How did you do last season?
- Tier your pricing to reflect the relative popularity/demand of some weeks vs. others
- How to handle shoulder season pricing
How to handle repeat guests in a rate increase
First, you have to consider how much each repeat guest is worth to you. Someone who has stayed with you for 2 or more years, for example, is more likely to return than someone who only came this past summer. Other considerations might be: how did/do they leave your home? How hard on your home were they (lots of kids, pets, etc.)?
You can offer to split the difference with them between the old price and the new, at least for the first year.
Or, you can allow them last year’s rate.
But if you do offer them a discount, be sure to make them very aware of it. “Just letting you know that we have had to raise our rates for next year. But we so enjoy having your family stay with us, we’re fine charging you only half of the increase.”
And if you do raise your rates, be sure to let them know about any upgrades you’ve made to your home of course.
When to lower your rates
Don’t wait too long to lower your rates if you aren’t getting the bookings you expected. The advantage to listing your home year round and having your pricing in place early is that it allows you time to gauge how attractive your pricing is. Especially in a market that is as strong as it still is, if you are not getting many inquiries, that usually means vacationers are finding comparable homes at a lower rate.
Smaller homes (3-bedroom or smaller) can book right up to the last minute, but larger homes book earlier in the booking season. So, if you have a larger home, be careful not to wait too long before reducing your rates for the remaining vacancies. And if you do, be sure to promote those reductions on your listing. (Learn more about how to fill last-minute vacancies.)
Marketing tips to get top dollar for your home
- Respond quickly, professionally, and thoroughly to inquiries. Suggest, or even require, a phone call prior to booking. You have a lot of competition – the early bird gets the worm.
- Advertise early! The recent trend has seen much earlier inquiries and bookings than usual. (Bookings by early December for the following summer are up over 78% this year from 2019.) Set up your pricing and availability at least a year in advance.
- For more advice, see our Top 10 Marketing Tips.