A Historical Perspective
Although the global pandemic is behind us, the STR industry is still feeling its impact. The demand for vacation rental homes dissipated somewhat from its historic high during the pandemic but is still stronger than pre-pandemic years.
The result of this unprecedented demand is that rental rates across the region have risen dramatically. From pre-pandemic 2019 to 2024, the average rental rate for a 3-bedroom home increased 44% on the Cape, a whopping 52% on the Vineyard, and 14% on Nantucket.
As you look at the graph below, keep in mind that one reason for the dramatic increase on the Cape and Vineyard is due to new, more expensive listings coming onto the market.
In addition, 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.
Tips to keep in mind for 2024
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.
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?”)
Be sure your pricing is transparent. 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.
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 how your home compares to your competition.
- Reflect on how you did last season.
- Tier your pricing to reflect the relative popularity/demand of some weeks vs other weeks, particularly the last week of August. (link to post)
- Keep in mind the greater inventory and decreased demand when determining shoulder season and off-season pricing.
How to handle repeat guests in a rate increase
Repeat guests are like gold. If you decide to raise your rent, you risk losing some of these guests. As an extra incentive to book your home again, you can offer to split the difference with them between the old price and the new, at least for the first year. Alternatively, you can allow them last year’s rate.
Of course, if you add amenities or make upgrades, you would be justified in asking repeat tenants to pay full price, even though you may risk losing a few of them.
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.”
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. If you are not getting many inquiries, it may mean that vacationers are finding comparable homes at a lower rate.
Smaller homes (3 bedrooms 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 to inquiries quickly, professionally, and thoroughly. 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 54% 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.