Of the myriad questions we’re frequently asked, one of the most common is about pricing. Should I go up in my prices for next year or keep them the same?
For many years, the typical annual rate increase ranged from 2-4%. This past year was an exception, however, with only a slight price increase due to the lodging tax effectively causing a significant spike in the amount vacationers have to pay.
To say that the 2020 season was not a normal year would be an understatement. Many owners reported that they could have booked summer weeks many times over, and rental inventory was at an all-time low. When we took an informal poll at our recent weekly Zoom meeting, more than 50% of the owners indicated that they were increasing their weekly rates for next summer.
It’s important to note that early bookings for next season are up dramatically from this time last year – in fact, the most significant increase in our 23-year history. Such strong demand will provide even more ability to raise your rates.
Although the pandemic may be with us well into next year, and perhaps into next summer, we do not anticipate the sudden, last-minute rush of vacationers that we had this year. We do know, though, that thousands of vacationers have discovered that renting a home on the Cape and Islands, versus staying in a public hotel or inn, was the way to go this summer. While hotel stays were down this summer, vacation rental home stays increased by 25% over 2019. Assuming they had a positive experience this summer, many of those new vacationers will be anxious to return to a vacation rental next year.
The Cape and Islands region also picked up a number of “converts,” who traditionally traveled to international destinations and weren’t able to do so during the pandemic.
Increased Costs for Homeowners
In addition to the increasing popularity of home rentals, there’s another factor in play here. Homeowners’ expenses increased markedly this summer, particularly when it came to cleaning and disinfecting. Cleaning companies charged more, and their rates may not come down. Many owners also went to the added expense of purchasing duplicate bedding, more cleaning products to leave for their guests, more amenities, etc.
Some Additional Homework
Before making your decision regarding your pricing, you might take a look at a previous post, The Pricing Dilemma: Go Up, Go Down, or Stay the Same, which provides a comprehensive look at pricing strategies, including checking on what your competition is doing.
Repeat guests are like gold. You know them, they know you, and they take care of your home. But don’t be too generous with the time you give to past guests to make their decision about the following summer. Perhaps on their departure, or even in a guest review, one of your tenants expressed an interest in returning for the same week next season. It’s important to contact past guests to get a commitment from them as soon as possible so that, when you get a new inquiry, you can respond immediately rather than risk losing them.
And keep in mind that you are much more likely to get a higher rate the earlier in the season your home is booked. If you hold off demanding a commitment from your past guests and they end up not coming, you risk not filling your home or having to discount your rates in order to do so.
Your Cancellation Policy
If we’ve learned anything this year, it’s that the future is unpredictable. On one hand, vacationers are already booking homes for next summer, especially if they missed out this summer. On the other hand, they are understandably anxious about what next summer will look like.
Your lease should still have the clause with your normal cancellation policy (no refunds unless week can be re-rented). But vacationers will feel more comfortable if you include a clause allowing for 100% refund if there are public health safety concerns that prohibit their staying in your home. Without this assurance, guests may be reluctant to book with you. (See our post about cancellation policies during the time of the pandemic.)