Of the myriad questions we’re frequently asked, one of the most common, and important, is about pricing. Should I go up in my prices for next year or keep them the same?
Some historical context
For many years, the typical annual rate increase ranged from 2-4%. In 2019, however, homeowners were afraid to raise prices due to the implementation of the lodging tax, which was effectively costing many vacationers nearly 15% more than their usual rent.
Then the pandemic hit, and to say that the 2020 season was not a normal year would be an understatement. Many owners reported that they could have booked their summer weeks many times over, and most vacancies were completely filled. But by then, most of their pricing had already been set, and it was on average an increase of 3.4%.
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.
Very high inquiry/booking numbers already for 2021
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 enables you to raise your rates with confidence.
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,” vacationers who traditionally travel 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 guidance
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.
Tier your weekly pricing
Rather than enter a flat weekly rate for an entire season, we recommend that you “tier” your rates to reflect the relative demand from vacationers. Within the summer season, for example, by far the most desirable rental weeks are the last 2 weeks of July and the first 2-3 of August. So, consider discounting your early- and late-summer weeks to provide incentive for vacationers to book those. Your town or area might also have uniquely popular weeks due to events such as the Falmouth Road Race, P’town’s Carnivale, the Vineyard’s Agricultural Fair/Fireworks/Illumination Night, Wellfleet’s Oysterfest, etc.
Increase your flexibility in Minimum Stay Requirements
There has been a steady growth in the trend towards shorter vacation stays. Whereas most homeowners continue to insist on a full week minimum stay during the summer, mostly for logistical reasons, the demand for shorter stays or those with flexible arrival/departure dates continues to rise. So, if you are able to be flexible with your turnover days, just be sure to charge more per diem to make it worthwhile.
This holds particularly true for the shoulder and off seasons when the demand for full week stays really plummets. You are much more likely to fill your home with shorter-stay bookings, especially if you have a large (4+ bedrooms) home. Again, be sure to charge enough per diem to make the shorter bookings worthwhile.
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 renters 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. If you wait too long to respond to the prospective renter while checking with the past guest, you risk losing the prospective renter, who may just move on.
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.
Promote special pricing or deals
Use our free Owner Special feature to draw attention to your listing and promote any special deal you might be offering. And if the rental week is within the next 4 weeks, use our fee-based Last-Minute Availability Alert to further promote your offer and enter your listing in our Last-Minute Availability and Deals directory.
Don’t wait too long!
If you haven’t entered your 2021 pricing and availability in your Calendar yet – or, worse, your listing isn’t currently active – you’re probably missing out on inquiries and bookings. Vacationers are looking and booking for 2021 now! And your competition is – 80% of homeowners list year round, and 72% have entered their pricing/availability for next season. Their listings are the ones that will appear now in vacationer searches.
2021 Pricing take-aways
Next season will mark the third year with the lodging tax, and presumably vacationers have come to accept the added cost. Their acceptance is due in part to the fact that many homeowners chose not to raise their rates in order to mitigate the impact of the tax. But especially given the added efforts and expenses caused by the pandemic, homeowners’ expenses have only risen.
In addition, not only was the 2020 season an unexpectedly strong season for vacation rentals, but early inquiries and bookings for 2021 are already extraordinarily strong, too. Thus, we feel that homeowners should feel more confident than usual that they could raise their rates for the 2021 rental season.