Establishing your Rental Rates
Where do I start?
- Firstly do some market research, find the closest property to your property in terms of size, quality of accommodation and location.
- Secondly check the availability of that property, if the calendar is showing acceptable levels of bookings for the time of year you are doing your research then it is safe to assume the prices quoted are acceptable to the market. If the calendar shows very few bookings then this is a very good indication the prices are too high and you may need to set your prices lower.
- If a property is in a sought after location, is attractive in décor and it’s virtually empty then the reason is IT IS OVERPRICED. It is extremely easy to tie yourself up in knots trying to establish a price and the only real piece of advice I can give you is this: –
If you get lots of enquiries but no bookings or worst still, very little enquiries your price is too high – it really is as simple as that.
- The consequences of setting your prices too high, even by just a few hundred pounds are: –
- You will end up getting late enquiries and bookings.
- You will probably have to start offering discounts.
Which would you rather have?
4 weekends in June at £3200.00 which gives a total income for the month of £12,800?
3 weekends in June at £3500.00 which gives you a total income of £10,500?
Your fixed costs remain the same, but even with a 4th changeover cost (cleaning, linen, guest supplies etc. approx. £450.00) you are still around £1850.00 better off.
Getting your price right to begin with = quicker and easier sales.
The emphasis here is on the right price, not the cheapest. Many Online Travel Agencies such as Trip Advisor will have us believe that all customers are driven by price, or rather the cheapest price and this is simply not true.
It is always easier to increase your rates rather than decrease them.
This is particularly true for properties new to the market. Once you have set prices, if you find bookings are coming in thick and fast then you can try increasing your rates, but, a little at a time.
If you price too high and then have to drastically reduce rates you have wasted valuable time, potential customers who enquired will have probably booked somewhere else, but more importantly you run the risk of upsetting the few customers who did book at the higher rates when they see similar dates drastically reduced, it does not bode well for a good review or repeat custom.
Weekly and Weekend Prices
The traditional method of determining weekend prices by many agents has been to take a percentage of the weekly total. The weekly totals having been established first, however, this model makes no sense for larger properties because;
70 – 80% of your revenue will come from weekend bookings
Therefore your 2-night weekend rate is your starting point. If you have a 10-bedroom house it is very unlikely anyone is going to want to rent for a week in January but you may very well get 2 or even 4 weekend breaks.
It is essential to offer 2 night weekend breaks, many agencies and owners are offering a minimum stay of 3 nights, but this involves people taking an extra day off work and many people simply do not wish to do this. I have on many occasion, taken an existing rate for 3 nights and made that a 2-night rate, I have then added 10-15% to this rate to make a 3-night weekend rate.
The majority of our houses offer 2 night weekends from 4pm Friday until 4pm on Sunday. The guest is then getting 2 full days use of the house, which gives us a USP. Most cleaners or cleaning companies do not want to work on a Sunday and if they do, they generally charge more.
Mid week breaks need to be priced less than weekends, there is far less demand for mid week breaks in large properties, however, during school holidays you will find some families taking advantage of the lower mid week rate, leaving you free to sell the weekend at the higher rate and netting a greater rent than if you took just one booking for 7 nights.
To summarise, if you wish to maximize your rental you need to appeal to all your potential customers (see the article Your Guest Profile and How to Cater to them). Therefore you need to identify, in order of importance: –
Your 2-night weekend rate
Your 3-night weekend rate
Your weekly rate
Your mid week rate
Need some more advice? Simply fill the form out on the left hand side of the page and we will be in touch soon.