In 2022, the average 1 bedroom cabin owner in the Pigeon Forge/Gatlinburg/Sevierville market made $40,242. With us, the average 1 bedroom made between $65,000 and $70,000.
How are able to crush the competition? Dynamic rate setting.
Setting nightly rates like hotels and airlines use is the single most impactful thing you can do to make the most money possible. We change rates daily based on more than a dozen rules, using occupancy as the largest guide on how to adjust nightly pricing. We also look at each property individually weekly to make sure bookings/occupancy are trending correctly.
How we approach revenue management is a critical factor in how we outperform the market. Given there are over 16,000 cabins in our market it’s important to really pay attention to the details to stand out where possible and price aggressively to secure top-dollar bookings.
I think it’s important to understand some of the factors that go into our rate setting approach, so we are on the same page. The list below outlines the more important rate setting rules we use.
Given the amount of competition in the area, it’s VERY important to watch your competition’s booking levels. We use both commercial tools (Keydata and Airdna) as well as custom in-house software to monitor both bookings and pricing. Depending on the time of year, we’ll want to see 65-75% occupancy over the next 30 days. This means we’re getting those higher dollar bookings while giving us a small number of vacancies for last-minute stays.
a. Local Competition. We need to make sure that your pricing strategy matches the units in your immediate vicinity. We don’t want to compare condos to cabins as condos price differently. We also want to make sure the comps are of comparable size as that also impacts booking patterns.
Occupancy plays a role here as well. If we see that occupancy of your area is going up, we need to make sure you’re priced so that your occupancy rises to match. This happens as we hit May for summer bookings or if a local event changes dates — either way we’ll rapidly see it and adjust.
b. Variability. Given that a typical booking for us is 3.5 days, one booking in a month can impact your booking levels 10-20%. This means that while our goal may be 75% occupancy for the next 30 days, we won’t necessarily lose sleep if you’re at 50%. We carefully watch and compare it to your comp set and adjust when it’s appropriate.
The booking window is the time between when a guest makes a reservation and the start date of their stay. For smaller properties this will be between 3 and 4 weeks. For 6+ bedroom cabins it can be 2 to 3 months depending on the time of year. This means that you shouldn’t worry if you don’t have bookings 2+ months out — you SHOULD worry if you have more than a booking or two far out because that means you may be underpricing.
Time of Year
January and February are the slow months in our market and rates will be dramatically lower than peak months. “Shoulder” months are April, May, August and September and these will have average rates. June, July, and Oct-Dec are peak months and will be priced accordingly.
Day of Week
Like many short-term rental markets, Friday, and Saturday command higher rates. Sunday to Thursday will have prices that can be less than half the weekend rates.
When pricing your property, we need to make sure we hit the standard that’s expected for a property of your size. As an example, 99% of cabins have a hot tub. As you hit 2 bedrooms and up, you’ll find arcade games are common. Three bedrooms and above will have a pool table. And with 4 bedrooms it’s very common to have a media room. If you have an indoor pool, you’ll command a massive premium, especially if you have 4 bedrooms or more.
Holidays and Events
We’ll automatically adjust for holidays and local events like Rod Run. If a specific holiday day is lower priced than you expect, check the weekends around it as that’s often when the actual demand will fall.
Our inventory is perishable, so it’s important that we “get heads in beds” to make the most possible. That means offering a discount for a last-minute booking or an orphan day between two other bookings. After all, 1 or 2 of these stays a month equals several thousand (or more) in your pocket at the end of the year.
At the same time, we want to make sure that guests take care of the place properly. Vetting guests is a good topic for another post but suffice it to say less than 1% of guest stays will require a damage claim; it’s just not a big problem following our approach.
While not strictly related to the Revenue Optimization topic of this post, there are a couple other areas it’s important to become familiar with:
Listing SEO. There are many factors that impact where your listing shows up in the rankings – price, date last updated, Superhost, amenity options selected and more. Be sure to focus on the title, photos and copy to help drive clicks and conversions. Avoid sending clicks to your listing that won’t book as that harms your listing.
Good Reviews. When your reviews slip below 4.7*, there is a 9% decline in booking revenue. If your score slips, you’ll have to drop prices to secure bookings. Reviews are primarily driven by three factors: customer support, quality of listing, quality of cleaning.
Finally, anecdotal data isn’t so useful for setting an overall pricing strategy. It’s possible for a neighbor to get a booking for more than your (much nicer) place. But we follow the law of averages, which means that a proper pricing strategy will have you coming out far ahead at the end of the year.