When you first start in the rental cabin business, setting your nightly rate might seem like a straightforward equation. Just punch in a price and you’re good to go… Right?
In reality, finding the optimal number is a little more complex. There are many factors impacting your demand and they also determine what you can ask for in your charming cabin. With over 16,000 cabins here in the Pigeon Forge/Gatlinburg/Sevierville market, competition is FIERCE and you need every edge possible to find success.
For one, your cabin type matters, as well as how it stands beside your competition. Every market behaves differently, not only across different locations but also over time. Even when you reach a baseline price, you can’t just leave it at that. If you do, you’ll be leaving money on the table.
Price setting is not a one-time task — it’s an ongoing process.
We call the process of continuously analyzing and adapting your pricing to maximize your earnings “revenue management.”
What is revenue management and why is it important?
In a nutshell, revenue management means strategically setting the right price at the right time for the right guests. It involves constantly adjusting rates to ensure optimal pricing based on market conditions, to maximize occupancy and revenues.
Revenue management is a game-changer that can catapult your investment cabin to new heights. And there’s a way to go about it. Read on for the seven steps you should take to maximize your cabin’s potential.
Thankfully these rules apply to every market including both Pigeon Forge and Gatlinburg.
Step 1: Choose the right pricing tool
Figuring out the multitude of factors influencing your pricing can feel like putting a million puzzle pieces together. It’s a lot to handle.
Luckily, our tech-infused industry offers many options for revenue management and dynamic pricing software to help with that. These are automated solutions that leverage historical and real-time data, analyze similar listings in your area, and consider real-time demand to adjust your price at any given moment.
If you’re serious about revenue management, you should definitely pick one of these tools. They’ll take 70-80% of the workload from your back.
Here’s how they help:
- They adjust rates based on area demand and occupancy;
- They find the best price during both high and low seasons;
- They identify the optimal length of stay based on seasonality;
- They handle orphan days;
- They identify major events taking place in your area that you might not know about;
- They help manage last-minute cancellations and rebooking to minimize revenue loss.
With so many options available, choosing the best one can be tough. Our favorite tools are Wheelhouse, Pricelabs, and Beyond.
Let’s quickly break down our findings.
- Beyond: known formerly as Beyond Pricing, this option is very user-friendly, and ideal for those seeking a “set-it-and-forget-it” approach (though we don’t recommend that). While it may not offer extensive customization, it handles many of the adjustments you need.
- PriceLabs: this is a very powerful one. It provides the most flexibility and customization options, allowing you to really maximize your revenues if you invest your time into it. PriceLabs also integrates with various other systems and gives you a lot of control over your pricing strategy.
- Wheelhouse: positioned somewhere in between the first two, Wheelhouse is great for revenue optimization. Expect to review and adjust your settings every week to track performance and make necessary tweaks. Wheelhouse also allows for integration with other tools for enhanced efficiency.
Remember, any software is only as good as the user who sets it up. If you want to maximize earnings, think of the task as a part-time job!
Also, know that these tools come with a cost that is comparatively cheap. Generally, you can expect them to deduct around 1% of your gross bookings (Beyond) or under $10-20/month (Pricelabs).
Step 2: Identify your competition
Creating a competitor set, or a “comp set,” involves identifying a number of similar cabins or properties that closely resemble your own in terms of location, size and amenities.
By narrowing your focus, you can benchmark your rental cabin against the true competition. The goal is to track their performance and make adjustments to ensure your cabin stays competitive.
To build a comp set, you can use various tools available in the market, including Beyond, PriceLabs, and Wheelhouse. These comp set tools offer great data analytics, helping you make informed decisions.
Here are six major components to consider when building your comp set:
- Amenities: evaluate the amenities you offer and compare them with similar properties in your area;
- Size and guest capacity: consider the size and guest capacity of your cabin and compare it to other listings;
- Location: look for properties close to yours to accurately measure the local market dynamics.
- Performance: check factors such as revenue, average daily rate (ADR), and occupancy rate. The tools mentioned above provide you with much of the performance data — even for your competitors.
- Quality: consider ratings and reviews of your property and the properties in your comp set to evaluate guest satisfaction.
Building a comp set will enable you to make data-driven decisions and stay competitive. With this information, you can improve your performance and enhance the guest experience.
Step 3: Establish pricing metrics
When you set pricing metrics, you’re basically laying down the rules and criteria to figure out how much a night should cost on your cabin. Start with your baseline price. Setting this price is as much about performance as feelings. Our inventory is perishable because a night without a head in the bed is revenue you can’t make up which means that even $1/night could work. However you’ll also have an emotional value you don’t want to go below because you feel that’s what the value is.
Once you decide on a minimum rate, never go below it.
Now that you have your comp set, you can use this information to set a competitive base price. It helps to take a step back and evaluate your cabin objectively as if looking at it from someone else’s eyes.
When setting your metrics, have in mind that your occupancy rates will be different at different times of the year, so you should set minimum and maximum pricing. Use minimum pricing in the slow season and to fill last-minute gaps. It’s a good strategy to set it as low as you comfortably can, but still respecting the no-loss rule.
Besides seasonality, there are special events and holidays, and pricing on weekdays differs from weekends. Use a dynamic pricing tool to automate rates across all your channels.
All the above can and must be adjusted over time. Testing different nightly fees can help you optimize your pricing strategy. Once you set a new one, try to understand how the market reacts by studying the data and noticing the effects on your booking rate.
Step 4: Customize with any specific rules
When it comes to your pricing strategy, there are several custom rules you can apply to optimize your overall approach.
Here are some of them:
- Raise the price outside the normal booking window: consider raising your prices for bookings that fall outside your usual booking window, which typically ranges from four to six weeks before the check-in date for one- to five-bedroom cabins here in the Smokies.
- Last-minute discounts: if you have vacancies within three weeks of the desired check-in date, start offering discounts to incentivize last-minute bookings and fill those empty slots.
- Orphan discounts: reduce the price for short gaps in your rental calendar. These are known as “orphans” and happen between two longer bookings.
- Minimum and maximum night stays: choose the ideal length of stay for your market. For instance, even if the average stay in our market is 3.5 days, if you notice a significant demand for one or two-night stays, implementing a 2-night minimum stay requirement can help cater to the widest range of booking preferences.
- Holiday exceptions: consider blocking check-ins on major holidays like Christmas and New Year’s Eve to allow your cleaning staff to spend time with their families. You may also want to increase your minimum length of stay.
- Weekday discounts: demand for cabin rentals is typically lower on weekdays compared to weekends. To attract more bookings during these less busy periods, offer lower prices for weekday stays.
- Longer stay discounts: boost extended stays by offering discounts for a week or longer. This not only helps fill vacancies but also reduces cleaning and operational costs. Note that our market has VERY few stays longer than a week.
After you implement these rules, analyze their impact on your rates and fine-tune your pricing with a data-driven approach.
Step 5: Connect to your channels
With cabin rentals, it’s never a situation of “if you build it, they will come.”
Bookings happen online, so it’s crucial to list your cabin on multiple platforms to reach as many people as possible. Every day, OTAs receive millions of visits and by listing your rental on these platforms, you can increase your visibility and attract more guests.
Also, the more exposure your listing receives, the more room you’ll have to set a higher nightly rate.
First, you need to determine which platforms to list your property on. In our market, the most popular channels are Airbnb and Vrbo – a typical split could be 75% for the former and 25% for the latter.
- Airbnb: as a user-friendly platform that takes care of many tasks for you, such as payment processing and insurance, Airbnb is an excellent starting point. This is also the go-to platform for most people searching for rentals.
- Vrbo: in the States, Vrbo is a popular alternative to Airbnb. It particularly shines in traditional vacation rental markets. Listing on Vrbo also grants you exposure to Expedia and Hotels.com, which is a significant advantage.
- Booking.com: with a vast reach, Booking.com is another excellent marketing option, even if it primarily focuses on hotels. If you’re already listed on Airbnb and Vrbo, adding Booking.com to your portfolio can broaden your potential guest base.
Remember, when you create your online rental listing, it becomes a representation of your cabin to the world. Make sure it provides comprehensive and accurate information about your cabin and the rental conditions.
Step 6: Watch your performance closely
Once everything is set, you can employ some effective strategies to attract bookings and watch how everything unfolds closely.
In the beginning, one trick is to look up similar rentals in your area and set your nightly fee slightly lower than theirs. If you want to gain momentum, you can offer a 20% discount on the first three bookings made through Airbnb and Vrbo. Both give a boost to new listings to compensate for the lack of reviews. Keep a close eye on your booking activity during the initial days and make pricing adjustments if necessary.
Don’t keep your prices low indefinitely. Once you have earned a good number (of positive) reviews, it’s best to save this strategy for the low season. Positive reviews establish your credibility and give you more leeway to experiment with increasing prices.
Step 7: Review everything on a schedule
As we said before, revenue management is an ongoing process. It never ends. If you want to make the most of your investment cabin, set a weekly reminder to check in and review your occupancy and rates, compare them with the market, and adjust it as needed.
Here are some insights from our revenue management team:
- If your 60/90 day vacancy rate is trailing the market, consider dropping your base rate to 5 or 10%;
- Likewise, if your 60/90 day vacancy is over 10% higher than the market, you can raise your base rate to 5 or 10%;
- If your 60/90 day vacancy is good, but the 30-day vacancy rate is too low, apply a discount manually across the next month to fill in that time.
Extra tip: skyrocket your cabin’s success with a dedicated revenue manager
As you can see, revenue management can be complex. While using the right pricing tools can certainly provide a boost of 20-30% in revenue, having a knowledgeable professional who understands the intricacies of pricing strategies is something invaluable.
At Avada, we own this game with a full-time revenue manager who specializes in analyzing market and booking data. Her role is to thoroughly analyze and interpret everything to make informed decisions that optimize your cabin’s revenue potential.
No question about it: with a dedicated revenue manager constantly fine-tuning your pricing strategy you’ll be soaring past the competition and watching your cabin’s success skyrocket.