Dynamic pricing for short-term rentals is not effective everywhere.  Contrary to all of the recent hype about these great computer programs (for a fee) that will help you make loads of money, they may not.  Then why is everyone on this kick now or “hack”?  Using a dynamic pricing tool will help those who have properties in big travel areas.  It does not always work with vacation rentals.  Before you spend any money or jump to the conclusion that your current short-term rental pricing tools are inadequate read further.

Dynamic pricing comes from searching booking sites

Dynamic pricing software simply searches Airbnb and VRBO website data to determine what is listed for rent, when, where, and for how much.  It looks at a specific area that you are interested in and tells you what you should price your property at for a given day, weekend, week, etc.  The theory is that if you adjust pricing frequently you can capture a greater level of profit and obtain more bookings.  The concept is great for many areas but not all.

Washington DC
Big market for travelers who utilize short-term rentals (more than 5,000 available)

Take San Francisco, Washington D.C., Atlanta, or other large metro area.  A large number of travelers during the year are people on business trips.  I know I was one of those for decades.  Most stays are during the week for what I call “travelers”.  Now “travelers” are not the same as “vacationers”.  Travelers are moving from one place to another mostly on weekdays.  They can stay for a few days or a week depending upon the situation.  Others can stay for a few weeks, months, etc.

Travelers vs Vacationers

Both use short-term rentals, areas with lots of travelers can be managed with dynamic pricing

45% of visitors to Atlanta are on business. 56% of travelers to Washington DC are on business while 22% of travelers to New York City are on business. Needless to say, there is a very large market for business travelers to use short-term rental properties.

Vacationers except for major holidays and the summer will stay for two or three-day weekends.  Vacationers tend to visit areas that are considered tourist destinations such as beaches.  The difference between the patterns of stays between travelers and vacationers is that travelers tend to focus their efforts around big cities and big metro areas that are also vacation areas.  The tourist spots such as the beach, receive vacationers during set periods of the year.  

Hotels use dynamic pricing for travelers

Using dynamic pricing as hotels do in big cities allows them to charge more when for example a convention is in town and less when it’s over.  For this reason alone, using dynamic pricing in these areas is a good tool.  Let me try to explain why it is not always an effective tool for earning higher rental income from vacationers.

During the low season, there is little you can do except to reduce the minimum stays from 5 to for example 3 as in a weekend or even two.  The problem is that fewer people are visiting.  You and everyone like you have the same idea so they all reduce the number of stays for example.  The next thing the first-time owners will do is to reduce rental prices.  The thinking is that lower prices will attract more people.  It’s possible but if everyone does the same thing, where does that leave you?   Chasing the prices down.  Again, remember fewer people are coming to the area.

Short-Term Rentals vs Vacation Rentals

Both are the same in most cases. Most guests (57%) search for the word “vacation” vS SHORT-TERM

During these low periods which can stretch for months, dynamic pricing will not generate more revenue or higher occupancy.  It’s just as easy to determine market rates by going to Airbnb and VRBO listings.   You would want to do this anyway to assure yourself that it’s not just your property that is not renting.  Of course, negative reviews can have an impact, actually, one that is far greater than using dynamic pricing software. 

Use a local property manager

Your best move is to use a local property management company.  Good local property management companies know their markets far better than any software located in San Francisco.  Short-term rental hosts are good at pricing owners’ property to obtain the best result.  Local short-term rental managers have been using the concept of dynamic pricing well before computers have been offering it.  Their approach is hands-on.  

They know the market, block by block, and understand that some areas are more desirable than others.  Computers do not catch the fact that during the height of the season, even a shed will rent.  During the critical periods of the year e.g. fall and winter, the better properties will rent more often.

Customer support and return guests are very important.  People who have rented a property and like it will be more inclined to return without price shopping.  Also, property managers are in a position to offer a last-minute deal when someone calls requesting a stay with one hour’s notice.  How about a few examples of how this works:

Last week, a guest booked a stay at the property management website because Airbnb and VRBO cut them off, within one hour of arrival time.  They booked on the website and called the property manager.  They were fortunate that the property had been cleaned and moved in.  In another example, a very large party moved into a property where there was a water leak.  

The property manager was able to move the large party to two adjoining condos at another property immediately.  If it were not for the quick work by the property manager the 7-day booking would have been lost.

How does a local property manager arrive at pricing?

​A discounted rate can be offered by the property manager for returning guests or friends of owners for example.  Let’s discuss how a local property manager arrives at a dynamic pricing solution.  At Christie’s Gulf Beach Rentals, the managers look at the entire year calendar.  They mark out beginning and ending dates for every holiday that brings in more people.  

Every event that does the same and any other periods that should be priced higher such as June and July.  Prices are adjusted according to the calendar using competitive data that is obtained from third-party platforms and from talking to other property owners.

While this system does not raise and lower rates from Monday through Thursday for example (unless it’s an event or holiday), it does consider all opportunities for higher revenue based on the volume of vacationers coming to the area.  When it is busy the prices are higher and when it is not, prices are lower.  Pretty simple.  As I mentioned above, in big cities when travelers are coming in for events, etc., rates can be adjusted daily.

During the low seasons in tourist areas, raising and lowering prices during the week makes no sense.  Often our clients will make price recommendations which more often result in lower revenue.  Recently a client asked that we lower their prices because they were not getting what they thought was sufficient rentals.  Christies did what they asked.  

Prices were increased and they earned more per stay

There were a few short-term rentals during the period but at a lower price than other Christies properties were receiving.  They concluded that they needed more revenue and the prices came up.  The occupancy rate did not change.  What did change was that they earned more money.

Higher prices can affect the number of sales during most of the year.  Some clients want higher prices and fewer stays because the theory is by the end of the year the total income would be about the same without the additional wear and tear on their property.  

Property management companies understand pricing dynamics and adjust them accordingly.  You can play with prices only so much.  The key to any successful vacation rental property is guest count and price hitting that sweet spot.  In some areas, there are so few rentals during some seasons that reasonable prices should bring in as many guests as any of the competition.

Fewer bookings are a trend in 2023 and will be in 2024

Fewer bookings have been the trend because of the larger number of vacation rentals hitting the market since 2021.  Lower prices in this environment are not the best way to increase revenue.  Of course the average base rate is lower during the low season, you do not need expensive software to accomplish this.

A great way to entice more people to stay at your property if you are an owner is to help the property manager by advertising to everyone you know.  Push your property on Facebook and other social media.

The short-term rental market is in transition.  Market demand is about the same but with more properties available, short-term rentals become more of a commodity.  Short-term rental properties must be ready for the peak season.  You can help your property by having everything repaired and doing preventative maintenance during the off-season.  

Short-term rental owners should stay at their properties during the off-season to be sure that everything is ready for the peak season when more extended stays are in high demand.   I have had issues with my properties during the peak season e.g. AC and had to move high-paying guests losing the revenue.

Local property managers know their seasons

​Your property manager knows how to manage the peak season, this is the one time when even the dynamic pricing is exceeded by “what the market will bear”.  There is no need to run numbers during this season as virtually everything is booked in these vacation areas.  Getting back to the benefits of dynamic pricing, they fall into the big metro areas on a year-round basis where catering to both vacationers and travelers is the focal point of their efforts.

Beach Biloxi Crowd
Vacation locations receive crowds at the same times of the year every year

Real estate investors must understand the idea of the best price and a competitive price as explained by their property managers.  Many look at the high season as the savior where most of the income is earned.  This may be true for some real estate investors but not for all.   The high-season income is not as great as it has been in past years so using that income to cover gaps in the remainder of the year is no longer a good strategy for many property investors.

Research using the free Bard AI

If you decide that you want to do some research, use Google’s Bard, AI to inquire.  I asked the following question of Bard:

​”How many 2-bedroom short-term rentals are being offered for rent on Airbnb in Gulfport MS” The answer is as follows:

According to the Airbnb website, there are currently 394 2-bedroom short-term rentals being offered for rent in Gulfport, MS. This number is based on the search results as of August 5, 2023, at 11:31 AM PST.

The average nightly price for a 2-bedroom rental in Gulfport is $129. The most expensive 2 bedroom rental is listed for $212 per night, while the cheapest 2 bedroom rental is listed for $88 per night.

  • A Bard search also determined that the number of searches for vacation rentals in September 2023 vs. September 2022 was 6.25% higher. Searches for short-term rentals were 9.09% higher for the same period. By itself, this data will not affect a property manager’s decision on pricing short-term rentals but it’s a factor to take into consideration.

If you use an AI, learn to use it first

​If you have time, you can continue to dig using various parameters.  The data is the same that is used by all of the dynamic pricing software models.  Some include VRBO but the trends will be about the same so I stick with Airbnb.  There are other service providers but they usually take their data from Airbnb and VRBO.  You can obtain market data and market trends from Bard too.  Or, you can just talk with your property manager.  

A word of caution about using an AI like Bard. The data provided can often be incorrect. As a property manager, I know this when I see it. Many would not. It’s very important to tell the AI Where you want to obtain the data. For example, it may find data at a website that grabbed some from Airbnb and others. Aggregated sites are not always accurate. learn how to use an Air before you rely on its results. Another good reason to ask your property manager.

Property managers use a variety of management systems that help them manage their businesses and short-term rentals.  Most property managers that I talk to manage their short-term rental business by doing local research which includes not only data on the web but also speaking to Cities that issue licenses to properties.  Sales tax revenue data is also available that can provide indications of the health of the local markets.

short-term rentals price break down
listing on Christies Gulf Beach Rentals Site

Summarize: Dynamic pricing is good for some but not everyone

To summarize, Dynamic pricing is good for large cities and metro areas where travelers and vacationers create an almost year-round market.  There are many markets in North America where dynamic pricing will probably not improve profitability. Beach areas away from big cities, mountain areas, and others that have seasonal business don’t need dynamic pricing for the busy season.  Nor do they need dynamic pricing for the slow season.  

Local property managers fully understand the dynamics of their market including the availability of properties, pricing, and activities that affect pricing e.g. special events.

Visit ChristiesGulfBeachRentals.com and read some of our blog articles about vacation/short-term rental management. Our clients receive access to their client portal which has a wealth of information to help them understand the market and value of their investment.

If you are interested in purchasing a property for use as a short-term rental or vacation rental/second home, click and see what is available on the Mississippi Gulf Coast.

Please stay with us on your next trip to the Mississippi Gulf Coast. Check out our great properties and reserve on this site. Vacation travel insurance is included at no additional charge.