What is dynamic pricing for vacation rentals and how does it work?
Dynamic pricing is a practice that helps you maximize your income from short-term rentals by modifying nightly rates to reflect seasonality and other changes in the market. Dynamic pricing tools use a pricing algorithm to identify how much your price needs to fluctuate depending on the demand. With these tools, price changes can happen several times per day.
In order to implement real-time pricing, you need to connect your property management system (PMS) to your preferred dynamic pricing tool so that pricing bots can control your rates. Factors that affect dynamic pricing include
- Seasonality
- Days of the week booked for the trip
- Dynamic demand
- Special events and local activities
- Availability or vacant dates
- Performance of your listing over time
- Competitor prices and occupancy rates
- Listing reviews
- Location amenities
Why dynamic pricing tools are crucial for your rental business
When becoming a vacation rental owner, dynamic pricing tools are a must if you want to:
- Increase your revenue
- Optimize your time
- Extend the average length of stay
- Get ahead of your competitors
- Invest little and get high rewards
- Keep your listings updated
1. Increase your revenue
Dynamic pricing tools adjust your nightly rate in real-time so you can respond quickly to market demand and increase your overall revenue. For example, if the tool identifies a high demand for the weekend, and you have availability, then it can adjust your nightly rate to accommodate the increased demand.
2. Optimize your time
Whether you’re a vacation rental manager by trade, or a self-managing property owner, you need to become more efficient so you can focus on other personal or work-related priorities. Using a dynamic pricing tool helps automate price changes and ensures you’re making the most possible profit without any hassle.
3. Extend the average length of stay
By setting a minimum length of stay in your dynamic pricing tool, you can offer discounts for longer bookings and increase occupancy rates.
For example, you can set a three-day stay minimum for low seasons and offer a discount to guests who stay for four days instead. That way, you can extend the length of stay and increase revenue. Those adjustments also help you fill gaps in your booking schedule.
The best dynamic pricing tools now identify “gap night” opportunities, allowing you to fill gaps between bookings.
4. Get ahead of your competitors
While your competitors are asking around, guessing how much they should charge per night, and manually updating their prices, you’re at a clear advantage because you’re making data-driven pricing decisions. And by analyzing trends, you can make future adjustments to your strategy and use it as leverage against your competition.
5. Invest little and get high rewards
Dynamic pricing tools aren’t expensive and they’re relatively easy to set up and use at a basic level. The reward, on the other hand, is high. Using the right vacation rental software to manage pricing fluctuations can increase your bookings, reduce vacancy rates, increase yearly revenue, and improve your ratings.
6. Keep your listings updated
In platforms like Airbnb and Vrbo, you need to keep your listings frequently updated to increase visibility. Using dynamic pricing tools helps you make slight changes to your listing prices, keep them updated, and get more bookings on Airbnb or other OTAs without any additional effort.
4 Best short-term rental pricing tools to consider
The most acclaimed STR pricing tools in the rental industry are Wheelhouse, Beyond Pricing, PriceLabs, and Airbnb Smart Pricing.
1. Wheelhouse
Wheelhouse’s calendar summary shows proposed prices for the different days of the week according to strategy information.
Wheelhouse is a pricing platform that combines ease of use with detailed pricing customization options. It integrates with several PMS, OTAs, and other all-in-one property management tools. Wheelhouse stands out from other dynamic pricing tools by focusing on personalization and building a strategy according to your goals.
Main features and benefits
- Automated customization. With Wheelhouse, you can set automated nightly rates that drop as the date approaches to increase occupancy as quickly as possible.
- Night gaps filling. This tool lets you disable single-night stays to avoid having gaps between reservations.
- Reliable event calendar. Wheelhouse shows all the special events that might affect the price of your stay.
- Transparent seasonality price adjustments. Users can hover over the different suggested nightly rates and get a detailed description explaining price changes.
- Competitive Sets tool. This platform lets you compare your prices against direct competitors and use that data as leverage.
Main drawbacks
- Limited customization. Since Wheelhouse is so easy to use, some functionalities can’t be edited. But they’re frequently working to improve this. For example, in the past, you could only turn on or off “gap nights” but it wouldn’t let you edit the price per night on those days. They’ve now added settings that allow you to add a percentage of discount to gap nights.
- Doesn’t integrate with Vrbo or Booking.com. Wheelhouse won’t connect directly to these platforms. However, you can connect to these tools using a third-party PMS.
What we love about Wheelhouse
We use Wheelhouse at Jetstream because we believe they have the most accurate dynamic pricing tool.
“We also love Wheelhouse because they’re frequently making improvements to their pricing engine. Whether it’s actively seeking out new data partnerships, introducing new features, or improving their price modeling. Wheelhouse is always on the forefront of automated pricing technology.”—Dave Shepherd, Revenue Manager at Jetstream.
Pricing
Wheelhouse offers a variety of plans to suit your financial needs. You can either request to get charged with 1% of your monthly revenue or pay $19.99 per listing per month. Or you can partner with Jetstream, and get Wheelhouse included in your package.
2. Beyond Pricing
Beyond Pricing offers a detailed explanation of the proposed night rates taking into account seasonality, events, and day of the week.
Beyond is revenue management and dynamic pricing software that helps property managers and vacation rental homeowners automate their pricing strategy. One of their key differentiating features is that Beyond Pricing offers a health score that shares how well your listing is performing according to the base price.
Main features and benefits
- Property calendar management at a scale. Beyond Pricing makes it easy for people who manage several properties to adjust nightly rates in a few minutes.
- Native Airbnb, Booking.com, and Vrbo integrations. Unlike Wheelhouse, Beyond connects directly with three of the most popular OTAs. Also, this platform integrates with a large suite of PMSs that allow you to reach other channels.
- Superb insights tool. Using Beyond’s market insights tool, you can better define your pricing strategy based on real-time market data.
- Uses historical data to provide market-based health scores. Beyond gives you performance insights based on profitability instead of occupancy.
- Supports different currencies. This tool allows you to edit prices in different currencies around the world.
Main drawbacks
- Steep learning curve. Some users mention that this tool can be difficult to understand at first. Especially when trying to customize prices.
- Seasonality and event automation are complicated. The platform will let you edit prices per month but not necessarily by seasons, and users end up manually adding events and changing prices.
What users love about Beyond Pricing
Users love Beyond Pricing due to its ability to change pricing at a scale and because it integrates natively with Vrbo and Booking.com. “I love the fact that you just manage your base price and it adjusts everything from there,” shared Daniel D. on GetApp.
Pricing
Beyond Pricing charges 1% of your revenue coming from Airbnb, Vrbo, or Booking.com.
3. PriceLabs
PriceLabs has a dashboard that lets you review the status and health score of all your listings at once.
PriceLabs is another dynamic pricing tool that’s easy to use. It helps in revenue management and to reduce vacancy rates for STR. This tool makes a difference in terms of customization, it lets you edit occupancy-based adjustments.
Main features and benefits
- Transparent pricing. PriceLabs offers a fixed price instead of 1% of your revenue. Making it more affordable for owners or property managers with a large portfolio, it also comes with a free trial for you to test the functionalities before paying.
- Detailed future occupancy information. PriceLabs gives you a percentage of occupancy for the next seven, thirty, and sixty days.
- Discounts and premiums management. You can automatically add discounts and premiums for when your listings get a certain occupancy rate.
- Historical data analysis. PriceLabs uses your past data to discover trends and understand booking behavior in every location.
- Base price calculator. Unlike Beyond Pricing, PriceLabs calculates the base price for you, making it easier for you.
Main drawbacks
- Doesn’t offer event tracking. PriceLabs adjusts prices based on seasonality but it doesn’t offer event management
- Steep learning curve. Since it’s so data-driven and comes with many different functionalities, PriceLabs can be hard to understand and use to its full potential.
What users love about PriceLabs
Users love PriceLabs’ support team, since they get to talk to humans first instead of getting answers from a bot. They also love the ability to adjust the seasonality feature. “I love the seasonal pricing with the ability to set your own base, minimum, and maximum,” posted Dan M. on Capterra.
Pricing
PriceLabs offers a fixed price of $19.99 per listing per month for dynamic pricing.
4. Airbnb Smart Pricing
Airbnb Smart Pricing lets you set minimum and maximum night rates as well as review the suggested platform prices.
Airbnb Smart Pricing is an integrated Airbnb feature that lets them automatically modify the nightly rates based on market demand. What makes Smart Pricing different from other similar tools is that is an Airbnb native tool and doesn’t allow much customization.
Main features
- Control over the minimum and maximum prices. Airbnb lets you add a range of nightly prices that work for you. To define these rates you can use platforms like AirDNA or Vrolio for market research.
- Insights and price tips based on real-time metrics. This tool uses app analytics to come up with pricing trends in real-time .
- Improved occupancy rates. Airbnb has the same interest as hosts, they want listings to be booked, that’s why they’ll adjust prices based on demand.
- Native Airbnb tool. Since this is an Airbnb feature, you won’t have to worry about lags or syncing issues, prices will always be updated without any mishap.
Main drawbacks
- Users complain about prices being too low. In order to increase occupancy, Airbnb often lowers rates on the low end and hosts lose revenue as a result.
- Pricing recommendations don’t differentiate quality. Airbnb Smart Pricing compares listings that are in a similar location and have similar dimensions, but it doesn’t take quality into account, so you might be compared against properties that aren’t in the same category as yours.
- Doesn’t take seasonality or event management into account. Airbnb Smart Pricing responds to real-time market trends but doesn’t include seasonal fluctuations or nearby events.
What users love about Airbnb Smart Pricing
Many Airbnb hosts prefer to use other dynamic pricing tools, but the ones who use this one appreciate its simplicity. They can just set their minimum prices and then let Airbnb change prices for them without any additional work. “I do smart pricing but I set my own minimum, not the suggested one. That way I’m always at least making my minimum with the ability to make more if they increase the pricing on certain weekends,” said Reddit user, 9months2late.
Pricing
Airbnb Smart Pricing is a free tool that comes with using Airbnb as an OTA.
How to implement dynamic pricing into your business strategy
There are 3 main ways to implement a dynamic pricing strategy for your STR business.
1. Use short-term rental pricing tools
Short-term rental pricing tools use AI and OTA data to automatically adjust your nightly rates. Whether you manage vacation rentals on your own or want to outsource the responsibility, getting up to date with the latest technology is essential.
2. Hire a property manager
A good property manager will either use one of the dynamic pricing tools listed above, and integrate it with your PMS, or come up with their own internal solution to manage frequent changes in nightly rates.
3. Let Jetstream handle it for you
Jetstream uses Wheelhouse for automated dynamic pricing and has a dedicated team of experts that will manage other areas of your business like marketing and 24/7 guest communication.
If you’re up for hiring experts to help you manage your STR business, Jetstream offers a unique service that’s customizable to include the solutions you need. You can retain control over your listings while we manage the admin remotely, with no upfront costs or time wasting for you.
In fact, Jetstream is a better option than doing dynamic pricing by yourself because we offer complete revenue management. If you say the word, we’ll come up with a strategy to increase your bookings through every channel—including direct bookings.
Increase your revenue first, pay later.
Enter the Jetstream and get a team of experts to manage dynamic pricing, 24/7 guest communication, and marketing across multiple channels.
