If you want to maximise your earnings – and who doesn’t! – don’t make these holiday home pricing mistakes:
1. Pricing the same as the “competition”
This is an easy mistake to make. You find a nearby holiday rental that’s similar to yours. You then maybe add a little bit more on, because you have an extra bedroom, or charge a little bit less they have more outdoor space then you. So what’s wrong with this strategy?
Well it falls flat because who is your competition? You’re assuming that they have a comparable product to you, to which you can make a comparison.
When you offer a holiday rental to the market you’re offering two things – the product and you the owner. Even if both products are identical in terms of size, facilities, location, amenities etc, the one key difference is you the owner. You are unique.
The way you care for your guests, the way in which you’ve styled and presented your property, the extras you add as standard, your experience of the local area that you can share with your guests, your commitment to giving them a holiday experience rather than just a place to lay their head is unique.
It’s intangible but adds such value to your overall offering and needs to be factored in to your pricing
When the pricing strategy of pricing versus the competition is applied you are not comparing apples with apples. Be aware of what they’re charging but do not assume you should charge the same.
2. Under-charging just to get bookings
I see this happening a lot, particularly when owners first start out. Deliberately pricing themselves low, or undercharging just to get foot fall through the door.
But the moment a guest books with you because of your price only, is the moment your business model falls apart. Competing on price is a slippery slope.
Of course they were happy to stay with you rather than the very average place down the road, because you’re the same price. But are they likely to come back when you revert to your normal price? Or will they then think that you’re too expensive? If so, they are not the right guests for you.
From the off, you need to charge what your property is worth to the right guests. For those guests who will appreciate your offering and be more than willing to pay full price to stay with you.
Set your prices and stand by them. Of course discount on certain weeks as an incentive to book that particular week or for returning guests. This way you’re in control and not the guests who are only choosing you because you’re “cheap”.
3. Not knowing your costs
How much does it cost you to prepare your holiday rental for each set of guests?
In other words what are your changeover costs? This includes the laundry costs, the cleaning, the gardening, the restocking of supplies, the added extras, the welcome hamper, your time.
You need to know this figure and you’ll be surprised at how high it is.
This cost will be the same in high or low season so needs to be kept front of mind when pricing all year around. This cost is the same whether guests stay for 1 night or a week. And you need to factor this into all your prices.
If your changeover cost is £100 and your low season short break is £200, then that’s £100 gross revenue. From this needs to come other expenses. Plus your time has a high value. Even if you live next door and have no travel time, it’s not free and you deserve to be paid well for it. So with this in mind is earning that £100 worth it?
When setting prices start with your costs, then think about how much you want to earn per booking and then set your prices. Just covering your costs per booking isn’t a sustainable long-term business plan.
Even though you enjoy welcoming guests to your beautiful cottage and your stunning part of the world, you’re in it for the money! It’s one of the 4 Ms to holiday rental success. The others being Mindset, Makeover and Marketing. Each of the 4 Ms form the 4 pieces of the jigsaw, fitting together to make a successful holiday rental business.
To understand more about The 4Ms check out my masterclass. Get easy to follow, actionable steps so you and your holiday rental business can grow and flourish one M at a time.
The 4 Ms program covers the business foundations that you need in place to get bookings, what decisions you have to make, where you need to focus, what you can do today, how to stand out from the crowd and get the competitive edge. >> Find Our More and Get Access<<