Latest / Host Planet: Airbnb, Holiday Let, and Vacation Rental Insights / The Smart Way to Price Your Vacation Rental

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The Smart Way to Price Your Vacation Rental · Host Planet: Airbnb, Holiday Let, and Vacation Rental Insights

0:00
Revenue isn't earned, it's designed.
0:02
Automation is about scale, but scale without insight is simply
0:07
just accelerated noise. If you're selling out too early,
0:10
you're likely underpriced. If you are getting somebody who
0:13
just tells you that it's all about pricing, then you should
0:16
change your revenue manager. What are the three Rs of revenue
0:21
management? Why is automation without
0:24
strategy just accelerated noise? And what are the obvious signs
0:28
that operators are under pricing their rentals?
0:32
Zach Alley is the special guest on today's Host Planet podcast,
0:36
and he's a revenue management expert with plenty of advice for
0:39
short term rental operators. If you want to fix your revenue
0:43
management strategy, you cannot afford to miss today's show.
0:52
Zach, thank you for joining us on the Host Planet podcast.
0:55
We're going to focus on revenue management, which is your area
0:59
of expertise. What are the most common revenue
1:03
strategy mistakes that short term rental managers are making?
1:08
Sure. So happy to answer that, James.
1:10
So in my experience, one of the biggest mistakes I see,
1:15
especially very early on is confusing activity with
1:19
performance. So for example, a lot of
1:21
operators start by reacting. So for example, tweaking prices,
1:26
chasing occupancy, signing up for every OTA possible, thinking
1:32
that more visibility will ultimately mean more revenue.
1:36
But that's just motion, it's not strategy.
1:39
And I think that's one of the largest mistakes, the biggest
1:42
mistakes that I've seen in my own experience.
1:45
Interesting that you say there about just going on every OTAII
1:50
guess there'll be property managers out there just thinking
1:52
I want more eyeballs on what I'm doing and they just go after
1:55
that. Why is that not necessarily the
1:57
right thing to do? I think you have to understand
2:00
your, your consumer, your target audience, your segment that you
2:05
are looking to attract. You know, if you are, for
2:09
example, a premium kind of operator, you are wanting to
2:13
target specific set of audience and therefore going on an OTA
2:19
that doesn't really give that set of audience to you just
2:23
wouldn't be the right thing to do.
2:24
So it's about partnering with those people who can provide you
2:29
the right type of customer that is suitable to your business
2:35
from what you are attracting as a brand and also from what
2:38
you're trying to attract from a profitability point of view.
2:42
And I guess that goes back to building the foundations and
2:45
understanding who your target customer is.
2:48
How important are those things when you're starting out
2:51
especially? It's it's exceptionally
2:53
important, you know, attracting the right guests at the right
2:56
time for the right business goal is fundamental in revenue
2:59
management and just business generally.
3:03
Opening up to a whole set of customers who are just not going
3:06
to be right for your business can have detrimental impact,
3:09
whether that be brand reputation, whether that be
3:12
profitability or whether that just be your growth trajectory,
3:17
you know. So it's really important that
3:19
you do attract the right guest and especially at the right time
3:23
that suits your business goals. So you've said in your writing
3:29
that revenue isn't earned, it's designed.
3:33
Tell us what you mean by that. Absolutely.
3:36
So revenue isn't earned, It's designed.
3:39
So that line basically captures how I see revenue.
3:43
It's not as a lucky outcome, but it's a structured system.
3:49
Automation has definitely added speed and efficiency, but
3:53
strategy ultimately adds purpose.
3:56
And without it, basically revenue becomes a reactive
4:00
outcome and not a deliberate design.
4:02
And that's what I mean when I say revenue isn't earned, it's
4:07
designed. What can short term rental
4:10
managers do to avoid being reactive?
4:15
What can short term rental managers do?
4:17
I think ensuring that you have a strategy and knowing what that
4:23
strategy is and ensuring your team or all those people who are
4:27
surrounding you, including tech that is used to support your
4:32
overall strategy is clear. I think once you have a clear
4:36
cut strategy in place, then it removes the element of being
4:41
reactive because ultimately you have to give it your all and
4:46
that does mean being super proactive in achieving your
4:50
ultimate goals from a revenue profitability point of view.
4:53
So I think ensuring that you have a clear strategy from the
4:57
very start, knowing what it is that you want to achieve is
5:00
critical. If we're to break that down for
5:04
people maybe at the lower end of the chain who maybe have one or
5:08
only a handful of properties, what advice would you give to
5:12
them when it comes to revenue management?
5:16
So I mean, it's an interesting question because a lot of, you
5:20
know, sole property owners think that revenue management doesn't
5:23
really apply to them and it's something that's been invented
5:26
just for travel companies or the big operators.
5:31
That's just not correct. You know, if you have perishable
5:35
inventory, which you do have, you know, you if if you don't
5:39
sell that property at that particular time, then it's
5:43
missed opportunity. So whether you've got A1 bed
5:46
property or a multitude of 50 different properties, you're
5:50
managing the fundamentals and the principles of revenue
5:54
management should be applied from day one.
5:57
And you should build your strategy all around it.
6:00
Because naturally through revenue management and it's more
6:03
than just pricing through revenue management, it gives you
6:07
the ability to not only analyse the data and understand what
6:14
works for you that will support your overall strategy.
6:18
But then also at the same time, it opens up a whole host of
6:22
different areas where you've not, you know, you've not seen
6:25
before in through analytics, for example, or through pricing
6:29
decisions that you need to make or through yield decisions that
6:31
you need to make. You have to you have to take
6:34
that approach, but you have to understand the fundamentals of
6:37
revenue management initially to go ahead and then apply that
6:40
across across your property and that could be A1 bed property or
6:44
A10 bed property or an agency. Let's imagine there are hosts
6:49
and property managers out there who they're trying to focus on
6:53
revenue management. Let's say they've signed up for
6:56
a dynamic pricing tool like Beyond or Price Labs perhaps,
7:00
and they start using it a little bit but don't really understand
7:03
it. And maybe they come to you and
7:04
say, well, I've signed up for dynamic pricing, it's made a bit
7:08
of a difference, but I don't really know what to do next.
7:11
What would your advice be to them?
7:13
Dynamic processing is what it is and I'll talk about dynamic
7:15
pricing shortly. But I think what's really
7:17
important to understand first of all is probably to take one step
7:21
back and understand what you require from automation, you
7:26
know, because dynamic pricing in a system like you mentioned,
7:30
it's automation and it's it's supporting you to make decisions
7:34
a lot quicker than you as a normal human being, you know,
7:38
are able to. However, automation without
7:42
strategy, in my opinion, is just accelerated noise.
7:46
And, you know, there's a growing assumption out there that
7:49
revenue management systems are basically replacing the need for
7:54
a strategy. But the reality is, is whether
7:57
you're A1 property host or, or you know, an agency, revenue
8:02
management systems are powerful assistance.
8:05
They're not the architect, they're, they're, they're very
8:08
good at what they do in terms of revenue management systems are
8:11
excellent at, you know, tracking patterns, optimising pricing,
8:15
providing data, valuable data. But the question is, is do you
8:20
have a tool or do you have a framework for how to make
8:23
decisions with it? And that is basically what you
8:26
need to ask your yourself when you're analysing your
8:30
performance off the back of the systems that you're using,
8:33
whether that be through dynamic pricing or yield management or
8:36
anything for that matter. I'm sure there'll be property
8:39
management companies out there, even some that maybe you've got
8:42
fifty 7500 rentals, you know, down to people at the lower end
8:46
of the scale who've got a few rentals.
8:49
You've mentioned strategy a lot. I imagine a lot of them don't
8:53
really have much of A revenue strategy.
8:55
So how do you go about actually getting one?
8:59
What are the basics and fundamentals that you need to
9:02
create a revenue management strategy?
9:06
I think it goes back to knowing your guest, knowing what it is
9:10
that you you are there to achieve ultimately.
9:13
So you know, what type of guests are you looking to attract?
9:17
What, what is your ultimate focus?
9:19
What's your plan in terms of, you know, growth?
9:22
What is it you're wanting to achieve and how, what, what's
9:26
the route that you're going to follow to actually go ahead and
9:29
achieve that? And that basically will assist
9:32
you with driving your, it's your commercial strategy more than
9:36
anything else. So how are you going to achieve
9:38
that? You know, I've talked about
9:40
revenue management principles and I've talked about the
9:43
fundamentals that you have to apply to, to, to succeed in
9:47
revenue management, but ultimately it's everything else
9:50
that feeds into it. So if you're wanting to list on
9:55
distribution platforms, then what's the strategy for doing
9:58
that? Who it is that you're wanting to
9:59
go and target? What areas are covered?
10:03
So recently, you know, I engaged in a conversation actually, so I
10:08
can't remember the author's name now on LinkedIn, but the
10:11
question was around regional agencies versus.
10:16
And I think you know that that raised a really important point
10:19
in the sense that you can use the likes of booking.com, Airbnb
10:24
as part of your commercial strategy, but ultimately do they
10:27
drive market share for the region that you're actually
10:29
trying to target? So as part of your overall
10:32
strategy, you've got to understand specifically from a
10:36
distribution point of view, what will work and what won't work.
10:39
And again, it goes back to attracting the right customer at
10:41
the right time again for the right price.
10:43
In revenue management, we have the revenue management cycle
10:46
which is largely used throughout the hotel sector.
10:49
And I think now it is catching up in this space.
10:52
I just don't think it's quite there yet.
10:54
But and that surrounds everything you do around, you
10:57
know, selling the right product to the right price to the right
10:59
customer for the right time and through the right distribution
11:02
channel. And that's largely what you
11:04
would base your strategy on in, in order to succeed.
11:09
Makes a lot of sense knowing your customer being so
11:12
important. Let's talk a bit about AI and
11:16
revenue management systems. So you've said that, as you said
11:20
before, automation without strategy is just accelerated
11:25
noise. So explain to us what this looks
11:27
like in practice. Yeah.
11:29
So like I said, you know, revenue management systems,
11:32
they're fantastic. I mean, I personally in my
11:34
career have had the opportunity to be part of three developments
11:37
in revenue management systems. And actually one of the
11:40
development that we did had recently been acquired by
11:42
Guesty. So it was it, you know, it's a
11:45
fantastic opportunity to be part of and revenue management
11:49
systems are fantastic at what they do.
11:52
They give you valuable data, but ultimately it's what you put in
11:57
to those revenue management systems that really makes a
11:59
difference. So the systems are incredible
12:02
engines, but like I said before, strategy decides the route.
12:06
I, as a revenue management person, help operators build the
12:10
map. So operators need to understand
12:14
that automation is about scale, but scale without insight is
12:19
simply just accelerated noise. And you still need someone at
12:23
the controls of that system steering towards brand
12:27
alignment, for example, or even guest value and profitability.
12:32
Now most revenue management systems today are built to
12:35
optimize for revenue. And that's, you know, I said
12:39
revenue management systems, but also anybody using any form of
12:42
tech, AI driven tech, which ultimately they want to use as
12:46
part of their revenue management strategy are there to optimise
12:51
for revenue. But what you have to remember is
12:53
they can only optimise for the kind of revenue you define.
12:58
And if you don't, and if you haven't configured the system
13:01
with, for example, a clear forecast or a margin threshold
13:06
or even a pacing benchmark, then the revenue management system
13:11
may optimize for top line revenue, but it won't account
13:17
for profitability, channel costs, or even brand positioning
13:20
for that matter. So whilst it does its job, it
13:24
might not be doing your job. And Simply put, strategic inputs
13:28
are basically what transforms, in my opinion, automation into
13:32
alignment. And that's really where it
13:34
starts and stops. How important is it to give your
13:39
system, your revenue management system a target?
13:43
Super duper important, you know, like so.
13:46
So let's be totally clear here. A revenue management system
13:49
platforms are excellent decision support tools, but at the end of
13:54
the day, they are only as effective as the goal we set for
13:58
them. And I've learnt this also in my
14:00
own experience of building systems and the user of a system
14:04
that Simply put, if you haven't provided, for example, let's go
14:08
with the the top three bits of critical information that I
14:14
think you should provide a system.
14:16
So for example, revenue forecast, pacing curve or even
14:19
profit threshold. The system it has basically
14:24
doesn't have a North star. So it makes pricing decisions
14:29
based purely on short term pickup or competitive behavior,
14:33
but it doesn't factor in your long term commercial growth or
14:37
so your long term commercial goals.
14:39
So if I was to give you an example, say your property is
14:43
selling fast, you know, 90 days out, a smart revenue management
14:46
system sees the pick up, but if there's no target revenue or
14:51
occupancy pacing curve in place, it may continue selling at the
14:56
same rate instead of slowing down that instead of instead of
15:01
basic slowing down to protect yield.
15:04
Now that's a missed opportunity to increase price and margin.
15:09
One constrained inventory or if you look at the opposite of
15:12
that, because naturally we get both scenarios.
15:16
If you're behind pace but haven't told the system your
15:18
goal, it might hold rates too high and basically miss the
15:23
demand window completely. So technically, it's doing its
15:26
job by optimizing based on what it sees, but it might not be
15:29
doing your job, which is to hit very specific revenue and
15:32
profitability targets. And that is the difference
15:35
between automated pricing and aligned performance.
15:40
Yeah, it's interesting. And if we break it right down, I
15:41
was speaking to a property manager recently and he said if
15:44
somebody comes along to him and says, oh, I've got 98%
15:48
occupancy, he says, well, your prices are too high.
15:51
It's, it's that simple. And and that's kind of breaking
15:54
it down, isn't it? Like you say there, if you if
15:56
you're getting loads and loads of bookings, like kind of there
15:59
is a point where you get too many, right.
16:02
Oh yeah, though you need to find the optimal point.
16:04
When to set, when to set right? That's it.
16:06
You know, at what point back in the day, I mean, I did a lot of
16:11
work with Princeton University in, you know, when I was back
16:14
building tech and in hotels. And I remember we used to talk
16:18
about the Boldman's curve all the time.
16:20
And you know, the Boldman's curve is a very, very good
16:24
visual graphic to actually understand.
16:27
At what point does it become a no go for you from a revenue
16:32
profit, from a revenue point of view?
16:35
At what point could you add too many bookings which then
16:39
basically start costing you revenue rather than you saying,
16:42
right, this is my optimal occupancy and this is basically
16:46
what I need to be targeting because everybody tries to
16:49
target on most people try and target 100% occupancies, which
16:53
we know realistically it's probably never going to happen.
16:57
But what is the target that they should be focusing on?
17:00
Should it be 60 percent, 70%, even 90% for that matter?
17:04
But what is the optimal occupancy at the point where it
17:07
starts to then go downhill from a revenue point of view?
17:12
Yes, an interesting point. You know, I was, I was having a
17:14
chat with my uncle the other day and this is slightly different
17:17
but similar. And we were talking about rugby
17:21
league and selling tickets for a match.
17:23
And he said, well, if you've got thousands of thousands and
17:26
tickets leftover, just give them away.
17:29
I guess if you apply this to a short term rental scenario, you
17:35
can say, Oh well, I've I've hit my occupancy and revenue targets
17:38
for this month, but I've still got five days left to fill.
17:42
Would you then just sell them at 10 lbs a night to give them
17:44
away? Like my argument to him
17:46
regarding the tickets was, well, if you just give stuff away,
17:49
you're cheapening your brand. You're you're cheapening
17:53
everything really associated with your product.
17:56
And I guess that would be similar with short term rentals.
17:58
You're not going to start and get to a point.
18:00
Well, I've got five days left. I'll just no give them away for
18:02
next to nothing. No, absolutely not.
18:05
It's, it's, it's what, you know, brand awareness or brand
18:09
reputation, should we say, forms part of your strategy.
18:13
And the destruction of any kind in brand reputation can cost you
18:18
quite dearly in terms of revenue.
18:21
There's a lot of research out there and I've been part of some
18:24
research myself with Cornell where you can see the direct
18:28
correlation between an increase in reputation score and what
18:34
that equates to in terms of revenue and how much of that
18:37
comes via occupancy and rate. And naturally protecting your
18:42
brand, whether that be through what you do online or whether
18:45
that be the type of customer that you attract is, is it's
18:49
fundamental and it's critical and it should be formed part of
18:52
the commercial strategy that is overseen by the revenue leader
18:56
of the of the operator. A similar way of looking at it
19:00
would be like airline seats as well, wouldn't it?
19:02
You know, if there's some airline seats leftover, do you,
19:05
do you just give them away or you've got, you've got to, you
19:08
know, protect it? You get me?
19:09
Started on airline revenue management.
19:11
I've done a lot of airline buckets in my days and it's a
19:14
very, very interesting concept. And obviously that's where the
19:17
whole principle back in 1970s of revenue management started, you
19:21
know, after the deregulation of the airlines.
19:24
It's basically the, the, the start of revenue management and
19:27
it's really an interesting, it's, it's, it's very
19:32
interesting in terms of what you can do and what you can't do and
19:35
how, how you manage each sector and each, each load, etcetera.
19:39
So it's, it's, yeah, we'd probably need a couple of days
19:43
to go through that subject. So maybe we'll do another day.
19:46
Now back to your, your writing and your book, of course.
19:50
And you've developed a framework called the Three Rs of revenue
19:55
strategy, rational pricing, responsive calendars, and
19:59
reflective positioning. So walk us through each of these
20:04
and explain why they matter. Sure.
20:07
With pleasure. So I use the framework as you
20:11
mentioned called the three Rs and it basically helps operators
20:15
turn automation into performance.
20:18
So rational pricing, responsive calendars and reflective
20:21
positioning, Simply put, it gives structure to pricing tools
20:26
and connects raw data to guest behaviour, brand positioning and
20:31
what your business outcomes are. Each of the Rs work In Sync and
20:36
that's really important to understand that you've got to
20:40
think of them as your strategic flywheel.
20:43
If you like, when aligned they create velocity, but when
20:47
misaligned they create a lot of noise.
20:50
And that's really how you should see them.
20:54
Now if you think about, you know so many operators who collect
20:59
data but struggle to make it actionable.
21:03
Data without direction is simply overwhelming.
21:06
Most operators have it. Most operators are very data
21:09
rich, but they're insight poor. They have dashboards, but they
21:15
don't have decisions. The three Rs are how you
21:18
translate data into design. So if I just start with rational
21:23
pricing for you, just to give you a little bit more context.
21:26
So rational pricing is basically pricing with a purpose.
21:30
It's not just reacting to to competitors or demand spikes,
21:35
but it's intentional pricing and that's what makes it different.
21:39
It's intentional pricing for the right guest, the right time and
21:43
the right business goal. So as an example, if your
21:47
average lead time for summer is 45 days, why would you be fall
21:51
at 90 days out? That's not performance in my
21:55
opinion, that's leakage and rational pricing.
21:59
It considers certain key indicators if you like or
22:05
criterias and what they would look like are pace versus
22:11
forecast. So it would look at pace versus
22:13
forecast. You would look at value by
22:15
length of stay, you'd look at rate integrity by channel and
22:20
lastly but most importantly, you look at profitability after cost
22:24
of acquisition and that's what it is.
22:28
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further details. So why do you think so many
23:28
operators collect a lot of data, especially in relation to
23:33
revenue management and and everything else, but struggle to
23:36
make it actionable? I just think, you know, I've,
23:41
and I've been in situations like this myself, it goes back to
23:46
strategy and story. You know, what is a strategy
23:49
you're trying to follow and what is the story you're trying to
23:52
tell? It's great.
23:54
Everybody gets excited when we've got a lot of data and we
23:57
have a lot of data channels or sources that we can actually
24:01
collect that from. But I think it's number one, it
24:04
goes back to making sure you're looking at the right data for
24:07
your business, you know, the one that's most relevant for your
24:10
business. But then at the same time, it's
24:13
how having the ability to manipulate the data in such a
24:18
way where you pull out those key insights.
24:21
Remember I said most operators are data rich but insight poor
24:25
and it's about identifying those key insights.
24:28
So at the same time, it's almost having the right benchmark in
24:33
place for you to be able to reference.
24:35
So like I said, as part of rational pricing, for example,
24:39
as part of my 3 Rs, from a rational pricing point of view,
24:43
you should be asking the questions, you know, who is the
24:45
right guest, what is the right timing and what is the right
24:48
business goal that I'm trying to achieve.
24:49
And therefore going back to the data and analyzing that data in
24:53
such a way where you are able to answer those questions.
24:56
And I think that's really what makes the difference in being
24:58
able to analyse the data in the way you need to analyse it to
25:02
then tell a story for it to be successful in terms of your
25:06
strategy. Makes sense how is rational
25:10
pricing different from traditional pricing or
25:14
traditional dynamic pricing or price matching competitors just
25:19
explain the differences between those different things it's.
25:21
Basically, like I said, pricing with a purpose.
25:24
So it's just simply not reacting to customers or demand spikes,
25:27
which naturally that's what dynamic pricing does.
25:30
You know, it does look at some level of history, it does look
25:34
at what's going out on in the markets and it does, you know,
25:37
it goes back to remember what I said about giving the system a
25:41
focus and giving the system a goal and naturally your demand.
25:46
So your dynamic pricing will position itself in in in the way
25:53
that it needs to do so off the back of what you've told the
25:57
system that you want to achieve. So yeah, through dynamic
26:00
pricing, it does react to market demand and spikes.
26:04
But like I said, intentional pricing is what rational pricing
26:09
is. And you've got to ask the
26:10
question, is this right for what I want for my business, you
26:15
know, and, and, and that's basically where the key or
26:17
critical difference is between dynamic and rational pricing.
26:21
For the average host and property manager out there,
26:24
would you recommend that they use a dynamic pricing tool?
26:28
Yeah, absolutely. I mean, I'm, I'm the revenue
26:31
management systems out there, you know, especially beyond and
26:34
price labs will be very happy to hear that.
26:37
I'm a massive fan of dynamic pricing.
26:40
Absolutely. I support it.
26:42
You know, it's, it's, it's definitely required because it
26:45
brings you in line with how seasonally seasonally you need
26:49
to behave and how you need to react to, to to markets.
26:54
You know, you mentioned at the very start of this interview
26:57
that reactive and proactiveness or you know, our host reactive
27:02
that that's basically the difference, you know, through
27:05
pricing, which is a large element of revenue management.
27:07
It's not just revenue management that I need to make that crystal
27:11
clear. When people think revenue
27:12
management, they think, oh, it's just changing a few prices, but
27:15
it's so far from it. And you know, going, This is why
27:19
I wrote the book, you know, in terms of changing times, because
27:23
back in the day you used to have people who just manipulated a
27:26
few prices and that was classified as revenue
27:28
management. But today your revenue manager
27:30
of today needs to be very commercially focused and
27:33
commercially driven, bringing in critical bits of data, whether
27:36
that'd be search activity, whether that'd be looking at
27:39
conversion rates, whether that'd be looking at channel
27:41
distribution analytics, All this needs to form part of revenue
27:44
management. And then that feeds into how
27:47
pricing works. And ultimately if you have
27:50
static pricing, yeah, it gives certain hosts who don't have the
27:55
capability or understanding of what the impact of dynamic
27:59
pricing is and what it can actually do for you.
28:02
It gives them using static pricing gives them a little bit
28:05
of comfort, but you're leaving money on the table at the end of
28:08
the day. And you know, why would you have
28:11
the same price points for your peak summer that you would in
28:16
off peak winter, for example, when the supply is so much more
28:19
stronger and the demand is so much weaker?
28:23
And you know, I, I, I always joke to people who ask me about
28:27
dynamic pricing and I always say that everybody does that, you
28:30
know, whether you have whatever perishable inventory you have.
28:34
And I don't know if Velveeta watches your podcasts, but if
28:37
they do, then here's a call out for Velveeta.
28:41
I, I tend to eat a lot of Velveeta biscuits and I like
28:44
eating them. That's the, that's the normal
28:46
ones. If anybody wants to send me any,
28:49
you know, and basically I always go and stock up whenever the
28:52
price falls. And if the price falls to a
28:56
pound, then basically I go and fill my cupboards.
28:59
But when the price is inflated, I don't because I know that the
29:05
static price if you like is whatever it is £1.30 or 40 or
29:09
50. I can't remember now because
29:10
nowadays it's always out of pound.
29:12
So that's probably the new static.
29:14
But ultimately, you know, the way a customer behaves or the
29:18
the way the customer reacts is through dynamic pricing.
29:22
And whether that be biscuits or as I once taught my hairdresser
29:27
to do, dynamic pricing for his for for his seat, which
29:31
basically allowed him to shift demand from or excessive demand
29:35
from a Saturday where he couldn't basically cope with the
29:38
level of demands he was actually getting to.
29:41
Then spreading it out throughout the week where he would charge
29:45
slightly lower on a Tuesday, but actually it would free up some
29:48
additional demand for Saturday to actually pricing for
29:53
accommodation or airlines and revenue management.
29:56
Sorry, dynamic pricing is critical in this day and age and
30:00
it's also very critical given the way the supply works in the
30:04
market and the challenges that are currently at present in the
30:06
market. Very well explained.
30:08
Yeah. And yeah, first mention for
30:10
Belvita Biscuits on the podcast. I'm pretty sure about that.
30:15
What are some obvious signs that an operator is under pricing or
30:22
pricing emotionally? Sure.
30:25
Yeah, I mean, you've, you've said it, so you know, it can't
30:28
be that difficult, right? In terms of experience, if
30:31
you're selling out too early, you're likely underpriced.
30:34
You know, if bookings stop after a rate increase happens, that
30:39
may be what you call emotional pricing, right?
30:42
So rational pricing is always in dialogue with your numbers, but
30:47
governed by your goals. You need to remember that
30:49
ultimately. What do you think is the optimum
30:54
occupancy rate for most house and property managers out there?
30:59
It's really difficult to say, James, because you know, it just
31:05
depends on at what point the revenue line starts to dip.
31:10
So I think understanding your booking performance,
31:15
understanding how how how your bookings come in and what prices
31:19
they come in at, you know, that's another thing actually, I
31:22
just want to mention here that for those hosts or for those
31:25
operators who don't actually have revenue management systems
31:29
and maybe they're starting out on their journey or they're not
31:31
quite comfortable with the system yet.
31:33
How do you determine what pricing works for you what, what
31:37
are the optimal price points? And then naturally, you know
31:40
whether you've got too much occupancy or not, and you know,
31:44
it's about analysing the data points or the price points where
31:47
you are seeing conversion. So going back into your
31:49
historical data, for example, understanding what the market
31:53
economics were and what the external factors were at that
31:57
particular time and understanding at what point were
31:59
people actually converting. And that's a really good
32:02
starting point for somebody who doesn't have a tool to help them
32:06
to determine what kind of prices they should be positioning their
32:08
property at, because it shows to you where the conversion sits.
32:15
However, going back to your point, in terms of too much or
32:17
too little occupancy, I don't think it's something that the
32:22
STR sector is doing much at the moment.
32:25
At least I've not really come across it and it's something
32:27
that I have spoken about previously, but it's really
32:31
ensuring that you know how your indexes are working for you.
32:34
So for example, you have three critical indexes.
32:37
You have your average rate index, which is basically your
32:40
ADR. You have your MPI, your market
32:42
penetration index. My hotel colleagues will
32:44
actually know what I'm talking about because a lot of them use
32:47
these benchmarks within within hotels.
32:50
And then you have your RGI, which is your revenue generation
32:53
index, and the RGI, you can basically position yourself
32:59
against your market or against your own positioning previous,
33:04
you know, to a previous year, for example.
33:07
And what that basically does is where you have an index of 1 as
33:12
your benchmark. Anything more than one means
33:15
you've got more than fair share. Anything less than one means
33:17
you've got lower than fair share.
33:19
And what drives that RGI is actually your MPI and your Ari.
33:25
And then what you tend to do is you tend to dissect that RGI and
33:28
let's just say we've got, I don't know, 1.2 as in we've got
33:33
20% more than fair share than our market.
33:36
We've got to go and understand what that means from a rate
33:38
point of view and an occupancy point of view.
33:41
So in, in rate, we might have one point, I don't know, 2-3 and
33:46
in occupancy we might have 0.85. So you've got to go ask
33:50
yourself, well, actually, is this the correct strategy?
33:53
So I'm getting slightly lower fair share in occupancy, I'm
33:57
getting slightly higher fair share in my rate, which
34:00
ultimately gives me more fair share in revenue.
34:03
So maybe that is the optimal occupancy that I should be
34:06
targeting. Do you see what I mean?
34:07
And that's really how you can answer the question around what
34:12
is the optimal occupancy you should be targeting for.
34:14
And that's why it's not always right to just say I want to
34:17
achieve 100% occupancy because it just might not be the right
34:20
thing. And realistically, in your
34:22
market it might not be doable. Yeah, absolutely.
34:26
We've we've mentioned hotels a few times.
34:28
Obviously you've got vast experience of revenue management
34:31
in the in the hotel industry. What can the STR space learn
34:36
right now from what hotels are doing?
34:39
I think embracing revenue management, obviously I may
34:42
sound a little bit biased, you know talking about that, but
34:46
naturally the hotel, I mean like I said, airlines started off the
34:51
concept of revenue management. Obviously Marriott were the
34:54
first in terms of hotels to adopt it from a hotel point of
34:58
view. But then it's widespread
35:00
throughout the industry and the hotel sector has seen the the
35:04
first hand benefits that revenue management done properly.
35:08
And like I said, more than just making price changes, it has to
35:12
be the whole commercial approach can deliver exceptional results.
35:18
And I think, you know, we need to talk as an industry, we need
35:22
to talk more about revenue management, whether that be at
35:25
conferences, whether that be on platforms like yours, whether
35:28
that be on webinars. But we need to have open
35:31
dialogue and we need to share best practice and and basically
35:35
bring revenue management to this sector.
35:37
You know, it has come a long way.
35:40
Obviously, even in my own experience, I know that it's
35:44
come a long way, but it's still not quite there yet.
35:46
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36:26
What's a common mistake that you see when it comes to brand
36:31
alignment and pricing strategy? Brand alignment and pricing
36:37
strategy. I think it goes back to
36:39
understanding who you know your core audience are and if you are
36:47
a premium, for example, provider, then ensuring that you
36:52
are targeting the, the, the right, the right customers, but
36:57
also ensuring that your messaging that you put out there
37:00
is critical. So if we just go back to my 3RS,
37:05
I talk about reflective positioning, that's the third R
37:09
and reflective positioning. Simply put, what does that mean?
37:13
You know, it basically means that you're telling a rate story
37:18
before a guest ever reads your description.
37:21
That's probably the easiest way I can put it.
37:23
So if the story is inconsistent, so if a high price with budget
37:28
visuals or a low price for a premium promise, then you
37:33
basically wrote trust even before conversion.
37:37
So reflective positioning is all about aligning price with the
37:40
perception, matching the tone and photography to brand, and I
37:45
would say supporting your rate decisions with emotional proof
37:49
if you like. So review storytelling, the
37:52
uniqueness, all these are things that operators need to look at.
37:58
But I think more more specifically, you know,
38:01
operators think like I said, they can price premium without
38:05
delivering premium. And that's really where in terms
38:09
of story, you need to have your story clear.
38:13
How important is it, do you think for revenue management
38:17
teams to be working closely with marketing teams and to ensure
38:21
that they're kind of going hand in hand?
38:23
Because you might think on the face of it, oh, revenue
38:25
managers, they're all, they're all techie.
38:27
They're, they're the geeks in, in the back working out how much
38:29
we should charge. Whereas marketing team are doing
38:31
all this creative stuff. Yeah, it's super important.
38:35
And if you'd probably ask me that question about 15 years
38:39
ago, my response might have been very different.
38:42
But in terms of today's digital world that we live in and with
38:46
the way things have changed, that things are changing at the
38:49
pace that they're changing on, you know, the traditional
38:52
revenue manager, they just don't exist in my opinion.
38:56
And if you are getting somebody who just tells you that it's all
39:00
about pricing, then you should change your revenue manager.
39:03
You know, it's just not, it's just not the right thing to do.
39:06
Understanding how marketing work and being the one who actually
39:12
provides insight into what it is that they're wanting to do in
39:18
terms of activity is critical. You know, you as somebody who
39:22
works in revenue management is king of the data and king of
39:27
strategy. You know, ultimately because
39:29
you've set your goals, what it is that you want to achieve and
39:32
you have to have a plan or a road map to basically go out and
39:37
set to achieving that, right? And you have to have everybody
39:41
on board. So that's not just marketing,
39:43
that's people who work in product, for example.
39:45
So you know, from a marketing point of view, what story do we
39:48
need to tell and where does our focus needs to sit in terms of
39:53
in terms of achieving that ultimate goal?
39:57
But then also at the same time, from a product point of view, if
40:01
you know that A2 bed property is doing exceptionally well within
40:05
your market. And what is the market share
40:08
made-up of that two bed property?
40:10
And you know that actually you've got what you call
40:12
unconstrained demand where the demand is too much for you to be
40:16
able to materialize on. Then that needs to be vocalized
40:19
to the people who are responsible for product.
40:22
And that is what you as a Rev as a, as a great, a good revenue
40:26
person would do in terms of supporting the overall business
40:29
strategy and commercial strategy to ensuring that we have the
40:33
right product to be able to put out there to then ultimately
40:36
support the marketing decisions who are going to be going out
40:40
there to try and attract the right customer.
40:42
Remember, it comes back to the revenue management cycle all the
40:44
time. And then for you to be able to
40:47
set yield or pricing strategies accordingly that that, that
40:50
that's really critical. Yeah, teams have to collaborate.
40:54
You can't have your revenue management team just working in
40:56
silo and and crunching numbers. Let's also talk about responsive
41:00
calendars. So most people assume that
41:03
calendar rules are just admin, but you talk about them as a
41:09
yield engine. So tell us about that.
41:13
Yeah. So it forms part number two of
41:16
my 3 Rs. So pricing can only go so far if
41:19
your availability strategy is basically static or inflexible.
41:24
Responsive calendars create opportunity.
41:26
They create real opportunity by making your inventory simply
41:31
more intelligent. So an example I can give you is
41:35
I often deal with, or we all as an industry, we often deal with
41:38
orphan nights. I don't, I, I'm sure you heard
41:41
of, heard of orphan nights. So it's, you know, for example,
41:44
those one night gaps left between bookings.
41:47
I get a lot of operators who tend to avoid one night stays
41:51
because they're Simply put, high costs hard run operations and
41:56
often attract lower value guests.
41:58
But here's the point. I'm not suggesting you go ahead
42:01
and open your calendar to a one night stay across the board.
42:06
What I am saying is use your system to identify where a one
42:10
night stay would be pure recovery, a night that would
42:14
otherwise simply go unsold. So if you have, for example, 90%
42:18
because you like that number, 90% occupancy that week, there's
42:23
one night gap between two strong bookings, that's basically a
42:27
sunk cost. So your staff are already on
42:29
site, your utilities are already running.
42:31
So let that night sit sit. Letting that night sit empty
42:35
because your minimum stay rule is inflexible isn't protecting
42:39
margin, it's leaving viable revenue on the table.
42:42
So I would say that the win isn't about chasing every single
42:45
night. It's about recovering value from
42:48
what would have been lost inventory.
42:51
And if you use it strategically, the approach allows you to boost
42:55
your revenue without basically compromising your rate integrity
42:58
on guest standards, your guest strategy.
43:01
And that's really how responsive calendars can really make a
43:04
difference to your yield opportunities.
43:07
Yeah, there's a few ways that you could fill that night.
43:09
If you have a booking either side, you can reach out to both
43:13
guests and say, hey, I've got a night before or, or an extra
43:18
night, do you want to buy it? And another, another thing I
43:20
heard, I was speaking to Bart Young late from Autumn Iser, and
43:25
he said if you make those orphan nights available in your
43:30
calendar, the OTAs will reward you because you've got extra
43:33
availability, even if you put them at a crazy rate, like 10
43:36
times your normal at nightly rate.
43:38
So just by having it available, you might perform better on
43:41
Airbnb or the other OTAs. And you never know, you might
43:44
fill that night at a crazy rate. Exactly.
43:47
And you are given more I guess from an OTA point of view, it's
43:50
because you are putting up more capacity out there.
43:52
Then obviously with the way that algorithms tend to work, it
43:55
gives you more opportunity in terms of positioning etcetera.
43:59
But responsive calendars are critical, you know, and if you
44:04
think about it, responsive calendars, most people assume
44:07
calendars are like you said, Simply put, just admin.
44:11
But actually they are so powerful if you manage them
44:13
correctly. And this is where going back to
44:16
revenue management systems, which are a lot of systems out
44:21
there are largely just pricing driven.
44:23
So the pricing systems rather than revenue management systems,
44:26
but bringing in to the mix dynamically managed calendars or
44:31
responsive calendars as per as my 3 hours go.
44:35
If you like it, you know, it really makes a difference in the
44:39
in the revenue and profitability piece that operators are looking
44:42
to achieve. So it's definitely something
44:45
that is underutilized at the moment and it's something that
44:50
the the wider tech partners that are out there should really
44:55
focus on in terms of the further developments.
44:58
Absolutely, Yeah. OK.
45:00
So before we get to the questions to finish, then what's
45:03
your biggest piece of advice for operators who want to stop
45:07
reacting and start designing revenue?
45:11
So the take away in my opinion is revenue management systems
45:14
are tools, but tools need strategy.
45:17
The three Rs that I've spoken about would give you simply that
45:22
structure. So the three Rs would give you
45:24
structure, they bring together data, guest behaviour and brand
45:29
values. And that's really where real
45:31
commercial performance begins. If you're not setting a target
45:35
for your system, you're not guiding your performance, you're
45:38
just reacting to it. So I think if you're ready to
45:42
move beyond automation and into intentional revenue design, then
45:48
ask yourself the question, are your systems serving your
45:51
strategy or is your strategy being shaped by your system?
45:55
Excellent, and just remind us the title of your book and where
45:59
people can grab a copy. Yeah, with pleasure changing
46:03
times in revenue management and it's available on Amazon.
46:08
It is a couple of years old and I am looking at doing a new one.
46:11
So I will let you know James, when I've done my new one and
46:15
then you can shout out about it. But also I'll be obviously doing
46:19
a few more articles around the the wider revenue management
46:23
piece. Yes, yes, Zach is joining host
46:26
Planet as one of our columnists, so expect much more articles
46:31
from him and talking about revenue management.
46:33
And of course, when the new book is out, we'll get you get your
46:36
back on the podcast, Zach to tell us all about it.
46:38
All right then, Zach, a few questions to finish your
46:41
favorite brand in the STR space. Favorite brand?
46:46
I mean, there's a lot out there, but I think my award would go to
46:50
Hostfully and more specifically to Joseph, who's hopefully going
46:55
to be watching this podcast. Massive shout out to him.
46:59
I think Hostfully as a brand obviously is exceptionally good
47:02
in terms of what it is that they're offering.
47:04
There's a lot of integration, great integrations that they
47:08
offer and the transition to using somebody like them is very
47:12
smooth. They have some great work
47:16
happening in pipeline. But just with Joseph
47:18
specifically, he's fantastic. I mean, he really listens to you
47:22
in terms of what your requirements are and really
47:25
tries to accommodate you. So yeah, good job hopefully and
47:29
great job Joseph specifically. Fantastic.
47:32
Yeah, we love Team Hostfully, one of our big partners and
47:35
we've done so much work with them.
47:36
And Joseph, of course. Yeah, I interviewed him earlier
47:39
this week. He'll be back on the host Planet
47:41
Bite Sized podcast very soon. You've given one individual
47:45
shout out, but we'll give you one more.
47:46
Is there another individual in the STR space you'd like to give
47:49
a shout out to and why? Yeah, absolutely.
47:52
I think I would like to give a shout out specifically to
47:56
Alistair. Hand aside.
47:58
Obviously I am a Pask board member, so I'm not being biased
48:01
at all. But Alistair and Pask generally,
48:05
you know he does. He works tirelessly to advocate
48:09
for the professionalism, the transparency and the
48:13
sustainability of the self catering sector overall.
48:16
He's not just influencing conversation, he's I.
48:20
I believe he's actually a large part of shaping the future of
48:24
how this sector is seen and supported at a national level.
48:28
And I think if you care about where this industry is headed,
48:33
then Alistair and Pask are a great starting point and I hope
48:38
you don't mind, but if you're not a member, you should be a
48:40
member. So check out Pask.
48:43
Absolutely, yes, very well said about Alistair is doing some
48:46
sterling work. I don't think he sleeps and we
48:49
will put the link to pass in the show notes.
48:53
Check them out. I think it's it starts at
48:54
something like 80 lbs plus VAT for the year and you will get
48:57
way more value than that. Final tip then your #1 tip for
49:05
managers who want to improve their revenue management.
49:09
You know, hit the reset button where required and really
49:15
understand what your approach is and what it is that you want to
49:20
do in form of a commercial strategy.
49:23
So set your strategy and make sure your goals are aligned to
49:27
your strategy to be able to achieve the overall positive
49:31
outcome that your business requires and needs and deserves.
49:35
Zach, it's been a real pleasure. Thank you for joining us on the
49:39
House Planet podcast. My pleasure, it's been great.
49:42
Great to chat to Zach Alley there about all things revenue
49:45
management. If you want to dive deeper, make
49:48
sure you head to Amazon to grab a copy of his book.
49:51
And if you're looking for more free education, head to host
49:53
Planet dot Club, the fastest growing multimedia platform in
49:57
the short term rentals industry. We're proud to help hosts and
50:00
property managers supercharge their businesses by sharing a
50:04
wealth of free content. Head online to sign up for our
50:07
newsletter, download our suite of ebooks, and listen to our
50:10
podcast series. Until next time, happy hosting.