Dynamic Rate Pricing Explained

Beach house rentals in Rehoboth

Seachange Vacation Rentals is the only vacation rental agency at the Delaware Beaches using Dynamic Rate Pricing (DRP) to raise Property Owner revenue and occupancy and delight Guests by giving Guests flexibility in length of stay requirements to match their needs.

Widely used in hotels, under-utilized in vacation rentals, dynamic rate pricing varies rents based on guest booking patterns to bring in 35-60% more revenue and occupancy, while giving Guests flexibility against rigid stay rules.

Flexibility comes at a price. Conventional logic says that the longer a Guest stays, the less they pay. DRP works the opposite way. The shorter a Guest stays, the more they pay. Why force a Guest to stay longer just to get a lower price?

DRP allows the Guest to select the length of stay appropriate for their needs, while filling the gaps left in the property calendar and maximizing Owner Occupancy and Owner Revenue.

That’s the broad overview of DPR. Read on for the details…

In conventional vacation rental calendar management, there are two sets of rules:

  1. Check In and Check Out Day. For the 17-week summer season, for example, this would typically be a Saturday in both cases.
  2. Minimum Stay. For the 17-week summer season, for example, this would typically be a 7-night minimum.

In conventional vacation rental rate management, there are two sets of rates:

  1. Nightly Rate. The price per night.
  2. Weekly Rate. The price per week (not necessarily the nightly rate x 7).

Most vacation rental management agencies at the Delaware Beaches will go through a formal rate setting process once a year in the fall. This sets out the rates (nightly and weekly) for their Property Owners to approve for the next calendar year. This process is done once, then never touched again.

Seachange Vacation Rentals (SVR) follows what works: an annual rate approval process. However, where we differ is that, using DRP, we get our Property Owners to pre-approve a window of flexibility that SVR can use to adjust rates up and down based on historical and current year patterns of guest booking. This is not a, ‘set it once and never touch it again’ method like the other guys. This is a dynamic approach to rate pricing that responds to fluctuations in the vacation rental market.

Having a window of flexibility pre-approved from our Property Owners means that SVR does not have to constantly call our Property Owners, bugging them with unnecessary workload. DRP means that our Property Owners are freed up of the work of managing their occupancy and revenue. SVR does this work. That’s why we were hired initially – to save a busy Property Owner the work and add our local knowledge of the real estate and hospitality industries.

How does DRP work? SVR has sophisticated Revenue Management software that not only tracks historical and current year booking data within SVR, but also within our local vacation rental market in general. Our software allows us to see trends in guest booking patterns, comparisons year on year (pacing), determine Guest sensitivity to rate pricing, and maximize REVPAP.

REVPAP is a term SVR made up! It is based our company Founder’s direct experience working with the Revenue Management and Marketing groups at the Washington, D.C. headquarters of the world’s largest hotel company – Marriott International. The hotel (hospitality) industry Revenue Managers work to analyze and optimize REVPAR (Revenue Per Available Room). The SVR Revenue Manager works similarly to analyze and optimize REVPAP (Revenue Per Available Property).

SVR uses our Revenue Management software in conjunction with the Rate Pricing window that our Property Owners pre-approve to adjust weekly and nightly rates up and down based on how Guests are booking. Not only that, SVR is pre-approved by our Property Owners to adjust the minimum stay and check in/check out rules to give Guests flexibility in booking.

DRP works. It really works! SVR has the data and the smiles on our Property Owner and Guest faces to prove it!

Rehoboth Beach Rentals

Guests are happy because they can book the number of nights, arrival and departure days that they really want, albeit at the price of higher nightly rates. Incidentally, Guests can generally still book the original stay rules at the original lower weekly rate at the cost of rigid check in/check out rules. Property Owners are happy because, as our data shows, we get a consistent average of 35% higher revenue and occupancy using DRP. On the high end, we’ve gotten up to 60% higher revenue and occupancy using DRP.

But SVR Revenue Manager, if you’re reducing a summer 7-night minimum to an x-night minimum, won’t I be left with empty gas in my property calendar? I’m glad you asked that excellent question! No! Using flexible rate pricing, we can reduce nightly rates on the ‘gaps’ and fill them. We’ve already gotten Property Owners more than the original weekly rate commitment that we made to them the prior fall, so gap filling works further to optimize revenue and occupancy. Don’t worry, Property Owners – we do not ‘bargain basement’ your rates. Remember that you pre-approve a rate window. In other words, you still sign off on the lower (and higher) ends of your rates. If we ever need to work outside of that window, we’re going to seek approval first.

Rehoboth Beach Rentals

Other vacation rental agencies and self-managing property owners out there – beware of thinking that this is as easy as I make it sound! Why do I need SVR. I’ll do it myself! SVR says in our About Us page that we work, “At the intersection of real estate and hospitality.”

Even with the best Revenue Management software out there, you can never replace the skill of the Revenue Manager. This is the person, or team of people who work daily to optimize the revenue and occupancy for their Property Owners. It’s a marriage of company, property, and local knowledge with the best software tools available that allows our Revenue Manager to straddle two industries – real estate (Property Owners) and Hospitality (Guests).

I’m sure my former colleagues and clients at Marriott International will say a hearty, “Heck yeah!” Guys – I listened! How are we doing?