Remember that quote about crisis meaning transformation? Often demand does not evaporate, it changes. If the motto becomes tutti a casa, many are going to need a home away from home.
That is where demand should meet your supply - as a vacation rental manager who suddenly gets less short-term bookings. But how do you price medium term rentals and adapt your policies and rate rules, across all channels?
In these times of crisis, many are going to need a home away from home:
Let's imagine a few of these cases...they are not sci-fi any more.
John comes back to London back from a business trip in Italy, and got the instruction to stay quarantined. His kid has asthma, and he prefers to love his family from a distance for 14 days.
Gretel was accommodated by her 70 years old grandmother during her studies in Munich, but now she feels like she has a cold. She does not want her grandma to risk anything, she needs to move out.
Jenna is a consultant on a project in Detroit. She still needs to meet her client in the factory from time to time, but most of the time she can work remote, and feels the prosmiscuity of her hotel is not the best- in elevators, in the breakfast or lunch space. And she feels trapped in her 40 square feet room.
Bob is 70 and lives in NY in a small apartment. it was fine when he could go out in the park walk his dog and play chess in the local park cafe, but now he feels like getting more space and out of the soon panicking city. He dreams of a cabin in the woods, with plenty of fresh air and a beautiful view...
Mary hears her UCLA co-ed roommate cough at night and feels like it is time to move out to her own flat for a while.
Michael and his family feel the air is getting unbreathable in the city. School is closed for his kids, his pregnant wife can take a leave, and he can work remote. They all just fill like filling the trunk of their car with food and enjoying a break from the collective hysteria in town.
All these will join the cohort of people who already needed a medium term rental:
digital nomads, consultants on a project, etc. see our next tips on niches.
As a rental manager who just lost many existing and potential short-term bookings, this is actually your opportunity to make yourself and the properties you manage useful. But how do you price right these stays from two weeks to a few months?
As usual, your pricing will be a compromise between what various segments on the market are ready to pay, prices proposed by your competitors, and the costs to serve that demand. Wait, do you know these costs, at all?
There are many reasons why shorter rentals are more expensive than rentals for a year or more. One of them are your variable costs per stay. If you do not know them, don't be ashamed, most vacation rental managers don't - or do not monitor their margin after costs per stay. But it is high time to figure these out- especially if you are forced to replace short term stays with stays for a few weeks or months.
The actionable task list for your team:
- Figure out your cost per stay
Depending on how sophisticated your financial controlling is, you will have to adapt. Blunt reality is , if you are a small to medium vacation rental company, is will already be a good step up to compute your cleaning, linen, maintenance and assistance costs and the time your reservation team spends per booking per property.
- Apply these to your past booking history taking into account the number of stays for each month
In normal times, determining this margin will help you arbitrage between short and medium term demand. In crisis time, it will help you estimate the bleeding if you replace usual short-term bookings with medium to long term.
- Compare that to market prices for medium stays
These are neither long term rental prices, nor the sum of your short term rental prices, so you need ad hoc monitoring and thinking for your destination.
- Lay out your target rate vs. LOS (Length of Stay) structure
- Apply that across all channels
|The pink scenario:||
Your software is able to convert these rate rules into an LOS rate table that will be consistent across all channels.
@ Escapia: when is this feature coming?
|The In real Life- more common scenario:||You will have to deal with the various LOS discounts in each channel and it will be a mess|
6. Broaden your distribution to channels that do more medium or long term rentals
7. Broaden your marketing to new niches and targets that need stays for a few weeks or a few months.
This will be the topic of one of our next tips below. ;-)
8. Monitor and manage not only revenue, but margins and profit KPIs.
The basic idea was presented in our article https://blog.vrpartnership.world/why-you-cannot-do-good-yield-management-in-vacation-rentals-today-revpar-is-not-enough .
But it has deep reaching impacts on your processes and organization.
It was not very fashionable in July 2019 when we came up with it. But the WeWork debacle and a few other bankruptcies since made it much more trendy...haven't they, Simon? ;-)
To be continued...we will try to post one tip a day.
Tip 2: Deal quickly and pro-actively with cancellations of those at risk, and try to re-rent fast
Tip 3: Replace foreign guests with locals
Tip 4 : Replace senior guests with young guests
Tip 5: Target safe regions
Tip 6: identify less Coronapanic-sensitive niches
Tip 7: Revise your prices
Tip 8 : Replace short -term rentals with medium or long-term rentals
Tip 9: Adapt all your mix, from cleaning
Tip 10: make your bets about how long the crisis will last- and adjust your options accordingly
The webinar is planned for Tuesday, March 17th at 16:30 CET (that is 11:30 AM Tuesday, Eastern Time (ET)). If you cannot attend, we will send you a recording.
You can vote below for which tip you would like to read first, we'll try to prioritize.