June 23, 2017

Gauging the Ideal Summer Vacation Rental Rates

June 23, 2017

Gauging the Ideal Summer Vacation Rental Rates

Vacation requests are on the rise at work. School is out for the summer. The weather is lovely. It's time for a break. What does that mean for vacation rental owners? It's time to set your vacation rental summer rates.
If you're relatively new in the vacation rental business, setting and adjusting rates as the year progresses can be a tricky business. Most rental properties will increase rates during peak seasons and lower them during slow periods to encourage additional bookings. However, gauging how high and how low to go can be difficult. Here are some tips to consider:

1. Start With Your Costs

Obviously, you'll want to set your price above what your outgoing costs will be. Hopefully, you've calculated these numbers before getting into the vacation rental business at all, but you may need to tweak these numbers during peak summer rental and usage months.
  • Mortgage and Interest. Most owners are probably still carrying a mortgage on their property. If you have consistent bookings throughout the year, you'll want to earn enough to make your monthly payment. However, most vacation rentals have peak periods, and you may want to shoot for earning two or three times your monthly payments in order to cover expenses during the slower months.
  • Insurance. You'll want to calculate your regular homeowner's insurance premium as well as the fees for additional insurance you may be carrying on your rental property.
  • Utilities. This is another area that may vary quite a bit depending on your bookings. You should expect to spend significantly more on electricity, for instance, during the hot summer months when you have customers staying at your rental constantly. Remember that vacationers are not always the best at conserving energy and that comfort tends to be a high priority, driving up usage and costs even further. Consider other utilities in the same light.
  • Maintenance and Repair. The more guests that you have coming through your rental, the more you will need to invest in maintenance and repair costs. If you have to take a ballpark guess the first year, be sure to keep an accurate record of your true expenses so that you can create a better budget the following year.
  • Laundry and Cleaning Costs. Again, the higher the traffic through your vacation rental, the higher the cost of cleaning and laundry as well. If you're paying a service for cleaning in between guests, you'll be able to gauge what your monthly bill may look like. Remember that the more you wash sheets and towels, the faster they will need to be replaced.

2. Understand the Competition

Before setting your vacation rental summer rates, take some time to see what the competition in the area is doing. Start with other comparable vacation rentals in your area that are roughly in the same location with similar size and amenities. Then, take a look at what hotels, suites, bed and breakfasts, and camping sites are charging in the area as well.

Once you've taken a look locally, do the same thing for similar vacation destinations a few hundred miles away. Many vacationers are not tied to one particular location, but may be looking for a simple getaway experience and are willing to drive a certain distance in any direction to find the best deal. 

3. Define Your Ideal Customer

Think about your vacation rental as well as your local area. Paint the picture of your ideal customer. Is your rental best suited for large families looking for an inexpensive vacation? Do you have a romantic getaway that is perfect for privacy and intimacy? Does your local area attract wealthy senior citizens looking for a unique experience?

Once you determine your ideal customer, start adding value for that customer in terms of amenities. For instance, if you want to attract families, start purchasing second-hand baby and child equipment and toys for your property. If you want to attract couples, learn about area restaurants and romantic spots in the area to co-promote with your rental unit or considering investing in something like a hot tub. If you happen to have a pond or lake, you might want to purchase life jackets, water toys and a canoe.

All of these extras can help justify a higher summer rental rate as these amenities can provide activities right at your rental unit that do not have a separate cost associated with them.

4. Proximity To Attractions

Most people are looking for a vacation spot where their lodging is near their favorite activities. The closer your summer rental is to popular attractions, the higher the rate you may be able to charge.

For instance, most vacationers are willing to pay more to stay right on the beach for a beach-side vacation. Running in for drinks, food or a break from the sun is so much more convenient if you're rental is right on the beach. If your unit is a block or two away, you'll have to settle for a slightly lower rate.

If you happen to be walking distance from a large amusement park or zoo, you can charge more for your unit. After all, you'll be saving your guests driving time and potentially parking fees if you're walking distance.
Share your thoughts on vacation rental rates in the comments below!

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