Over the past couple of weeks, we have shared a few posts detailing the noticeable changes in market demand for the first vacation rental markets affected by the recent Coronavirus outbreak. Since then, the outbreak has spread to many other areas of the world and has had a significant impact on the global travel industry. Various large corporations have banned global business travel, airlines are waiving cancellation fees, and more countries are introducing travel restrictions for visitors. With never ending talk of the COVID-19 virus, we wanted to share some of our thoughts and actions to stay on top of strategy as it pertains to these changes in high-level travel trends and what it means for you, our home and our short term rental partnership with us.
While lowering prices to stay competitive during times of low demand can be effective, there are also techniques that help support our overall strategy and may prevent the need to lower our pricing strategy dramatically.
This one is a bit of a given since before you became a client it is likely that we spent a considerable amount of time sharing our software based approach to pricing. But as a short reminder, if you are a short term rental and not using dynamic pricing (pricing that changes alongside changes in market supply and demand), then we would have to manually read changes in market demand and update our prices accordingly, on a daily basis which leads to massive inefficiencies on a variety of price levels.
With Coronavirus causing occupancy levels and overall demand to fall in markets around the world, pricing algorithms are picking up on that information and changing prices for our properties automatically. Software we utilize can actually look up how competitive homes in your area are performing. How many inquiries? How many bookings are they receiving? At what prices? How far in advance? How long are the stays? How many cancellations?
Because we are already utilizing dynamic pricing software, we are able to react to changes in market supply and demand in real time.
Understanding where our guests typically travel from and our top feeder markets is a great place to start to gauge how the spread of Coronavirus may impact our current and future business (forecasting potential impact by aligning this with travel restrictions) together.
We are now tracking changes in how people will travel to your market. Is your market reliant on air travel? Cities we operate where this is true include San Francisco (Bay Area), Los Angeles, Seattle, San Diego and Orange County (Coastal). If so, airline restrictions and cancellations may impact the ability for people to even get to a certain area. Drive-to markets are likely to be impacted less due to this, but may still see a decrease as travel fears worsen. Drive to markets we operate include Palm Springs and Lake Tahoe.
With reservation cancellations on the rise, we know it is important to understand and be able to share with you the plan we have in place for handling cancellation requests from guests. We are also daily reviewing any updated OTA cancellation policies as they pertain to our markets (Airbnb’s updates can be found here and Booking.com’s can be found here).
Since many airlines have allowed flexible cancellation policies in the wake of Coronavirus, and it makes sense for vacation rental managers to follow suit as appropriate. Allowing guests to defer and rebook reservations for later in the year may also help us manage customer satisfaction and shift revenue to a later date instead of losing it altogether. We are taking this on a case by case basis based on the guests needs/wants and timelines of booking to stay to cancellation notice dates.
While there are many factors to consider when updating our overall revenue management strategy for your home, pricing strategy in the short term can have an immediate impact on your/our business, coupled with changes in distribution, cancellation policies, and more.
We have found that using last minute discounts can automatically target available occupancy with lower rates on our behalf to drive occupancy during a period of low demand. Increasing both the booking window and discount percentage will help in attracting last-minute guests who may not have otherwise booked based on price alone. We think this is a sound strategy and are doing so when it meets the owners price guidelines. For those owner clients who have trusted Air Concierge to make all pricing decisions, this has resulted in an even more aggressive and profitable solution. For owners who have hard number rates we have been less successful in this arena.
We have utilized creating targeted promotions on multiple channels which can help direct bookings to specific date ranges, especially over the next few weeks as Coronavirus continues to remain in the mainstream media.
No one knows exactly how the recent Coronavirus outbreak will impact the global travel industry in the long term, but it is important to understand how potential long term effects will impact your home/short term rental business specifically.
We have explored the option of listing our properties on more channels than we currently do, as reaching more potential guests on digital channels can help drive bookings across the board. The downside (as it has always been) to this is that less known and utilized booking sites are rife for fraud and offer little in the form of guest verification or protection in the event of damage/destruction. It is a balancing act to be sure.
Since you are an Air Concierge client, here are some tips and tricks we are using in our pricing software to help you maximize the performance of your listing. We are:
We are hopeful that the downtime for the virus (in which business is most affected) is limited to the next two weeks but as we have done we will continue to keep you posted and keep your homes as efficiently managed, priced and advertised as possible.