Deciding our prices

If you are planning to buy a rental home, or you're thinking about what to do with one you have just acquired, this is the place for any questions about starting out in the rentals business.
Jeddy
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Deciding our prices

Post by Jeddy »

Hello

I'm nearly ready to list on HL to start with, then I'll look at OD as well.

I'm really struggling with the prices for all the different weeks. I keep looking at others in the area but I'm finding such a difference and no set pattern. Some of the lets seem to charge virtually the same all year, others seem massively cheap out of season and shockingly expensive in summer.

I have made myself a spreadsheet and have put in the special weeks such as half term, easter etc. To start with I have entered some prices based on others in the village, however it is looking confusing and random with 9 different prices for full weeks.

I'd love to hear how you approach this.

I want to be realistic but not the cheapest and I have allowed for the approx 14% that HL will add on. It's a 1 bed if that makes a difference, i.e. no children coming with them and therefore half terms not as important, unless they are teachers!

I'm sure I read a post about pricing and seasons but I can't find it.
zebedee
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Post by zebedee »

There is no easy answer.
Some people have 3 rates for high , mid season and low.
I inherited a more complex price structure from the agent we originally signed up with.

There is a good argument for going in a little on the lower side to get yourself known and encourage bookings, then gradually ease prices up, but not everyone would agree.

It very much depends upon local market demands. Do you know enough about this, or is more research needed?
Jeddy
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Post by Jeddy »

Most of the others are up with large agents, who we had out to look at ours. They gave us 10 different rates for full weeks. It seems overly complex to me, I like things simple.
zebedee
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Post by zebedee »

If you are managing the property yourself, you can undercut agent prices and still get more than your competitors. But then you have to consider any costs from listing on sites etc.

Perhaps tell us more about how hands onyou will be(or not)?

There are advantages in using agents, they have experience, attract potential guests understand what can be a realistic price etc and that can be evenmore true in the beginning.
Norfolk Canary
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Post by Norfolk Canary »

You also need to take into account any special events that are taking place in the vicinity throughout the year that will increase demand
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PW in Polemi
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Post by PW in Polemi »

Will you be letting for full weeks, or will you do weekend breaks? If the latter, then a 3 night weekend break should be more than 3/7 of the weekly price, and the "short break" of the remaining 4 nights should also be more than 4/7 of the weekly price - you will have to cover your costs for an extra changeover, don't forget!

We've set our prices for the various seasons, low, mid and high, (with no consideration for school holidays, only running costs) with a minimum of 7 nights throughout except July & August when it is really too hot for us to consider changeovers every week, so we say 10 nights minimum then. We do the changeovers ourselves, and we're not too concerned about having the odd day or so between bookings either, so are flexible about arrival days too, which helps with the various flights coming in here.
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Jenster
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Post by Jenster »

It also depends if you are low, mid or high range. I am relatively new to the market, having started last year, and I went in fairly low, but not the cheapest, to gauge the market without appearing too cheap. I am aiming for quality at affordable prices, so the high end of mid range, and will probably gradually increase my prices as I improve my property and service, until I am where I want to be. Starting lowish got me plenty of bookings in my first year which helped my confidence, but I felt I undersold myself at times. Having high, mid and low season rates rather than basing rates on school holidays makes sense to me if you are sleeps 2.
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Ben McNevis
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Post by Ben McNevis »

Hi Jeddy. It's a finger in the wind task. I don't think there's a really scientific way to do it in the first year, but your guesswork should consider all the factors. Here's my plan for thinking:

Think of an average time of year (e.g. mid September).
In a vacuum, think what you would be willing to pay if you wanted to spend a week there.
Now look online and get mid September prices for similar sized competitors in your area (difficult because they are all so different).
Now adjust your rate a little towards the average that you have found.
Adjust for any extra or unique features that your competitors don't offer (e.g. a hot tub in our area seems to be worth up to 50% on top of standard rate).
Adjust down for any detremental features (e.g. owner lives in attached annexe, near a main road or view of power station).
Adjust down if you allow full weeks only with fixed changeover day. Adjust up a little if you allow any day changeover.

Next: seasonal adjustments. Look at the price ranges shown by your competitors but don't assume that they are optimal. You've already got your Mid-price. Now set a High-price and a Low-price to get your range. Look at availability calendars for your competitors and draw a graph of average occupancy / week for the year (another tricky thing to interpret because occupancy is skewed towards near dates due to late bookings). Use your knowledge of seasonal demand to pick weekly seasonal rates from within your range. Look at local events and make sure that you charge high season rates for anything that attracts loads of visitors.

Next, think about your pricing model. If you only allow full week bookings, it's dead simple. If you allow full flexibility it's hell. Some charge a percentage of the weekly rate for short stays (e.g. 70% for 3 days, 80% for 4 days etc). A few do "per night" pricing like a hotel or B&B. Some do more complex calculations. It's up to you. Think about whether weekend nights are worth more than weekday, whether you want to charge higher for full occupancy, whether you charge extra for pets, cots etc.

In subsequent years, you can be more scientific about it, by keeping careful record of your enquiries. Even that is tricky because your published calendar will deter enquiries for already booked dates and therefore you will never know the extent of demand. A good indicator of high demand periods is that people tend to book long in advance.

Hope it all makes sense! If not, just ignore :D
Cheers, Ben
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charles cawley
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Post by charles cawley »

Jeddy.

Some excellent advice from the other replies.

Since 2012 when owners did not reduce prices to meet a serious fall in demand due to the endless rain, followed by the 2013/4 floods in the South, DFS Sofa pricing methods developed.

Headline prices advertised by go-it alone-people are often heavily discounted. The usual pattern is that rate card prices hold for about 70-80% of bookings then shorter notice bookings often see 25-30% reductions. These often apply to about 25% of bookings.

So if a cottage advertises at say, £400 for a week in May. The real average but unadvertised rate may be more like £400 less 1/8th (.25 x .25) or closer to £350.

Large booking agencies often have compulsory discount rates for owners who do not reach a certain number of bookings or a booking value target. These can be up to 20%. They will not, of course, be visible earlier in the year. So a £400 headline price could turn out to be as low as £320.

A note of warning. There are many really kind and helpful cottage owners. But some do not like competition. Do not fall for the argument that if you price too low (ie lower than them) you will attract riff-raff or people will not book because they will think something is wrong because it's so cheap.

This latter attitude did have something going for it way back when there was, at best, one photo no feedback and only a few words in cottage ads in the newspapers. You often get 20 plus photos, nearly always get feedback of some kind and so things have radically changed. People want and often expect bargains. This is what created the DFS pricing mentioned above. The motto of many booking directly with owners is 'if you don't ask you don't get'.

We recommend starting at a lowish rate and ratcheting rates up as quickly as you can to meet market demand. This way, you avoid going in too high and if you are quick enough reach the ideal rate quickly whilst picking up valuable feedback at the same time. Dynamic pricing can be very effective.

It is something large agencies with banding systems that almost always either overcharge or undercharge cannot offer.

We offer a spreadsheet device free of charge that has formula to generate less than full week stay prices in various permutations like Friday to Monday. Monday to Friday. Saturday to Monday and so on. If you want a copy, please dm with an e-mail and I can send it to you.
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Giraffe
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Post by Giraffe »

Hello Jeddy. This is my 3rd year of go-it-alone with one 7-person holiday let after my local agent ran it into the ground - no bookings in 2014. Like you, I found it really difficult to price. Here is my experience:

Year 1, 2015. A lot of research into local pricing, and further afield as visitors might be tempted to go elsewhere. I underpriced to get the business. Made a loss as we had leftover bills from the agent. Also we didn't start advertising until March 2015.

Year 2, 2016. Kept prices the same as 2015. More bookings than 2015. Broke even as unexpected costs incurred.

Year 3, 2017. Put prices up - by £200 in peak seasons, and £100 for other weeks. This gives me flexibility to give discounts to returnees and small parties. Bookings for 2017 more than this time last year. Should be into to a reasonable profit.

As Charles says, we learn as we go along. Key lesson for me? I wish I had the nerve to increase prices in year 2 rather than year 3.
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Jeddy
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Post by Jeddy »

Thank you for the many valid points.

I input some rates last night into HL and set the whole year as special seasons using the below headings. It makes more sense on my spreadsheet, blue being the lowest rates, then green & purple, and red being the highest. The red has 3 different rates, i.e. Summer High Season is the highest.

It still feels a bit over complicated to me but it has allowed me to be similar-ish to others in the area and, as mentioned in posts, I can change it as needed.

Early Spring Low Season
Spring Half Term
Late Spring Low Season
Easter Holidays 1st Week
Easter Holidays 2nd Week
Easter Holidays 3rd Week

Late Spring Mid Season
Late Spring Half Term
Early Summer Mid Season
Early Summer High Season
Summer High Season
Late Summer
Early Autumn
Autumn Half Term
Autumn Winter Low Season
Christmas New Year

One other thing, I tried adding a 3 night stay but HL then put me much lower down because my nightly rate for 3 nights was coming up as my minimum, instead of the weekly/7 price. I took it off immediately as it was putting me almost last. I must have done it wrong?
rosebud
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Post by rosebud »

Hi Jeddy

It's tricky. Rates vary hugely in my area too ... but I keep a close eye on what others are charging & how well they are doing..

The first 2 years I let solely through an agency so used the rates they suggested.. that simplified everything.

When I began advertising independently in 2013 I stuck with the agency's rates initially.. I often reduced my rates if I didn't have bookings - something I rarely do anymore.

Over the last 2 years - as the cottage has become more popular - I put most of my rates up - some substantially.

I guess you need to establish rates - on the low side initially to encourage bookings - then see how it goes!

I have the same issue with HL re pricing....
e-richard
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Post by e-richard »

As we see elsewhere, the dinosaurs of the listing business are a dying breed and a plethora of new sites are emerging. None will be big enough in the short term to fill all our needs, so we have to advertise on a wide range of sites.
Jeddy wrote:It still feels a bit over complicated to me but it has allowed me to be similar-ish to others in the area and, as mentioned in posts, I can change it as needed.
Now think about "changing it as needed" on 7 different sites with 7 different interfaces, rules and capabilities.

I suspect you'll want to simplify it :wink:
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Hells Bells
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Post by Hells Bells »

My prices are as simple as I can possibly make them.

Ski Season
Peak Ski Season.
Spring and Autumn
Summer
Peak Summer.

There is a little bit of variation in late Spring and early Summer which depends on whether our pool is open or not.
Jenster
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Post by Jenster »

e-richard wrote:As we see elsewhere, the dinosaurs of the listing business are a dying breed and a plethora of new sites are emerging. None will be big enough in the short term to fill all our needs, so we have to advertise on a wide range of sites.
Jeddy wrote:It still feels a bit over complicated to me but it has allowed me to be similar-ish to others in the area and, as mentioned in posts, I can change it as needed.
Now think about "changing it as needed" on 7 different sites with 7 different interfaces, rules and capabilities.

I suspect you'll want to simplify it :wink:
+1. I have fiddled with our prices several times over my first year and over several sites it is a pain in the proverbial to say the least!!
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