Rate setting

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charles cawley
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Rate setting

Post by charles cawley »

Over the years we have become more aware of how rate structures vary from area to area. The way niches behave, from sleep 2 to very large holiday lets and across the three types- 'standard', 'formula' and 'special' have significant impact.

There are two features. The general level of rent and the patterns of demand calling for variations. The former can be addressed by dynamic rate setting when starting out. Go in with a lower than desired rental and ratchet up to meet demand. This avoids the disaster of going in too high and consequent low occupancy and ensures swift feedback is accumulated and that your rates respond as the market reveals itself.

The latter relates to demand patterns and is, perhaps, more complicated requiring more judgment.

For many of our cottages, the rates vary depending on these factors- excluding local events.

Winter (Low season)
Week 1 spring half term
Week 2 spring half term
Spring (Shoulder)
Easter
Spring bank holiday (early May)
Late May bank holiday
Summer (Peak)
August bank holiday
Autumn
Week 1 Autumn half term
Week 2 Autumn half term
Winter
Christmas and New Year (Peak or Super-peak)

Half terms are becoming an increasing bother in the UK especially with growing numbers of Academies with the independence to choose dates, instead of being under local authority control.

'Standard' and 'Formula' lets tend to adhere more closely to this pattern than 'Special' ones.

Although we have been working for over 6 years in this business, rate setting is still, partly, a matter of judgment. The above patterns will not apply to most holiday lets but seem to work in this area. Does anyone else have a take on this perennial problem and has anyone else noticed recent changes in the way demand patterns are behaving?

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zebedee
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Post by zebedee »

I would agree with you Charles.
April pricing and Easter are even more complicated in my view. March used to be good (and can still be if the weather is ok) for short breaks as people use up end of year leave.

We have local authority areas opting to have set April weeks for the school holidays (but not all the same set weeks), people who can save leave till the end of March if Easter is early, and overlap with days taken from the leave year in April. Then we have those whose schools still take full weeks over Easter even if the bank holidays occur late.

Adults will think that we would welcome just a weekend booking (made early ) over Easter because the holidays are so variable.
I struggle to get my pricing right end of March and April.

I have had a full April this year, first time ever I think with full week bookings (but then wonder if this is because I have priced too low this year??) It is comforting to think that Charles, with all his experience, can be equally perplexed
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Post by Essar »

I have noticed changes too, but I tend to stick to the general format of:

Standard - 1st week onwards
February H/T
Standard
Easter
Spring
May/June H/T
Summer
Peak - School Hols
Autumn
October H/T
Winter
Crimbo & New Year

Each of these is a set of seasonal dates - these vary year on year as Easter changes. I have noticed that school holidays are getting longer due to variances in local authorities and academies dates overlapping. I have extended the H/T, Easter & Summer holiday periods by as much as 2 weeks.

It doesn't seem to make much difference, parents continue to pay the higher rates.

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charles cawley
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Post by charles cawley »

We have just published an article based on the above. Sometimes, after posting something on LMH, I take another look and think it should also go up on the web site.

The main content is much the same, with a few extra observations and bits and pieces. For wider readership, particularly in countries other than the UK, perhaps the most useful aspect might be the method rather than the periods we take in the example.

http://www.holidayletsforsale.com/rate- ... iday-lets/
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abode
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Post by abode »

There is a business that collects all the future school holiday date data (often before it is published) for the UK and overlays it with both pupil population data (and individual postcodes if customers request). It then predicts % (and numbers) of pupils on holiday for any given day/week of the year at local, regional, home nation and UK levels. It can also do this for catchments (eg local airports or holiday parks). This helps large corporates avoid pricing mistakes at launch (where customers are quick to identify a pricing "error" and bag a bargain).

They have been selling this data to large corporates (travel Co.s, multiple retailers and media Co.s) for nearly 15 years. They also sample for academies and teacher training days. Most academies follow the LEA (Local Education Authority) - witness the recent outcry in South Yorkshire where one LEA has chosen to shorten the Summer holiday!

These are some of the Easter principles they have identified:

Whilst the actual Easter religious dates obviously change every year so does the way authorities incorporate the actual Easter dates into school holidays. They will try to even up the term lengths either side. So Easter holiday weeks will be tagged on after the religious dates if Easter is very early and vice versa if Easter is very late. Of course not all LEA's agree on what constitutes an early or late Easter - however there is sometimes co-operation at a regional level.

To add to this there is a lot of anecdotal evidence that travel bookings for the early or late religious dates are also affected by travellers anticipation of likely weather. AKA - late easter likely equals poorer ski bookings (poorer snow) but better early sunseeker bookers (better sunshine).

I thought readers might find this useful. I have used the data in the travel industry.
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charles cawley
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Post by charles cawley »

This may sound a bit pedestrian, but do you remember the name of that business?
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abode
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Post by abode »

The business is called Leisure Industry Research run by Sarah Reid and you can call her on 0870 4440505 or 01535 637473 or email her on sarah@actahead.co.uk
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Ben McNevis
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Post by Ben McNevis »

This thread got revived just as I was propagating my rates into early 2018 and there's an idea I've been thinking about for some time but I'm not sure whether it's a good one:

I was thinking about having our desired rate on our own websites then having a slightly higher rate on listing sites, to cover the listing site fees. This way, I might feel more willing to go with the flow towards commission-based advertising by recovering 100% of the commission through charging a higher rate.

Has anyone tried this?

I would predict four effects:
  • We would gain some bookings by adding a few commission sites
    We lose some bookings because our rates might appear on the high side when viewed on a commission site
    We would irritate some guests who book through a listing site and then discover that they could have stayed for less
    Cleverer guests would feel rather smug having saved a bundle by Googling a bit further.
Cheers, Ben
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Essar
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Post by Essar »

Ben McNevis wrote:This thread got revived just as I was propagating my rates into early 2018 and there's an idea I've been thinking about for some time but I'm not sure whether it's a good one:

I was thinking about having our desired rate on our own websites then having a slightly higher rate on listing sites, to cover the listing site fees. This way, I might feel more willing to go with the flow towards commission-based advertising by recovering 100% of the commission through charging a higher rate.

Has anyone tried this?

I would predict four effects:
  • We would gain some bookings by adding a few commission sites
    We lose some bookings because our rates might appear on the high side when viewed on a commission site
    We would irritate some guests who book through a listing site and then discover that they could have stayed for less
    Cleverer guests would feel rather smug having saved a bundle by Googling a bit further.
I see nothing wrong in doing this; you reasons are valid.

The alternative that will have the same reasons but may have a better effect, is to reduce your prices slightly instead. :D
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russellt
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Post by russellt »

Ben McNevis wrote:having our desired rate on our own websites then having a slightly higher rate on listing sites, to cover the listing site fees
This is exactly what we do. Yes, some guests probably feel miffed at paying the booking agency's price when they see the prices on our website(though none so far have expressed that view to us). However, they are paying for simplicity :shock: and all the valuable :wink: guarantees that the listing sites provide.

However, repeat guests quickly get smart :lol:

And, if they mention the booking site differential, I always tell guests how much they saved by doing their search 'due diligence', trusting that the cottage actually exists, contacting us and booking direct.

And, with the current economic turmoil, I believe more guests will look to reduce costs by booking direct.

Setting your website price to 100% of the total cost on the booking site seems counter-intuitive to me. I'd be interested to know what the majority view is.
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Post by AndrewH »

russellt wrote:... Setting your website price to 100% of the total cost on the booking site seems counter-intuitive to me. I'd be interested to know what the majority view is.
+1
If you have a private website through which to advertise your property, then I believe sticking to your "real" rates is the answer. If the guest finds your site and books directly then not only will he be happy to have saved himself from paying an additional booking fee, but he will also be patting himself on the back for being so savvy.

This is the psychology, which I am going to try in the future. Till now I have been so unsubtle on my subscription listings. The theme in "capital letters" has been book direct and save! The reader may think "That's a good idea" but is more likely to think "What's the catch?". That's going to change. A little bit of encouragement might be necessary, but I would like the guest to think that he has searched and found my site and has worked it all out for himself.
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charles cawley
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Post by charles cawley »

As a full service agency, we have been backing away from owners trying to, in effect, get something for nothing.

It give us a bad name with guests and fosters a poor relationship with owners. As things are developing we do have some very successful non-exclusive arrangements but they are less common than they used to be.

Many part service agencies may be able to afford poor relationships with owners and any consequent poor service for guests but that is a road we cannot afford to tread. In some cases, recently, we have declined to do business with owners letting letting them rely AirBnB or what have you; it is not worth the grief and any possible threat to quality.
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russellt
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Post by russellt »

charles cawley wrote:owners trying to, in effect, get something for nothing.
Not sure I understand, though I have never used a full-service agency, so do not really understand the dynamics.

Do you mean that owners are advertising on online subscription/commission booking services but seeking to take bookings direct? Is that the 'something for nothing'?

I'm probably being thick. Pls try again. thx.
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charles cawley
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Post by charles cawley »

Not far off 50% of all costs go in advertising. Further costs go in IT before wages and overheads.

If and when there are upsets, usually due to circumstances outside of the control of owners or agent, we take the emotional steam out of the episode and work to make sure all are happy. One upset can sour a month or more. Dealing with money and other aspects also takes time. We also provide the benefit where guests return to our site because they trust they will not be disappointed and owners benefit. Also, in the early days, we spent a very large sum on Adwords and other advertising which generated a name that benefit owners today.

Full photo services are provided and I have been known to clear gutters and do emergency cleans on cookers. Although, strictly not an Agents job, in our area we have to work hard to keep owners and on the relationship.

We have costs to cover.

Something for nothing, in this case, is where some owners think they can get agents to charge above what might be market rate to 'pay for themselves'. When guests discover they could have paid less, it is the agent that suffers the bad impression.
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Post by Jenster »

I use the same price on my website and listing sites. I think the guest's commission/service fee pushes the price up enough without me adding more on top. It is cheaper on my website due to the absence of booking fees. On subscription listings with no guest fees (eg VHR) I see it as the cost of advertising - the guest is still in effect booking directly with me (with no involment from the site) for a better price. I have to admit though that I have put my prices up slightly across the board to account for the fact that I now take credit cards.
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