The Big Picture

In the grand scheme of things, revenue management is a relatively young concept that didn’t take off in practice until the early 1980s. What began with the airlines and hotels is now widely practiced across industries. You even see it in your Uber fare as demand spikes and falls through the day.

But revenue management has only recently come to the vacation rental space. And there’s a reason for this.

It all comes down to the many variables that define our industry. Airline seats are fairly standardized, with first class, coach, economy, aisle, and window seats. Hotels are somewhat more complex, offering various room sizes, locations, configurations, and packaging choices. But they are still relatively standardized.

Vacation rentals, on the other hand, come in all shapes, sizes, and locations—all with a near-infinite variety of amenities. Their uniqueness is the heart and soul of the vacation rental space. It’s the very thing that the public loves about us. While revenue management pricing tools work well in the simpler world of airline seats and hotel rooms, they’ve struggled (until recently) to account for the many variables among vacation rental homes.

The Static Pricing Approach

In spite of the benefits to homeowners, not every vacation rental management company practices the art of revenue management—and even fewer do it well. Why? Because it’s difficult work that requires a significant ongoing investment. Above all, it requires an experienced team with a great deal of expertise.

As you might imagine, it’s a fairly common practice for smaller vacation rental companies and self-managing homeowners to set rates at the beginning of the year and more or less forget about them for the rest of the season. But there’s a downside to this “static pricing” approach.

The problem is that it fails to take into account any surges in demand, which denies the homeowner the opportunity to realize a higher rate. Nor does it take into account any unanticipated softness in demand. This denies homeowners revenue by way of lost bookings, as their rates haven’t been appropriately adjusted downward.

Technology + The Human Touch

To make revenue management both effective and practical, revenue managers have implemented sophisticated software tools that have only recently come into their own. But it isn’t enough. Even the best current software tools—by themselves—lack the nuance to account for the subtleties of each vacation home in our care, as well as the goals of individual homeowners.

As a result, we rely on our people. The nine -member team of Natural Retreats Revenue Managers is equipped with the expertise to harness the benefits of the latest data and pricing tools—and to correct them when they fall short. They are on hand to override the technology when necessary AND to ensure that a homeowner’s revenue is maximized in a way that is in line with their goals.

Our Data and Pricing Tools

Key Data Dashboard (KDD): This is our direct-fed data tool. KDD aggregates pricing data collected directly from the market itself and “scrapes” data from various online travel agency (OTA) partners, such as Vrbo and Airbnb. Taken together, they develop a remarkably comprehensive picture of demand.

KDD also incorporates an analytics function that helps us interpret the data. When bookings surge, we see it in the moment. When they fall off, we see that as well. The remarkably accurate demand picture helps us predict where demand is currently and where it will be in the future, allowing us to anticipate needed pricing adjustments on a continuing basis.

This dual approach is one of the elements that set our Revenue Management platform apart.

While many smaller companies rarely have the necessary expertise and tools at their disposal, larger companies often fail to devote adequate attention to an individual property’s performance. They rely too heavily on technology and not enough on human expertise, preventing many of their homeowners from fully realizing rate optimization in a way that suits them.

Wheelhouse

In 2022, after many conversations with a number of pricing automation software developers, we found a company that offered the sophistication and reputation that we were looking for. Most importantly, the company provides transparency into their methods and models.

This is Wheelhouse—a platform that can be seamlessly integrated with best-in-class software tools to ensure optimal revenue performance. It also allows our Revenue team to set rates manually, adding that indispensable nuance to pricing.

As a dynamic pricing and automation tool, Wheelhouse recommends pricing based on observed market demand within a specific comp set of vacation rentals. For instance, it can see how other three-bedrooms condos are doing in a specific date range in a particular market. When a market pickup is detected, Wheelhouse is there to capitalize on that observed demand first. It makes the adjustment instantly, in real-time, and it does this constantly, doing what no human could ever do at scale.

That said, if you rely on this technology and this alone, things can go awry.

Revenue management isn’t the most dazzling subject in the vacation rental space. But it is vitally important. Signing up with a company with the proper team in place ensures that your rates are being optimized around the clock and that there is someone there to oversee the complexities of the process.