5 Things You Need to Consider When Setting Rental Rates

Making an informed decision on how to set your property’s rental rates can make a significant difference in your ROI.  By pricing a property too low, you’re fighting an uphill battle to profitability before the season even starts. On the other end of the spectrum, a rental priced too high may remain vacant and you risk not being able to cover out of pocket costs. Answering the 5 questions below will guide you on how to competitively price your property(s) – and fatten your wallet.

1.  What annual expenses are required to maintain my home?

To make a profit, your property’s rental income needs to exceed operating costs.  Figure out your business’ overhead by listing all associated rental costs using the list below as a guideline:

     Fees and Permits

-          Legal/accounting

-          Permits/licenses

-          Merchant account/credit card processing fees

-          Management fees/commissions for rentals

-          Mortgage costs


-          Electric/Gas

-          Phone/TV/Internet

-          Septic/sewer

-          Garbage

-          Water

-          Landscaping

-          Cleaning

-          Security/alarm

Once your list is complete, calculate how much you spend on each item per year.  Add up each item’s annual cost to determine your operating expenses. When you divide your total operating costs by 12, you can get a monthly average of rental income required to match your property’s expenses, making it easier to set rental rates.

Since seasonality will likely affect your property’s earnings each month, understanding your regions tourism trends will give you an idea of when you can expect to become profitable.  Once your rental income matches your operating costs, all other earnings are profit. To make sure that you’re making the monetary income deserved on each rental, ask yourself:

2. What are the seasonal tourism trends in my property’s region?

Seasonality in your region should be one of the most helpful determinants of setting rates.  While high and low season may seem obvious in some destinations, it can be much more difficult to assess in others.  Often times, contrary to common belief, seasonality is not always focused on calendar dates.  For example, don’t just lower your rates Labor Day weekend because it is considered the end of summer if travelers are still inquiring about your beach property through September. Extending your high-season rates just a few weeks may mean doubling your profits.  Special events, school holidays, and long weekends are also occasions to increase rates and maximize ROI.

Setting your rental rates properly and maximizing your income during holidays and high-season will help reduce the stress of obtaining renters during the off-season.  Securing a booking during the low-season may require more creativity.  Running a special offer, editing your advertisement (description, photos, and title), or offering your home for a ‘girls weekend’ or ‘yoga retreat’ will help boost inquiries and bookings.

While familiarization with tourism trends and seasonality will make it easier to set rental rates, awareness of competitive property’s rates will validate any reservations and help you confidently price your rental no matter what time of year.

3.  How have other owners/managers priced competitive properties?

Each season, go onto the major listing sites (FlipKey, TripAdvisor, etc) and review the other homes listed in your property’s region. Observe how much other owners/managers are charging for nightly, weekly, and monthly stays.  Check out properties with special discounted offers and perks posted.

It is important to compare apples to apples when examining competitor’s rental rates. Examine homes with the same sleep occupancy, number of bedrooms, similar location (ski-in/ski-out versus a drive from the mountain), and amenities as your own.

The minimum night stay is another key determinant for setting rental rates. Some tourist destinations are geared solely around weekend trips while others attract mostly weekly visitors. During the summer, owners with homes in Cape Cod, Massachusetts rent exclusively with a check-in and check-out on Saturdays. You don’t have to conform to the standard when setting your rates, but you should be aware of the renting habits in your region.

As you view competitive properties on major listing sites, check for uniformity in the rate’s table on each advertisement. While some homes have lots of detailed and specific rates, others may have just a high and low season rate listed.

4.  What should be included in the standard rental rates?

The structure of a property’s rates is vastly unique depending on the type of rental. For example, Bed & Breakfasts and self-catering units within a resort typically offer separate rooms but shared accommodations. Other homes have multiple apartments and are geared for larger groups and may be rented per unit or as a whole.

Travelers not only need to know how much your property costs to lease, but also how your property typically rents. The tips below will help to create a comprehensible rate structure for even the most inexperienced renters.

 - Determine your property type. Some owners/managers set a standard rate per booking while others charge per guest.  A unit with multiple apartments/accommodations can often be rented individually or as a whole, depending on the season, group size, and availability.  Your rates should easily convey those renting options.

 - Create a clear and concise rate table. Give the exact dates of your high and low season and the corresponding rates. Make sure that you do not use ranges or averages but be careful not to make your rates too restrictive either. Include any specialty rates (such as per guest fees) or intermittent spikes in rates for holidays or unique events.

 - Be cognizant of your renters and of their preferred payment methods. Knowing your typical renter and their preference for payment can make or break a booking. If your property is geared for families with children it may be easier to pay for their vacation in installments. Whereas a group of couples renting high-end property will very likely be able to reserve the home with a 50% deposit upfront.

 - List any additional charges, costs, and fees upfront. If you charge for taxes, cleaning fees, or other costs in addition to your rental rates be sure to include them on your advertisement or guest’s will assume they are only paying the standard nightly, weekly, or monthly rate.  Payment transaction fees can be upwards of 3% through online booking platforms such as PayPal so it’s important to be transparent.

If your property has a unique amenity or special selling point that sets your home apart from competitors (such as access to a  boat or golf course), then it’s okay to create an up-sell or ‘add-on’ to your current rates.  You may also want to consider posting your ‘add-on’ as part of a discounted offer, perk, or freebie when running a special.

5.  How can advertising special offers and discounts successfully incentivize a renter?

Lowering rental rates is common mistake when bookings are lacking. Simply lowering your rates can compromise the value of your home, but advertising a special can easily help increase bookings without having to permanently restructure costs.

Running a discounted rate is most appropriate for securing last minute bookings, filling a previous cancellation, or renting during the off season.  To create an irresistible offer, custom tailor the suggested discounts below:

 - Create urgency with an expiration date.  Don’t miss out offer ends soon! Setting your offer to expire a few weeks from its posting date creates urgency and prevents travelers from procrastinating on a booking.

 - Free night with qualifying stay.  Book 6 nights, get one free! Create an offer where if your guests book a certain number of nights, they get an additional one for free. You can set the minimum number of nights they are required to book depending on seasonality or your property’s availability.

 - Discounted rates. Take 20% Off Stay! Incentivize potential guests by offering a percentage off the total rental cost. You can decide if you want to have a minimum night stay to qualify for the discount, or run it for any booking within a specific time frame.

 - Perks and Freebies. Free Lift Tickets! Provide your guests with a gift or a give-away for booking your home. If your home is primarily rented with the expectation that your guests will likely be skiing, offer them a few free ski passes.

Accurately pricing your rental rates is the easiest way to increase your ROI.  Remember, rental rates can be adjusted as the market varies or even as your availability changes.

Don’t forget, when you change your rates you, must update them on any posted listing (both online and print), but that’s a lesson for another day. Until next time, happy bookings.

Why Your Vacation Rental Needs a Name

Guest post by: Sarah Brubaker of WebChalet.com

I recently received this email from a friend: “I found the perfect vacation rental for our Bahamas trip. Available September 10-18. The house is on FlipKey (#506635) called ‘Sunset House’ and sleeps 10. Check out the photos and your calendars. Who’s in?”

When I received the email, the first thing that stood out to me is that the friend not only included the FlipKey listing number but also called the vacation rental by its name “Sunset House.” I realized that the owner of “Sunset House” is actually a WebChalet client because I recognized the name of the vacation home.

Create a Brand for your Vacation Rental

A name is a way to establish an identity for your vacation rental, build a brand and help generate word of mouth marketing. A name is also a way for guests to remember your rental. I can guarantee you that when someone asks me where I stayed in the Bahamas a year from now, I am not going to remember a FlipKey number but there is a good chance that I will remember the name “Sunset House” (and associate it with cocktail house and the amazing view at sunset). With an easy-to-remember name, you can also increase your word of mouth referrals. Word of mouth – recommendations made by friends, co-workers, or neighbors you know and trust – is the most effective and cost-effective way to win new guests. You cannot create this word of mouth buzz when your past guests don’t have a brand name to share.

Show Up in Search Results

A second reason to name your vacation rental is that it is highly likely that guests will type your vacation rental name into their search engine. In fact, a recent vacation rental marketing survey found 74% of people looking for vacation rentals would definitely “Google” the name of the property or the owner outside the listing environment. Today guests are doing their own research before booking. Let’s say you gave your vacation rental a generic name like “Bahamas Vacation Rental.” In addition to not being memorable, it is very difficult to optimize your listing or your personal vacation rental website for this search as you will be buried below many other websites. Now type the phrase “Sunset House in the Bahamas” into Google.com. What shows up? The Sunset House’s FlipKey listing, VRBO listing, and the owner’s personal website.

Importance of a Vacation Rental Website

Because users may type your vacation rental name directly into Google or Bing, you should not only include your vacation rental name on all your listings, but also optimize your personal website for the keywords as well. You can expect users to research your brand online and this is a way to take control of your brand image. Guests will look to see where else the house is listed. Are there other reviews on other listing websites? If you have a professional vacation rental website design, you can establish a brand and instantly impress your guests. A user doing her due diligence can now find more information about the vacation home and local area and is more likely to book.

How to Name your Vacation Home

The vacation rental name can be whimsical, but most importantly, it needs to be memorable so it is top of mind when a guest is choosing which vacation rental to book. If your vacation rental has a special feature or attribute, you could tie this into the name. A great name will help set you apart from your competition and help you create a brand that past and future guests can identify with. As for me, I am already daydreaming about sunset hour at the “Sunset House.”

Sarah Brubaker is Co-Founder of WebChalet.com, a vacation rental software company making it easy for owners and managers to book travelers directly with their own professional website. Starting with a variety of vacation rental website templates, owners and professionals can create their own professional website with availability calendars, online payment processing, and a suite of marketing tools built into the software.