Property Management Blog

Dynamic Pricing for Short Term Rentals

Bob Preston - Friday, November 15, 2019
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The following blog post is a time-stamped, full transcript of Bob Preston’s interview of Marc Peckler, Senior Account Executive for Beyond Pricing. The episode was recorded November 14, 2019 and published on the Property Management Brainstorm Podcast. The audio version of this podcast can be found at this link of the North County Property Group website, as Episode 25- Pricing Your Short Term Rental: Property Management Brainstorm Show

Bob Preston:                     01:13                     Hey everyone. I've recently discovered a cool new service called Instacart, which saves you a trip to the market for groceries. We share this with our renters because they might be here on vacation, have a sick child at home or just take a work all day. Instacart connects you with personal shoppers in your area to shop and deliver groceries from your favorite stores and as fast as an hour. It's amazing. Follow the link in the show notes and get free delivery. If your first order is over, just $35. This also lets Instacart no, we sent you and helps support our show.

Bob Preston:                     01:47                     Welcome, welcome, welcome to the Property Management Brainstorm podcast. I'm Bob Preston, your host of the show, broadcasting from our studio at North County Property Group in Del Mar, California. On today's episode, we're going to venture into the world of short-term rentals. These are sometimes known as vacation rentals. We're talking about the same thing here and this type of rental property is typically furnished, set with all the amenities for someone to come in on vacation and have a stay in a cool property away from their home, likely on vacation or sometimes maybe in town for some kind of special event. Specifically. Today I'd like to talk about setting prices for short term rental units. This is pretty complicated and for homeowners who want to put their home up on Airbnb, or VRBO, this can be really confusing, largely due to the seasonal and sometimes special event fluctuations and the rental comparatives in that particular city or area. Our guests on the show today as an expert on this topic and is one of our partners here at North County Property Group, Marc Peckler from Beyond Pricing. Welcome Marc to Property Management brainstorm. 

Marc Peckler:                    02:48                     Thanks so much for having me. Great to be here. 

Bob Preston:                     02:52                     Yeah, so let's start Marc the episode with you just telling us about yourself and what Beyond Pricing is all about.

Marc Peckler:                    02:56                     Yeah, absolutely. So, I am a Senior Account Executive at BM and I lead our sales efforts in the Southwest and Southeast territories of the US. And Beyond Pricing, we're based in San Francisco and we are a dynamic pricing engine that provides nightly rates for vacation rentals. So similar to airlines and hotels, how over the last few decades they'll change their price on a daily basis based upon market fluctuations and supply and demand. We do the same type of thing for the vacation rental space.

Bob Preston:                    03:22                     That's interesting. I know the marketplace for short term rentals is changing rapidly and there are a lot of things impacting this. Right. Can you tell us a little bit about that? What's going on out there that is having such a big impact on the growth and the booming and all the changing dynamics of the short-term rental market?

Marc Peckler:                   03:37                     Absolutely. I think the biggest thing that we're seeing is that in addition to property management groups like North County Property Group and others that we work with, there's become a huge influx of individual Airbnb and VRBO owners who put their homes on the market in North Park without having a property management team managing that relationship. And so, because of that, the supply of units in all of the markets that we work in has gone up exponentially. And so, it's become a lot more difficult for our clients to price their units a much more competitive landscape than what we dealt with in the past.

Bob Preston:                    04:07                     Yeah, absolutely. I mean, we're seeing some other dynamic changes too, like the online travel agents. We're, we're calling them OTAs. We're noticing that just the way that people want to book their reservations has changed. I don't know if you agree with this, but for example, just the sharing economy, Uber, you know, things like this where you get on your cell phone and you can make something happen really quickly. It seems to have an impact on this market. Does that match kind of what you're, what you're seeing out there?

Marc Peckler:                   04:30                     Yeah, I think there's a lot of validity to that. You talked about the OTAs earlier, and I think it's becoming a lot more difficult to only post your listings on Airbnb and VRBO and expect that you're going to get the same type of play as someone who is also putting it on on FlipKey, on individual, you know, sites as well. And so, what we're seeing is that the competition has gone up tremendously across all markets. And the sharing economy certainly has a lot to do with that. 

Bob Preston:                    04:55                     Yeah, no, absolutely. And I think it's kind of an interesting transition into my next question because we're starting to see Airbnb ads on TV, right? Where they're putting ads on programming that's aimed at the consumer and they make it seem so glamorous and easy. But in reality, I mean it's kind of complicated for the typical person who just kind of wants to rent a room or wants to rent their place out. Right? And in terms of getting set up in the pricing.

Marc Peckler:                   05:18                     Very much so. So, one of the reasons why it becomes a lot more difficult is because these people, again, they want to put it on Airbnb and VRBO and that's usually where people will start. But there are so many other OTs to get your properties on and each of those may take a certain percentage of your revenue and there may need to be technical integrations that work in order for your rates to post all of those various places. So, with that comes quite a bit of difficulties that you just mentioned.

Bob Preston:                    05:43                     Yeah. And each of those sites, I mean right now we're talking about two Airbnb and VRBO, but if you, okay, expand that by 10. So, let's say you're trying to get out to 10 different sites, each of the sort of mechanical way that those listings are posted, all different on each of those sites. So, it actually is pretty complicated for the typical kind of average homeowner who wants to rent their North Park property themselves. So absolutely. Yeah. So that's one of the reasons why people come to us because we have relationships with companies like you guys. Hey. So one of the other challenges, and then I want to dive into pricing, but this kind of sets up that topic is when homeowners come to us and they ask, Hey, you know, we'd like you to manage our property. My neighbor down the street who I was talking to at the mailbox yesterday says he's killing it on VRBO and they're charging and blah blah blah, you know, some amount and you know, so this is where I want the pricing. He said, well, kind of talk is sort of cheap, right? And this is anecdotal pricing information that people are picking up or maybe they see their neighbors ad. Is that similar to what you hear from other people that you speak with in this business?

Marc Peckler:                   06:43                     It's very interesting that you bring that up Bob, because we have these discussions all the time with new clients who say, well, I know that my competitors down the street are charging this amount and so I should be able to expect, you know, X in return. And what often happens is they are not taking into consideration their own personal brand. They're not taking into consideration the marketing of the property, the pictures. There's so many other factors outside of price. And our methodology internally at Beyond Pricing is we don't necessarily care what your comp down the street is priced at. We care whether or not it's booked because all faculty, they don't take the time to look at the calendar. They just hear gossip and Hey, did you hear that? So, and so down the street. Yeah, exactly. And like the whole, yeah, we'll get into it of course with dynamic pricing, but the whole point is to understand what's happening in the market and fluctuate your price based upon what's going on around you. 

Bob Preston:                    07:33                     Okay, so let's dive into that. This is where you guys come in Beyond Pricing because you actually have the data or the data to back up what you're saying the pricing should be. So maybe you can just tell us about that. It's all based on analytics. Tell us how it works.

Marc Peckler:                   07:44                     Yeah, absolutely. So essentially, we are able to scrape the OTAs and get all of the publicly accessible listings around the world on Airbnb, VRBO/HomeAway, and Expedia. We will dedupe that list. And then what we do is we take the latitude and longitude of your actual property, take the 50 to 150 closest units to it and we're actually able to tell you for every single day over the last 365 days and the next 365 days what the market occupancy was within those 150 homes. So, we're able to really dive deep into what is the market occupancy and demand again for each of the previous 365 days and the next 365 days. And that ultimately helps us determine how we should be raising or lowering your rates off of those factors.

Bob Preston:                    08:29                     Okay, so based on that data. Then you guys are recommending, Hey, on this specific date next year, this is what your pricing should be on your property, right? That's correct. And you're comparing them to like properties. So, if you've got a four bedroom, three bath home with a pool, I mean you'd be looking for those similar types of properties, right?

Marc Peckler:                   08:45                     Absolutely. I mean the software itself will automate your pricing, but one of the things that we have internally is a team of revenue managers who've come over to us from the airline and hotel spaces. And so, they will actually look at our customers historical performance, specifically occupancy, average nightly rates, the average lead booking time. So how far in advance are people generally making their reservations per time of year? And we'll actually talk through what we think your rates should be, collaborate together on where we think that base price should start. And then over time we'll fluctuate that price up or down based upon the pacing of your units and how the market's behaving as a whole.

Bob Preston:                     09:19                     I see. So, there is someone setting a set of eyes on this, not just taking it from the numbers and I guess sort of giving the judgment of Hey, is this reasonable? Before you guys had before you guys recommend a set price?

Marc Peckler:                    09:31                     Oh absolutely. We are not a set it and forget it tool. And I make sure to tell all of my prospects and clients about that the best relationships that we have, our revenue managers make suggestions, but then our clients are proactive. Look at the data that we provide within the software and make changes on their own down the line.

Bob Preston:                     09:47                     Okay. So, for our listeners, I think this is defined as dynamic pricing. Right? Did I get that right? And to your point, there are industries that have been doing this for years. Hotels, airlines, how does it compare to, for example, like when you book an airline ticket, right? I mean maybe that's a good analogy, or you pick the analogy.

Marc Peckler:                   10:05                     Oh no, that's a great analogy. So, I mean, we've all been there where I'm originally from Chicago, I live in Los Angeles, but my wife and I were trying to get tickets home for Thanksgiving. And so, we look on the various airline websites on a Monday and then we look on a Thursday and the prices are typically different by maybe $10 to $20. And so, these industries, again, airlines and hotels to be specific, they've been doing this for a long time, or they will modify their prices day over day based upon the supply and demand that they see in the market. And so, we are just trying to take that same analogy and apply it to the vacation rental space because as you.

Bob Preston:                     10:36                     As inventory in a particular market becomes, I guess booked, right? The inventory technically goes down. So, you guys would actively be tracking that as you approached that particular date. Is that also built in?

Marc Peckler:                    10:49                     That's correct. And I think a good way to put this, Bob, is that a lot of the customers that we speak with or what we first speak to them before they become clients and we ask them how many pricing seasons they have. They generally say somewhere in the five to 10 range. So, they'll have a high amid a low season and then they'll adjust up for some holidays in North Park. That's how we used to do essentially. Exactly. But essentially what that means is that there may be a point during the year where you may have 60 consecutive days at the exact same rate on the home. And what we're saying is certainly Thursday through Saturday performs a lot better than Sunday through Wednesday, but on top of that, the second Tuesday of July historically performs better than the fourth Tuesday in July. And so, you should be pricing that Tuesday a little bit higher than that. So, it gets a lot more technical than just simply what is our price day by day. We're really looking at the market historically and being able to make suggestions, offer that information.

Bob Preston:                      11:37                     I see. Okay. That's really a good way to explain it. So, you're right. We used to have five seasons, winter, spring, summer, fall, and then the holidays. And that used to be how we set our things and it didn't necessarily take into account Labor Day or here, you're familiar with our community in Del Mar, California. We have the thoroughbred racing season, which lasts for about nine weeks. Right. So, your model has essentially 365 seasons because each day is treated as a separate occurrence. Is that correct?

Marc Peckler:                    12:06                     That's exactly right and so we then we'll do a rolling 365 so every evening we will put our pricing suggestions for the next 365 days into either your property management system or we also have direct integrations to Airbnb and VRBO. So, if you don't have a property management system, we can get our rates directly to those channels the way that they are.

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We're a professional property manager. You know, we're one of your clients. What about the average or the typical kind of do it yourself, homeowner? Can they use your product as well?

Marc Peckler:                    13:31                     Oh, absolutely and so just to give you, I guess an understanding numbers wise, we probably have about 325ish global clients that are property managers like yourself that work with us. We have of course, hundreds of properties. Yes, exactly. However, we have thousands of individual Airbnb and VRBO owners who use our software for maybe their one or two properties. So, we have a very different relationship with our, let's call them enterprise clients, which are property managers like yourself, but anybody can sign up for our services and utilize our software and data and manage the tool themselves as well.

Bob Preston:                     14:03                     Okay, terrific. So, one property, two properties, it doesn't really matter all the way up to a hundred properties like ourselves. Okay. Now, one of the things we have going for us is that we have a property management software system and that helps us do this sort of data translation, if you will, of all of our listing information out into the format. If I'm explaining this well, I hope I am, that is required by Airbnb, VRBO, all these different disparate sites in your tool, your pricing tool integrates into that system. How would that differ for somebody who is an individual North Park homeowner?

Marc Peckler:                    14:38                     Yeah, so somebody who's an individual homeowner, all they have to do is create an account on our website and then we have a button where you can click. I want to push to either Airbnb, VRBO or both, and we simply ask you to login with your Airbnb or credentials that allows us to hook up our system directly to your unit and then you would actually do the pricing within beyond pricing and then we would push those prices directly out to the various OTs that you'd like.

Bob Preston:                      15:02                     I see. But they would still have to have their own account established on Airbnb or VRBO or wherever their listing may be appearing. Is that right?

Marc Peckler:                    15:09                     Yeah, that's correct because that just allows us to pick up their property and then be able to push that data out to wherever they need it.

Bob Preston:                      15:15                     Okay. That's terrific. I mean, on this podcast, I like to pass on information that can be usable to our homeowners who are wanting to rent their properties themselves, which your tools perfect for, but I guess I also want to communicate that for those considering a property manager, we have a baseline property management software that does a lot of this automatically. So, a lot of our clientele find it well worth it that they have somebody like us who can put all the information on the home into one property management software. And I'm not talking about beyond pricing here. They are a kind of a bolt on or integrate with that software and then that software does all that sort of translation and automatically post to all these other sites. So just a little bit of a difference between doing it yourself or using a professional property manager. Okay. So, within your tool, I know from our experience the health of our listings is analyzed and that's based off the factors such as the neighborhoods, the seasonality, the local demand and more. So, tell us about kind of the health analysis of the listing.

Marc Peckler:                    16:07                     Absolutely. So, whenever you log into our system, the first thing that you'll see is a dashboard with all of your properties and each property will have three numbers associated with it. There is your occupancy percentage over the next 30 days, your occupancy percentage over the next 90 days and then a health score out of 100 that essentially lets you know how efficiently are you pacing. Now to your point, Bob, every market behaves a little bit differently. So, let's call Hawaii example one. Hawaii is the fly to market. So, they want 90 days out. They probably want to be about 60,70, 80% occupied because so many people book their vacations and have to fly out far in advance. However, a lot of other markets, if you're priced or if you're booked 75% out for the next 90 days, you are severely under pricing yourself because you're actually booking too quickly. So our health score system allows you to see which units are pacing the most efficiently, AKA those that you really don't have to worry about the price all that often versus those that may have lower health scores, maybe either pacing too fast or too slowly. And those are the ones that you want to pay closer attention to.

Bob Preston:                      17:06                     Okay. And for property managers or individual homeowners, if they say something like, or if they're thinking something like, Hey, this is a week in July where I always like to come, but if I can get this price for it, I'm willing to forgo that visit to my property and maybe it's 25-50% more. They can override your system, right? So, they can set the property value for whatever they want at a specific time.

Marc Peckler:                    17:30                     That's true. You can set the property for whatever you want at a specific time. You also have the ability to set pricing floors or minimums. So, if you don't ever want to take less than X on a certain night, you can actually set that seasonally as well. So, there's a lot of customizations that you can do in the case that, Hey, I'm open to getting a booking, but only if it's above X dollars.

Bob Preston:                      17:49                     Well, and you know this about us because you helped us get set up that we do have some owners who kind of take that attitude like, look, this pricing recommendation is great, but unless I can get X, then you know what? It's really not worth the wear and tear on my property. And so that's what I need and if I can't get it, you know, whatever. Right? There are some people who have that approach and then there are other people who are, no, no, I want to maximize my vacation rental property for maximum income. And those are different types of mentality, so we always have to take that into account with our particular owners. 

Marc Peckler:                    18:15                     Absolutely. That's one of the discovery questions I always ask is what's more important to you? Occupancy or high nightly rates. And then I also like to ask, you know, is it more important for you to acquire new listings or retain the ones that you have? So those are always two sides of the same coin questions. But it's interesting to see where people fall.

Bob Preston:                      18:31                     Right? And there is a spectrum on that. So, the thing I like about your pricing tool, Mark, is that it allows us to show that information to our clients to have that tough conversation. So if they've talked to somebody out at their mailbox on the street or you know, the block party or whatever, who is bragging about the pricing that they're getting on Airbnb and we can show them the actual, the actual pricing that has been pulled from the marketplace. Sometimes there's a big discrepancy in that level. So that's one thing I really like about your, I mean, do you find that to be useful with your other clients?

Marc Peckler:                    19:01                     Oh yeah. So when I talk to most people, Bob at the top, that before they start using our software, I always like to ask what type of stats and data are you providing to your owners when they come to you saying, Hey, why am I not getting this? Or I think I should be here. Besides the pricing points in terms of things that you can provide to your owners as data and just stats. One of the stories I always like to bring, I mentioned at the top that I handle a lot of territory in the Southeast. So, I work with a bunch of clients in Saint Simon's Island, Georgia, right between Savannah and Jackson. I want to go there. Oh, it's a beautiful part of the country. And I was talking to a prospective client and they said to me, look, I was at a town hall yesterday and one of my owners actually accosted me in the hallway saying, Hey, I think I should be getting 70% occupancy all year. What are you doing wrong? I may need to go somewhere else. How would you answer that question Mark? Well, again, because we can show you every day of the year what the market occupancy and near your homes are. We actually went to that person's home. We pulled up the market data and we saw that over the last 365 days, there was only one day all year that was above 70% occupancy in Saint Simon's Island. And that was the Friday night before the annual Georgia, Florida college football game. It was literally the only night of the entire year that was above 70% so as we've been talking about this having data points to be able to explain to your owners why you are making changes not only builds a lot of trust but it helps you retain those clients and acquire new ones.

Bob Preston:                      20:25                     It's a real proof point. I mean you're kind of calling them out that Hey I know you think this and I know that you’re getting your assumptions from somewhere and it could be that neighbor mailbox conversation could be that they're looking at other properties on VRBO or Airbnb, but here's the reality and that's always kind of a tough conversation. Like your person from Georgia, you got it. Tell us about the calendar integration. This is important as well.

Marc Peckler:                    20:48                     So I think the calendar is really important. We talked a little bit before about 30- and 90-day occupancy and I think it's really important to know what your short-term calendar looks like when you are looking to make decisions. One of the things that our tool allows you to do is automated last-minute discounting, which I know is a very manual process for a lot of property managers and individual homeowners. Absolutely. And so you know, what we give you the ability to do is essentially create a rule set that says, Hey look, 10 days out from checking if I'm still vacant, I want to automatically apply a 10% discount to whatever price Beyond Pricing is suggesting. And I want that 10% discount the hold from 10 days out up until three days out. And at that point I'll increase my discount from 10% to 25% so being aware of your calendar, how empty or how booked you are in the short term allows you to utilize our last-minute discounts. And as we talked about before, oftentimes if you don't have a flight to market like a Hawaii, you don't want to be 50% book 90 days out because you are giving to the pricing yourself and leave it exactly leaving a lot on the table. So being aware of your calendar. To your point, Bob, very, very important.

Bob Preston:                      21:50                     But that integrates also with what is happening on Airbnb and VRBO, right? So, your calendar function integrates with those calendars from those, those different sites so that everything's tied together.

Marc Peckler:                    22:00                     Correct. And so what we actually have the ability to do is show you what we call the nearby listings, where we can show you all of the homes on both Airbnb and VRBO that have the same amount of bedrooms as yours. And we can actually let you know over the next 30 and 90 days, what percentage are those units blocked off? What percentage are those books, what price are you charging over the next 30 and 90 days? So, it gives you real good insight into your competition. Again, as I mentioned at the top, we don't necessarily care about the North Park comps price we care about whether it's booked, but I think that information is still very, very powerful for any property manager or homeowners.

Bob Preston:                      22:34                     Absolutely. Hey, so I was poking around on your website this morning, which is fantastic. I think it's a really good representation of your company. And I noticed there was an online demo which I thought was pretty cool. Maybe just for our listeners who might want to go. By the way in the episode notes for this podcast, I'll give the Beyond Pricing link to their website, but I know there's a demo there and why don't you tell our listeners about that cause it's kind of cool. People may want to go try it.

Marc Peckler:                    23:00                     Yeah, it's actually very easy. So, if you go to beyond there will be a place where you can actually click to quote unquote try our demo. And what we allow you to do is we give you a bit of a step by step process in terms of what we are doing. Basically, Hey, we have pricing tools that can connect your property management system and price all of your individual listings across channels. We talk a little bit about a base price as well as that minimum floor price that we talked about. And then we give you the ability to preview a listing of yours so you can take any listing off of either Airbnb or VRBO that is your own. You can actually put it into our preview tool, and we'll give you the 30,000-foot level of some of that market data that we talked about that previous 365 and next 365 days in terms of occupancy. And you can also see where our prices would sit for every day of the year depending on what you choose your base price to be. So, it's really nice to get that high-level look at the tool and then obviously myself or one of my colleagues could do a more granular demo and connect to your PMs or to Airbnb or VRBO itself. 

Bob Preston:                      23:58                     That is really cool. Okay, so for all the listeners who are interested in this topic, I mean go try this, right? Because if nothing else it gives you a good eyeopener to like, Hey, am I spot on or am I off by, you know, by a factor and then my getting, am I charging too much or maybe am I charging too little and these specific times of the year. So that's really good tip and advice. So, Mark, this has been really fun. Great conversation. And in the interest of time though, I need to start wrapping up because we're about at that 30-minute mark. Any other comments or any other tips that you might want to provide as takeaways to our listeners?

Marc Peckler:                    24:22                     Yeah, you know, I'll give a tip that we've been talking to a lot of our clientele about recently. Oftentimes in busy season we find a lot of property managers that requires seven-night minimums Saturday to Saturday. I'm sure that happens in San Diego during July, but what we're finding is that more people are taking smaller and shorter vacations and so we often recommend that if you have the ability, and if you have a homeowner that is willing to take a three or four night minimum as opposed to a seven night minimum, you will ultimately book more nights and make more money. And especially if you're using a dynamic pricing tool where you can effectively price those weekdays differently than those weekends, you can make a boatload of money that you wouldn't have otherwise expected. So, I think the minimum stay requirement, having the ability to shorten it if you can really open up some bookings and make you some more money.

Bob Preston:                      25:06                     Okay, fantastic. That's really good tip and you talked about your website I'm going to put a link in our show episode notes as well, and that would be the best way to get a hold of Marc and his team. Hey, thank you for joining today. That's really good stuff and I thought it was a great episode, so hopefully you'll be proud of it too. I'd like to make a quick plug to leave a positive review for Property Management Brainstorm. It will make our day and pay it forward to encourage more great guests like Marc on the show. And that concludes today's show. Thank you to all of our listeners for joining Property Management Brainstorm podcast. Until next time, we'll be out in the field working for our clients to maximize their property value and rental income and maintain top tenant relations. And we'll see you next time.

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