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Revenue Management: Start Now, or Regret Later

Kigo Product Updates

Discovering the true value of your properties.  

It’s always a pleasant feeling, having something that feels out of reach suddenly become possible. It makes the world seem that little bit smaller and that little bit more under your control. This is how property managers have been feeling since starting to use Revenue Management to help control the pricing of their properties. The analytical power of big business at their fingertips, driving occupancy up with a higher average nightly rate.


Once it seemed to be the reserve of global hotel brands and airlines, with rows and rows of computers and of staff all chipping away at data like miners at a wall of rock. They had the resources, the turnover and the volume of transactions to drag some sense from their sheafs of data. They could see patterns with supercomputers, they could forecast footfall and turnover using decades of previous statistics. They had the power to see below the surface and use big data to cement their position as the market leaders.


Vacation rental managers had to be content with a summer season and a winter season. High and low. Nothing much in between. But, things have changed.


The phone in your pocket is now more powerful than the computers that were first used in major hotel and airline revenue management, yet the principles remain the same. The playing field has been levelled and now every property manager and vacation rental business owner has the opportunity to benefit from Revenue Management. We’re talking about why every successful property manager is looking towards revenue management and how you can get started, too. You can even learn more about Kigo Revenue Management here, and you can download our free Ebook on revenue management here.


The first step is to understand your Average Night Value. This is your total revenue divided by your total available amount of nights. If you have any unbooked nights it is going to be lower than your nightly rate. This gives you a better idea of the current value of your properties. Then comes your occupancy rate. You should measure this for each property, certain areas and your entire business. This way you can see hotspots, and areas where you may need to adjust prices to get the right balance.


The next step is simple. The higher the occupancy rate gets for your properties, and the properties in your area – the higher you should make your price. The ultimate goal of revenue management is to increase both your Average Night Value and your Occupancy rate. You can set parameters to adjust your prices a certain amount based on your percentage of occupancy each month. For example, if your occupancy is over 50% more than 90 days in advance, increasing your price  20% seems about appropriate, right?


But, this will have to be based on trial and error to find your perfect system. Overpricing leads to underbooking, underpricing will lead to lost revenue. It’s a simple notion, but getting it right is a delicate balance. Customers can sense and resent a last minute price hike that juts out above the industry standard. They can also sniff a deal. Price your properties too low and you will sacrifice ANV for occupancy.


The ideal scenario is that your booking percentage grows gradually as time progresses. Whilst it might sound great, having your properties booked up early is actually bad for business. Here’s why:


You are limiting your potential. Your product is in demand, but you have not adapted to the demand and lost money. A sharp spike in booking is a clear sign you have undervalued your properties and is just as damaging for your bottom line as an unbooked night. Good revenue management allows a steady growth of occupancy, at the right price. Adjust prices gradually and in stages. Don’t wait until the last minute to make changes and don’t let low occupancy panic you into making more drastic price alterations. Test and measure the system you use to find the right balance.


Doing this for more than one property, more than one area and across multiple portals is the reason why vacation rental managers have been unable to apply these standards as widely as they would like. This is why so many have turned to an automated system that uses a tried and tested algorithm, adapting to demand in real time. It will update prices across portals for every property you have, meaning you can be sure of having every property priced at the most competitive levels, every single day.


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