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Length of Stay Discounts to Boost Short Term Rental Income Transcript
(00:04):
What’s up friends? Thanks for joining me on another episode of Vacation Rentals with John. So today I’m gonna do an episode on pricing. I’m going to do more episodes on pricing actually, because the last thing I want for you guys is to lose money and have vacancies. I want you to be booked to the gills. So today I’m going to talk about length of stay discounts. Why do we use these? Well, people travel for different reasons and we’re trying to price for as many customers as we can. We want to grab and keep guests. We do not want them to cancel on us. And as vacation rental owners, we have one door. So if we have one rental, we can’t spend as much money on ads because we don’t have the scale that larger brands and hotels do. So we have to get creative with our pricing strategy so we can cater to a larger audience.
(00:51):
Now, that’s where length of stay discounts can help us here. If we don’t use these discounts, we’re not going to be as competitive for many different types of states. So we might be competitive for short stays, but we’re definitely not going to be as competitive for long stays, and we’re going to lose out on some rental income there and that’s no good. So if we have longer bookings, the rule of thumb is to have a cheaper price. Price and profitability. Let’s think about this so longer, the rental period, cheaper the rate. It just makes sense. If you have your rental for $300 a night, it would make a 30 day month $9,000. That’s just way too much for most guests trying to book a month. Now, if you offered a biweekly rate of $3,000 or a monthly rate of $5,500, your weight more likely to ha be booked and have no vacancies.
(01:41):
Now, on the flip side, the odds that you’re going to actually be booked for 20 plus days at $300 a night, they’re slim to none. I’m not saying it’s never going to happen, but it’s really rare that someone’s going to pay full price when you’re booking such a long time period. If they’re staying for an extended period, they definitely are going to be looking for some sort of deal, and that’s going to reflect in how they search and book properties. Now, if you’re a beginner at this, what I recommend is use three day, four day, seven day, and 28 day discounts. They will work. You want more days booked with less total reservations when you’re in slow season. Wait, did you say less total reservations? Well, yes, that’s what I said. Why? Because slow season is slow for a reason and you’re not as likely to have three, four, or five bookings a month when you’re in September and you’re in a tourist market like Walt Disney World or Orlando, Florida.
(02:32):
So why not make those one or two bookings? You actually get longer stays. Well, here’s how we actually do that. So we’re gonna use these 3, 4, 7, and 28 day discounts. We want to be priced above market for a one night stay because if someone books for a one or two night stay, they’re actually blocking our ability in slow season to place a longer stay. So we want to be a little more expensive for that one night stay if we don’t want it, or just block out one night stays with the minimum. Although I’m not recommending doing that if you’re shooting for occupancy. And then we’re going to use multiple length of stay discounts, and this will allow you to crush it. Why? Because you’re gonna get that group going to see Taylor Swift’s concert. They’re just coming to the concert. They want to chill when they’re done, so they’re not gonna stay for a whole month, right?
(03:16):
And then ladies having a girls’ night or a girls’ weekend, you’re gonna get that group too. You’re also gonna get those snowbirds that want to stay for longer because you’re giving them a discount. What about traveling consultants who need the place for two or three weeks? You’ll win those two and so on and so on. Now, the logic here is it’s better to have a two or three week stay at a lower nightly rate booked than a vacant calendar. So let’s go over a couple of case studies, just two. I won’t take that long. Case study A, we have no length of state discounts here. We’re $250 a night. We get three bookings, one bookings for three nights, another for four nights, and finally one for five nights. We get $3,000 in rental revenue. It’s not horrible, but this is just covering the bills, if not a net loss.
(03:58):
We’re at about 40% occupancy here. Now let’s look at when we use length of stay discounts. This is case study B. We get two bookings. So we do get less bookings in case study A, but one of those bookings is a 10 day booking, slightly discounted with our length of stay discount. So we get $2,000 of rental income there, another 12 day booking discounted to 190 a night. We get 2280. So it’s $4,280 at 73% occupancy. It’s not the perfect scenario, but it’s way more attractive. Gross rental income, we give a little, we get a little. Now there’s no perfect scenario, right? But me personally, I want higher occupancy and overall high gross rental income. I’m okay with lowering rates. If it means net net, I am at a better net income year end. You can play around with the length of stay discounts, but here’s a suggestion.
(04:47):
Three day discount, 5% off, four day discount, 10% off seven day discount, one week, 15% off, 28 plus day discount, 25% off. Now your numbers can be whatever you want them to be. It’s your rental, it’s your choice during control. But the more attractive your length of stay discounts are, the better you will be received by future potential guest. So thanks for tuning in today, my friends. The next episode will be on outsourcing Without losing the Soul of Hospitality. I want to make learning short-term rentals easy and accessible for everyone. If you wanna support me on my quest, it will just take 20 seconds. If you can leave me a rating or review on Apple Podcasts or Spotify and subscribe, you’re helping me more than you know. Doing this helps promote the show to new listeners. So thank you so much for your support. It means more than you know, and it helps me create more of this content for you. Thanks a million, and until next time, friends, take care.
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