Ideas that Help you Succeed
Blog (noun) blawg
: a collection of experiences, observations and opinions to help the vacation rental industry
: a collection of experiences, observations and opinions to help the vacation rental industry
Seasonality has been a major consideration for the travel industry since the very beginning. Leisure travel is tightly connected to several factors, such as: The seasons themselves
What you consider “typical” seasonality is a function of your own experiences and the peculiarities of the area. In the U.S., for example, we’re used to the school year running from August/September to May/June with a month or so off over the Holidays. Someone in another country, especially in the Southern Hemisphere or where there is year-round schooling, will have a different perception.
If you’re reading this, your peak and high seasons are probably summer and/or winter. Apart from lending themselves to popular activities, the weather tends to be more predictable. Holidays, of course, are seasons in themselves.
Fall and spring are usually considered “off” or “low” seasons, with “shoulder” seasons leading just into or just out of the high, or peak seasons. “High” and “low” in these cases refer to demand.
Some markets have six, or ten, or more distinct “seasons.” It all depends.
When adjusting to shifts in seasonal demand, the easiest and most obvious lever to pull is price. But there is a great deal more to seasonal strategy, and this article will explore some of the other considerations for optimizing revenue regardless of the season.
Seasonality offers a prime example of revenue management. During peak season, it’s all you can do to “mind the store.” Low and shoulder seasons give you the room you need to plan ahead.
However, this view ignores a critical factor: You. After a long peak season, the last thing many property managers want to do is immediately launch into planning and forecasting. In that situation, it’s easy to just stick with the same seasonal adjustments you’ve always made.
“Same thing we did last year” might be a plan, but it’s not strategic.
First, it assumes all the same variables — market conditions, competitive landscape, infrastructure, etc. These are always changing. Second, and most important, it assumes your competitors are being equally passive.
Fortunately, there’s a good deal more to seasonal strategy than just price. As the old saying goes, an ounce of prevention is worth a pound of cure.
Unfortunately, we can’t talk about cancellation policies without talking about COVID-19.
With ever-changing restrictions and guidance around the pandemic, the market is demanding lenient policies. Free cancellations are becoming the norm, and that’s certainly where the OTA channels headed from the very start. This is convenient for travelers but a dicey scenario for both the channels and, for short-term rentals, owners.
The takeaway here is that generous cancellation policies are likely to be the norm for quite some time.
Pandemic conditions aside, cancellation policy can and should be reviewed on an annual basis.
High season is usually marked by tighter cancellation policies, which define:
A good cancellation policy keeps demand, supply, revenue, and guest expectations roughly in balance. In the end, it’s there to protect your bottom line and qualify prospective guests. Everyone uses them, and guests know to seek them out.
Cancellation policies that are too strict for the season are like insurance that your guests “pay,” even if the only “cost” to them is worry or inconvenience. At worst, they come off as thinly veiled threats.
A few years back, Sundance Mountain Resort was troubled by its flagging conversion rates. They analyzed their KPI data (1:36 in the video) and learned the No. 1 reason for both missed bookings and customer dissatisfaction was their cancellation policy, which many guests felt was overly strict.
At the time the policy was implemented, it aligned favorably with the competitive landscape. But a few years of inattention was enough to shuffle them lower in the deck and impact their conversions.
Now would be a great time to review your cancellation policy and ensure that:
During low seasons, a generous cancellation policy can actually help set you apart by making guests more comfortable. Consider this during periods of unusually low demand, like, say, a global pandemic. Many PMs moved to free cancellations this past year, and it might be tough to walk that back.
No seasonal strategy has stood the test of time like promotions. “Promote” means to move up or put out in front, but what you’re really doing is simply adding value.
Adding value serves one of two purposes: To goose demand or, in some cases, to encourage a particular choice. OTAs constantly run promotions, but ignore those opportunities at your peril because guests have been conditioned to look for them.
Overall, participating in channel campaigns is better than simply discounting. Not only are guests watching for those tags, but the channels spend millions promoting them. This is a key value-add funded in part from the fees you pay to the OTAs, so make the most of it.
During low or shoulder season, promotions like discounts or package deals draw people in by offering more bang for the buck. It can be as simple as a free bottle of wine with every booking or as complex as a “Lovers Getaway Package.”
If your occupancy plummets during low season, a creative and well-advertised promotion can yield great results.
One strategy is to combine elements of your own offering into one compelling package, like the aforementioned Lovers Getaway or Fourth Night Free. Free upgrades and food deals like free apps or drinks are classic examples you can implement easily.
But chances are, your low season is also low for area businesses or services who might be open to a combined offer like a free beer tasting experience, local restaurant vouchers, or a sled-dog tour. Combining local flavor with a stay for one low price promotion can be very effective for guests in need of a quick getaway.
How creative you get with promos depends on what the competition is doing. If they’re not running many at all, a simple “fourth night free” or discounted tickets might be enough. The key is to know and be open to trying new ideas. As Dilbert said about marketing, it’s mostly liquor and guessing.
Flexible rate plans
This is what we call “pulling the price lever,” a.k.a. seasonal rates. Anyone who takes this business seriously already knows that you push rates as high as possible during high season and discounted rates during off and shoulder seasons.
Maybe that’s all it takes to get heads in beds and keep the bottom line healthy. But what if a more dynamic pricing strategy could boost your margins even higher?
Dynamic pricing is critical for revenue management, and here at Lexicon, that’s kind of our thing. Our tools can constantly monitor competitor pricing and warn you if you’re priced too high or low. Effectively, this allows you to adjust even for the “micro seasons” that take shape throughout the year, capturing those little extra bits of revenue that really add up.
If the thought of adjusting your rates more than three or four times per year gives you hives, consider building a comp set to simplify the task. Then, instead of poring over the OTAs to see what the outfit down the road is doing, you just dedicate fifteen minutes per day to check in on that handful of properties.
VRBO has a good post about this with suggested increases and decreases.
Mobile devices have opened up a world of possibilities for seasonal promotion. Assuming your customer database includes mobile phone numbers, for example, any number of services can make it super easy to push out little flash sales or special offers to past guests via text message (assuming they’ve opted in, of course).
Social media, which lends itself to mobile, is another great way to either connect directly to users of that platform or simply to post (or advertise) a current or upcoming promo. If you actively use social media as part of your outreach, remember that your prospects are probably on the go, so keep your posts short and sweet, ideally with great photography.
The “low consideration” nature of social media promotion lends itself to impulse buying. Posting or advertising a limited-time offer, e.g. “Act fast — offer ends at midnight!” can be a great way to spur immediate bookings. And if it’s a direct booking, so much the better.
Minimum length of stay (MLOS)
As Jean Francois Nourier, formerly of REVPAR GURU, correctly argued in HospitalityNet, the internet and OTAs have rendered this “old school” method of controlling demand (and managing revenue) during peak times practically obsolete.
Using MLOS as a revenue management tool is a bad look. Effectively, it tells a potential guest that they’re on your schedule, not the other way around. It’s like saying, “I see here you want to spend three nights and a wad of your hard-earned money with us, but unfortunately, our minimum stay is four nights. Sorry.”
Not only do minimum stays rub guests the wrong way; they’re also much less effective than dynamic pricing. If demand is through the roof and you want to throttle it a bit, just bump your rates.
In the vacation-rental space, MLOS should only come into play for larger properties that are especially time-consuming and/or expensive to turn over. Guests paying $800/night for a house with a pool and hot tub, for example, will generally understand if you require four nights. The 2/2 condo with a view of the parking lot?
Not so much.
Post-pandemic seasonal strategies
Nobody knows what to expect from the summer of 2021 and beyond. VR has stayed comparatively strong through the pandemic, and with the pent-up demand we all know is out there, there are reasons to be very hopeful.
That said, we don’t have any precedent for the current market and buyer dynamics. Some travelers made out pretty well during the pandemic and are chomping at the bit to travel. Others have had a rough time or are leery about jumping back into their usual vacation plans right away.
Our best guess is that occupancy will be strong throughout 2021, and that pent-up demand will cause ADR to spike for early summer bookings. You’re probably seeing this already.
But the extent to which vaccinations enable increased leisure travel remains to be seen. It’s likely that COVID-19 will become endemic like the flu, but it’s too soon to predict how that will affect hospitality in the long term.
Point being, this is going to be a tough year in terms of planning. But since this (and possibly other) viruses are likely going to be a fact of life for years to come, we recommend filling the gaps in your record-keeping practices so you have accurate 2020 and 2021 data to guide you in the future.
With peak season just around the corner, now’s a great time to get your planning house in order. To recap:
Have a safe and busy 2021!