Last month, Christine Karpinski, Director of the Owner Community for HomeAway, held seminars for vacation rental owners throughout the country.  During her tour, one topic seemed to be on the forefront of everyone's minds--the topic of low rental rates. The following article is derived from the discussions and ideas that came from other vacation rental homeowners.  As the vacation rental industry grows and more vacation homeowners decide to put their homes up for rent on sites like HomeAway.com and VRBO.com, the urge to go into panic mode to keep up with the competition may be stronger now than ever. Your initial instinct might be to slash your prices. however, lowering your prices to stand out amongst the competition is the wrong strategy. Don't do it!

Avoid Price Wars

Once a few vacation rental owners in an area start to lower their rates, the rest may follow creating an all-out price war. Who does this help? Maybe the traveler-- but definitely not the owners.

If your property was worth $1500 a week last year, it is still worth $1500 this year-- maybe even a bit more to account for inflation. While it's appropriate to run a special here and there, there's a fine line between running a special during otherwise slow times and slashing your prices for the entire year.

Think about Perceived Value

Most travelers have a price or budget in mind when they look for a vacation home to rent. Let's say they have budgeted $1500 for a week. The vast majority are going to look for a place that rents for $1500 per week. They're not going to look for properties that rent for $1000 per week. It's all about perceived value. They perceive the property at $1000 per week as somehow inferior to the one that rents for $1500 per week.

If you find yourself in a market engaged in low-balling and price wars, stand your ground and keep your rates firm. It's all about psychology. Renters perusing the sites will wonder what is wrong with the ridiculously under-priced properties and will see your reasonably-priced property as the safe bet.

Give them what they are looking for, and more…

The travelers want the best property they can buy for their budgeted money.
Instead of lowering your rates, raise your standards—give your guests more value for their money. This could mean sprucing up your property with newer décor, adding a unique amenity or two, or even just offering exceptional customer service.

Your property is nice. You've put time and money into making it so. Amidst the frenzy to secure bookings, don't succumb to the panic and give your place away.  

How do you keep up with the competition without lowering your rates? "I'm always willing to negotiate within reason if it's not the busy season. My rule is:  Something is (WAY) better than nothing!" -Mary, Bald Head Island, NC "Buy an entertainment coupon book and leave it in the unit...let them use it. hundreds of dollars in savings at local places to eat..." - Sal, Ft. Myers, FL "I had people wanting deals in January...I told him I was always willing to negotiate but not this early in the season. I told him to check back later in the spring. I also broke the payments up into small payments for one eager renter instead of 2 payments and never had to lower my price. Everyone wins!" -Lindsay, Ocean Isle Beach, NC (VRBO #138235) "We offer a well-stocked kitchen complete with coffee, condiments, and spices so guests can save food costs. They always comment how much these extras are appreciated!" -Kay, Birch Bay Resort, Blaine, WA (VacationRentals.com #1837) "I responded to an inquiry the other day for a "Deal rate" by explaining to them that [renting by owner] is the reason we don't allow deals to be made on our condo. Our last rental/management company were always making deals with our renters without our permission but yet expected us to fit the bill when there were damages or theft issues in our condo. The deposits were not ever with-held from the renters where theft or damages occured. VRBO has allowed us to handle our own deposits and our own rates that are reasonable and fair and do not require deals to be made. I told the potential renter "Good Luck" and to call me again if I can assist them in the future." -Anita, Gulf Shores, AL (VRBO #196958) "I ask them what price they have budgeted." -Sallie, St. Simon's Island, GA (VRBO #14461) "Have something the others don't like safety items.  We have an emergency lighting back up good for 90 min run time,conicerge serivce free." -Troy, S. Lake Tahoe, CA (VRBO #8399) "For same day sales, I follow the philosophy that an empty room isn't worth anything. However I do want to get the most possible for it. I start by telling the customer the regular rate for the room, and then let them know that as it's a last minute booking we would reduce the rate by 10%. If they are quite hesitant or say that's more than they planned to spend I ask the guest what they wanted to spend. This is quite often more than I would have accepted, and I will let them know that if they decide to stay the next day the same rate will apply. This us often effective as people sometimes want to make sure they "like it" before committing for a longer stay. Especially if this is their first time staying at a vacation rental property, instead of a hotel." -Irene, Peachland, British Columbia (VRBO #220624)

Determining Monthly Rates for Your Vacation Rental Home A general formula you can use to determine monthly rental rates.   Determining the Target Renter for Your Vacation Rental By narrowing your focus, you can more effectively target your vacation rental ads.   Raising Your Rates: When and How Much? When and how much should you raise the rates of your vacation rental property for next year?   Creating a Top-Notch Marketing Plan for Your Vacation Rental Pointers for attracting more travelers, getting your financials in order, and determining your personal keys to success.

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