Blog 17 of 98

Price Right - Lodging Newsletter May 31, 2020

By Wm, May
Published: 05/31/20 Topics: Covid-19 Virus, Dynamic Raes, Lodging Newsletter, Yield Management Comments: 0

Do these letters always sound like we are bragging?

Sorry, we are constantly innovating and redefining how to do far better management than anyone else. So, yes, I guess we want to crow about it every now and then.

As mentioned last month, we have been working for many hundreds of hours for over a year on version 3.0 of our Yield Management Software called "Strategic, Studied, Dynamic and Distributed" (S2D2).

Some of those giant carpet bagging national companies that try to manage vacation rentals from far away like to think they have good yield management - but they have a major hole in their knowledge. They are not local and don't have wide regional data.

But we do because we have been managing on a "Local, Personal and Global" basis. That means we advertise on every possible advertising website, far more than those giant companies.

We also operate local and regional websites to glean far more information, all of which results in the perfect rates. Super high in high season, modest in shoulder seasons, and lower in slow times.

Every property owner loves the idea of high rates. But getting the highest "possible" rate in every season adds greatly to the best net income for owners.

Yield management is far more complicated than can be imagined. So this letter is going to give you a glimpse to the hundreds of factors that go into the algorithm our data scientists use.

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Everyone has noticed how rates vary on airlines and big hotels. Plus, how the rate for a date in the future may go up and down before the date arrives.

I must admit, I liked it better when it was always $250 to fly to Hawaii on a plane where the entire back section was empty, so I could fold up the arm rests and lay down over four seats, take a nap, and wake up in paradise.

Unfortunately, the airlines were going broke until they began manipulating rates to encourage people to book early, or late and to fill every seat. Until Covid, every seat on every plane has been filled for decades.

Best of all, consumers have subconsciously accepted the idea that rates fluctuate. In fact, many seem to enjoy the game of searching for best rates. They willingly move to less desirable dates (such as midweek), which helps the property fill those dates.

Yield Management does not seem logical on its face. The algorithm does not need to know when the high season or holidays occur, because it looks forward to watch rates and occupancy to predict and set our rates when demand and occupancy is high. Likewise, it ratchets down rates when the market has too many nights available and when competitors are dropping rates.

But, of course, weekends are always more popular, more booked and consequently rates are higher. Same with holidays. The high seasons have the same kind of profile and the science pushes those rates through the roof.

National, regional, and local economic trends are considered. Comparable units ("comp sets") are continuously monitored. Inns, Resorts, and Hotel future booking statistics are computed. Amenities, resorts (if any), and neighborhoods contribute, sometimes more and sometimes less.

If there are small holes in the schedule, rates may be adjusted down to get them sold. But if there are openings when the market is tight, rates go up - sometimes dramatically. Bigger openings may be higher because they offer a wider range, or cheaper if the opening is too large.

When Covid arrived so unexpectedly, S2D2 told us rates were crashing. In areas where rentals continued, we won what bookings were to be had. Suddenly, S2D2 told us "Hey something is going on," just as we noticed guests returning. Then it said, "It's time to bump up rates." And then, "Bump them up again".

Not all markets have returned to normal, but in some markets rates have up to doubled and occupancy is higher than ever before. We noticed the corporate managers missed the trend. Their clients lost thousands of dollars, while we grabbed the market.

New vacation rental owners often ask "What will the rate be?" But today, no person sets the rate. In fact, the market sets the rate. Over millennia, in high school, middle school or earlier, we learned price has always been based solely on "Supply and Demand".

The Yield Management idea, which is so closely tied to intricate supply and demand fluctuations, is so obvious and now, with our help, it is being employed to help every vacation rental client we have make more money.

Author: Wm, May, Vortex Managers
Blog #: 0771 – 05/31/20
Sponsor: Vortex Organization – We train quality people to help run unique Inns, Resorts and Vacation Rental Management companies, in an industry that has been a webby net of technology combined with good old fashioned property, guest and owner services. – VortexManagers.com

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