Expertly Boost Your Rental Income by Managing Minimum Nights

Short term rentals require unique revenue management practices that are not found with 12 month leases or at hotels. A short term rental is either 100% occupied or 0% occupied on any given night of the year. This is in contrast to how a hotel operates in which 40 out of 50 rooms might be booked that night, giving an occupancy of 80%. This makes short term rentals unique from a revenue management perspective. Managing rates requires managing minimum night lengths as well to maximize overall monthly revenue.

The Simple Side

Most solo owners or managers know the easiest minimum stay to require- 2 night stays minimum for weekends. And this captures the heart of the problem with revenue management of STRs: some guests will happily book a one night stay like a Friday or Saturday night, but by doing so, now the guest that searches for your listing next time for a 2 or 3 night stay won't be able to find or use your rental. So solo owners respond by requiring 2 night min stays on weekends- it's wise and the right move. But still the whole month needs to be managed. Another booking will likely come in for something like Monday to Thursday. 3 nights and now 2 nights left in the week unoccupied, but also the most difficult to sell. A rogue Sunday night and a rogue Thursday night with no opportunity to arrive before those days and no opportunity to stay longer. They can be filled, but they are harder to fill. The best way to to manage these is by discouraging them in the first place. There are several strategies to do this:

• Slight discount of days adjacent to a booking: If normally each night is $100/night Sunday to Thursday. Then dropping the Sunday to $80 and the Thursday to $80 will make your property more attractive to potential bookers. But you also don't want to reduce your overall weekly revenue potential if you're far out. So the most optimal outcome is to increase the price of the middle. Up the price of Monday and Wednesday to $120/night each. And Tuesday up to $130 or $140/night. This way if someone is searching for Sunday to Tuesday they pay a average of $100/night, even though one night was $80 and the other $120. But if someone is searching for Monday to Thursday they'd only book if they paid a full elevated rate of $120, 140, and 120. This is a highly effective way to discourage orphan nights. But it is also tedious to do manually as after every booking you need to manually readjust prices. Software is the obvious solution. Our firm will manage your properties with these sorts of rules using our software solutions and over time maximize revenue for you on a monthly basis.
  

• Higher cleaning fee: One concern people rightly have about the above strategy is that if you drop the Sunday and Thursday price to $80/night rather than the number you think it is worth ($100/night) you might get a bad type of guest who wants a cheap one night stay. This valid concern can be addressed by making sure the cleaning fee is set at a good rate. If it is $100, then the guest can only book if they pay $180 for the Sunday or Thursday night. So cleaning fees not being tied into the nightly rate but used as one off fees on a per stay basis serves as a strong defense against undercharging for any particular night.
  

• Multi day or week discounts: The above strategies balance pricing when there are booked nights creating a block in the calendar. Antoher way to avoid the problem created by short stay guests though in the first place is to get a long stay guest booked. This is where multi day or weekly discounts come into play. A manager should set a decently high price on a per night basis for their property. This makes it unlikely to get a one night booking. But if a guest wants to stay for 4 days or a week, then kick in an automatic discount that brings the overall price to a more reasonable level. Doing this now means you get a block of revenue at a reasonable rate and do not need to worry as much about nights getting orphaned.
  

• Review rent regularly: Finally seasonality and special events create demand spikes or troughs. A good manager will review these upcoming events and plan accordingly.

  
  

The above strategies come together to create the optimal revenue for a short term rental. But short term rental revenue management is more complex than both annual leases and hotel revenue management because of the unique fact that short term rentals can only ever be fully occupied or entirely vacant on a given night. Make sure to choose a manager that understands these challenges and has the appropriate solutions in place to manage them.