STR Revenue FAQ: Daily Routines, Listing Fixes, and Pricing Wins

Welcome to today's episode. I am going to be answering the most common questions that we have received over the last few months. So if you have any questions about revenue management, you can always email me personally at jasper@freewyld.com and any questions you have around revenue management, feel free to send them over.

So I got six questions. Now some of these questions have been asked by multiple people, and some questions were a little bit different than the question that I'm covering. But from all the questions that we've gotten, I've narrowed everything down to about six. And so I want to cover these, and I think by covering these I will answer everybody's questions.

So I'm going to dive straight into it.

Question 1: What Pricing Tool Do You Recommend?

First of all, we still get this question a lot. This question was asked by Julian: what pricing tool do you recommend? We've talked about this a few times. There are three major tools out there that connect to most of the PMS systems: PriceLabs, Wheelhouse, and Beyond Pricing.

It's very rare that we get an operator that applies for our services that is not using one of these tools. Sometimes if they're managing more like hotels, they're on different systems, but most of the time they will be on one of these three pricing tools. And there's a few other ones out there. Very occasionally we see those. But the market leaders are Wheelhouse, PriceLabs and Beyond Pricing.

Now, I've personally used every single one of these tools. In 2014 when Beyond Pricing came out, I was very excited because I was manually pricing. That was the only option back then, and I had a whole model for my pricing that I could then throw in the garbage can. I think it was the summer of 2014, at least that's when I started using it. I was so excited. Immediately my revenue went up. I learned the lesson very early on that you have to use a pricing tool. A pricing tool is always going to beat your manual pricing because you can't replicate your manual pricing in a pricing tool.

It's like if we're mowing the grass and you're using a scissor and I have a machine, but I also have a scissor, then I am at least going to do it as good as you because I could still use the scissor, but if I'm using the machine, then I'm going to be doing it faster, right? So that's kind of what a pricing tool is too.

You can still manage the pricing like you would do in a manual fashion, but you have all these tools now that you can use like dynamic minimum stay settings, you can automatically have last minute pricing factors that lower the price every single day by a little bit. There's so many tools that are now at your disposal that will help you not only increase your revenue, but also save time as well.

So I definitely think everybody should be using a pricing tool. Not everybody is. We still get applications coming in from companies that are not using a pricing tool. Those are generally companies that have been doing this for a long time, and they just had a system 20 years ago, and they're still using it.

So what pricing tool do we recommend? Well, if you listen to this podcast, you know that our preference is PriceLabs. Why is PriceLabs our preference? First of all, the user interface. We just find it very easy to use. It's very easy to understand the data with the different graphs and the layout of the tool.

I find it more difficult in Beyond Pricing and Wheelhouse to get a good understanding of how we're pacing, what the competitive pricing looks like. All these factors—for us we just feel like it's easier to consume the information in PriceLabs. And then there's a lot of functionality.

PriceLabs is constantly coming out with new functionality. They're very innovative. They listen to feedback when we provide them feedback. They often implement it very fast. They've come out with so many new, different things. There's the booking report that's very useful. There's customized reporting. There are different functionalities on the neighborhood data graphs, pacing graphs—they're constantly innovating, coming up with new functionalities. We like the team. They're easy to communicate with. We have a good relationship with them. So yeah, we like PriceLabs.

It's not to say that Wheelhouse and Beyond Pricing are not good. Those tools work as well. You might have a preference in terms of the user interfaces—they're all different. I will say that I do believe that PriceLabs will probably have the best functionality. I would say PriceLabs and Wheelhouse also have a lot of functionality. Beyond Pricing I'd say has less functionality. It does have a nice interface though.

If you're the type of revenue manager who doesn't really want to get into the nitty gritty on everything and you just want something that's easy to use, Beyond Pricing could be a good option. If you're more nitty gritty and you really want to take advantage of all the different functionalities, then PriceLabs or Wheelhouse would be best.

I would say test them all out, see what you like best. We like PriceLabs, but again, it's not to say that the other tools aren't good.

Question 2: What's the Best Way to Get Better at Revenue Management?

Second question from Lena: what's the best way to get better at revenue management? How do I get better at revenue management? That's a question that we get quite a lot. People phrase those questions in different ways, but at the end of the day, it usually comes down to: hey, how do I get better at this?

There's no substitute for experience. So if you want to get better at revenue management, just like if you want to get good at tennis, what do you do? You practice every day. It's the same with revenue management. You just practice every day. What does that mean? Carve out 15 to 30 minutes a day in your calendar and spend it on revenue management. That's how you get good at it.

Number two is there's a lot of resources out there. There's a lot of free resources. This podcast is a great place to start. We've been talking about revenue management for a long time now. So if you listen to every single episode that we've done and implement all the lessons, then you're going to get 80% of it probably. So use this podcast as a free resource.

The different pricing tools have a lot of education as well, more around how to use the tool. But also, part of being good at revenue management is understanding the tools that you're using. Especially PriceLabs. There's a lot of education. There's a lot of trainings, there's a lot of webinars. There's all sorts of stuff. Their help section is great, so you can get pretty good at it by just practicing using all the free resources that are out there.

And then if you really want to take it to the next level, if you really want to dial everything in, then you can sign up for our Cashflow Mastery course. So if you're interested in that, that's our revenue management course that I personally created. If you're interested in that, feel free to reach out and then we'll make that available to you. You can find it on our website as well: FreewildFoundry.com.

Question 3: How Much Time Do I Need to Spend on My Revenue Management?

Next question is from Sophia: how much time do I need to spend on my revenue management? I have about 30 listings and I have a lot of other things to do. Pretty busy, but I don't want to ignore revenue management. But I'm not sure how much time is necessary. Right now I just look at it once a week. I change a little bit of the last minute pricing and for the most part, I just kind of let it run.

Yeah. Good question. Obviously, you can spend as much time as you want. There's an unlimited amount of time to spend because there's so many things to look at. There's so much data. There's so many factors to consider. You can spend unlimited time, but obviously there's a diminishing scale of returns when it comes to time spent versus revenue increase, meaning that if you spend zero time, and you go from 0 to 1 hour, that's going to have a big effect on your revenue from 0 to 1 hour a week. From 1 hour to 2 hours a week, it's also going to have a significant impact. But if you go from like 12 hours a week to 13 hours a week, it's not going to have as much of an impact, right? So obviously, the more time you spend, the less additional revenue you can expect.

But I would say for an average portfolio of say 30 units, I would say spend 15 to 30 minutes every single day. You have to do this every day, no matter how many listings you have. You have to look at it every day because number one, you can't miss any bookings. Every booking has information. Every booking can lead you to make a pricing decision, right? If you get a booking today for September next year and you realize, hey, there's an event going on, I need to increase my prices. If you didn't see that booking a couple days from now, your entire portfolio might be booked up if somebody books for a concert. We've seen this happen. Somebody books for a concert. If you don't look at it for a couple of days, you might be booked up. You might have missed out on a huge opportunity.

So you've got to look at this stuff every day. We always say at Freewyld, we say every booking, every day. Right? You have to look at every single booking that comes in every single day. That's the basis. So spend 15 to 30 minutes. You get a booking. You look at the booking. What's the booking window? How many days did people book? Where's the guest coming from? What are they doing? So much information, so much that you can learn from that. So I would say that's your daily process.

And sometimes you get two bookings, both last minute. It's not really much to learn. Maybe you only have to spend five minutes that day, but then the next day you get a bunch of bookings that are more interesting. You spend 30 minutes, right?

Now also, you want to spend a few hours on a weekly basis, and that time you want to use more for looking at the strategy. How are you pacing? How are you pacing this month? How are you pacing next month? How are you pacing for the summer? What listings got the most pickup? Do we need to make any changes to our base prices? Do we need any changes to the seasonality? Do we want to make changes to our OTA discounting strategy? Do we want to put discounts on Airbnb and Booking.com? There's so many different things there to consider that you want to spend at least a couple hours every single week.

And then I would say on a monthly basis, you want to spend maybe half a day or an entire day to just go through everything, go through the results over the last month. What changes do you want to make to your strategy? Educate yourself. Take some time to listen to this podcast. Listen to other resources, educate yourself.

So yeah, at a minimum, I would say 15 to 30 minutes a day, a few hours a week, and then probably half a day to a day every month. If your portfolio is larger than that, obviously the time goes up. And I'm talking about this is just to get the 80/20. We're spending much more time than this. But this is for the operators who have a lot of other things to do. They don't have a ton of time. This is the absolute minimum that I would recommend if you really want to squeeze all the juice out of the orange. You want to spend more time, right? You probably want to spend an hour or two hours a day.

Question 4: What Should I Be Doing on a Daily Basis?

Amara is asking this. What should I be doing on a daily basis? Well, I just kind of touched on it. Definitely make sure you look at every single booking, every day. We always update our dashboard, our performance dashboard. We import data from PriceLabs, put it into a dashboard so we can see exactly which units are pacing behind compared to last year, which units are pacing ahead. What are some potential red flags? Which units do we have to pay attention to? So those are things that we look at on a daily basis.

We also look at last minute pricing. So we look at the occupancy for the next week. Typically the weekends—a lot of markets are heavy weekend markets. So we'll look at the weekends. How are the weekends filling up. Do we need to make any last minute price changes? How's the market pacing? There's a lot that you can look at in order to determine if your last minute pricing is good.

And then, yeah, I mean, if you look at those three things on a daily basis—you review your performance of your units, you review the bookings that came in and you review occupancy for the next week or two—that's a pretty good basis to go off of, right?

And then oftentimes what happens is you get a booking. Let's say we get a booking for July, which is far out. So we look at the price. How is the price compared to last year. What does that do to our MPI for that unit? As we're looking at the booking, we're also looking at the overall pricing for the summer. So we raise it a little bit. Is the unit pacing well? Typically a booking is kind of a reason to look at a listing because something changed. You got a booking so something changed. So then you want to ask yourself the question: should I change anything because this booking came in, right? If it's a far out booking, oftentimes there's more reason to change things than when it's a last minute booking.

Question 5: How Do I Increase Revenue?

Question number five from Theo: how do I increase revenue? Now obviously that's a question we get a lot. How do I increase my revenue? Well, it's hard to answer that question of course, because I don't know your portfolio. I don't know your market. I don't know your strategy. I don't know anything. Right?

So but what I can tell you in general is the most important things to look at. And the best way to increase your revenue is number one, like I mentioned, spend time every single day on it. But number two is there's three categories where we see typically the biggest opportunity for revenue increases.

Number one is pacing. You have to really monitor your pacing. And when I say pacing what I mean is you have to compare your future occupancy with the occupancy in the market to see if you're ahead of the market, if you're behind the market in terms of occupancy. What season are you going into? You want to set MPI targets. You want to monitor that on a weekly basis. You want to monitor your pacing because pacing is the most important concept in revenue management. And so I'm not going to go too deep into that. I've done a lot of podcasts about pacing, so go back and listen to those podcasts where I talk about market penetration index, how to set targets, how to change prices based on your targets and your future occupancy. But pacing is the most important thing.

Number two is, I would say, minimum stay strategy is often a place where we can get a lot of extra revenue. Most operators are too restrictive, so typically loosening up your minimum stay profile is usually leading to more bookings. I mean, obviously there's a lot of nuances there. Again, I also did an episode on Minimum Stay Strategies. So if you're not clear on your minimum night stay strategy, go listen to that episode.

And then lastly, I would say OTA discounts. A lot of people are not utilizing discounts on Booking.com, discounts on Airbnb. Talking about length of stay, early bird. Booking.com has a ton of promotions. Just talking to my contact at Booking.com a couple weeks ago and he mentioned that a lot of operators, they onboard with Booking.com and then they don't get any traction because they don't know which of the discounts to apply.

And on Booking.com specifically, people are used to getting discounts. The people who use Booking.com as a platform, as a guest, they're used to getting discounts. And so if you're not offering any visible discounts—because you can lower the price in your pricing tool, but the guest is not going to know that they're getting a discount. So you have to apply these visible discounts, right, for the guest to understand that they're actually getting a good discount. So that's really important.

Outside of that, I'd say listing optimizations, especially on Airbnb, is huge. I have a client whose listings were not completely optimized, and all he did was he changed the titles and he changed at the top of the description—he added bullets of the major selling points and literally the next week, 70% of the bookings came from the couple listings where he made those changes. Listing optimization is extremely important. It's not necessarily—well, you can argue whether it's part of revenue management, but it's definitely going to impact your revenue. So you've got to optimize those, especially those Airbnb listings. Make sure you use all the different sections, have a complete listing, don't leave the captions out. Don't leave the where you sleep section out. Fill it all out. Everything in order to increase revenue.

And cancellation policies. We still see a lot of operators that apply for our services who have just a general firm, strict policy. It just doesn't really make sense in most markets. If you have large homes, like 4 or 5 bedrooms, in a seasonal market where the potential cost of a last minute cancellation is really big, then you could put those units on firm. But for the most part, 1 or 2 bedrooms, I wouldn't go strict or moderate. 3 bedrooms are kind of in the middle. 4 or 5 beds, you could be a little stricter. There's a new policy in Airbnb called Limited, so if you're on firm they're going to limit it. That will give you two weeks of protection. That's still reasonable time to rebook.

So yeah, I mean in general how do we increase revenue? Improve your strategy, improve your pricing strategy, make it easier for people to book, make it more attractive for people to book, improve your listings. Right? Those are really the major factors here.

Question 6: What MPI Should I Target in a Seasonal Market?

All right. Last question that I'm going to answer today is from Marcus and he's asking: I'm in a seasonal market. People have started booking for the summer. What MPI should I target?

Well, first of all, congrats that you're even asking this question. Most people don't even know what MPI is let alone setting a target and then let alone measuring their MPI compared to their target. So the fact that you're even thinking about that is a huge win.

So yeah, MPI stands for Market Penetration Index. I've done I've talked a lot about market penetration index on this podcast. It's my favorite KPI. It measures future occupancy compared to the capacity in the market.

Now as a general guideline, if you're going into a season, your MPI target is going to depend on what you expect the final occupancy in the market to be. If we're expecting final occupancy to be very low, like, let's say, 20, 30, 40%, you just want to get as many bookings as possible. So there's no limit. The perfect MPI is like a million, just being fully booked, right?

I mean right now, a lot of our listeners are probably coming out of the low season now. Like January, February is usually low season in a lot of markets and then March—getting out of that low season. If you're in a spring break market, then you could see that you could have a pretty good March, and then April might dip down a bit. But if you're going into low season and there's hardly any demand that you can get, just get as much as you can. So then there's no limit to the MPI.

If you're going into shoulder season, let's say you're expecting final occupancy to be around 50, 60%, 40, 50, 60%, then I would say you want to target around 150 between 150 and 200 MPI. Because if you follow that pacing, then you're going to end up with about one and a half to two times the market occupancy. So if it's like 40 and you end up with double, you end up at 80, which is good. But if it's 50-60, you probably want to pace around 150. So you end up with 75, 80%, maybe even a little bit higher, depending on your minimum prices. If your minimum prices are high, then you probably can't get these really high occupancy numbers.

But going into high season and that's really what Marcus is asking. People started booking for the summer. What MPI should I target? Yeah, it's always like in the beginning for the high season, early in the booking window, we often see the underpriced properties getting booked up first so that first 10 to 20% of market occupancy. I wouldn't worry if you're not participating in that. Typically people are just scooping up the underpriced properties. And if you're expecting final capacity in your market to be above 80, then you probably want to pace a little bit behind for that reason. So you want to pace probably like 70, 80, 90%. That's a good range for the high season.

And again, that's because early in the season, a lot of the underpriced properties will get booked first. And then also because the good inventory, the good product, the good listings, the high quality listings, those are going to run out. So you could still book at pretty good prices last minute even. And so therefore there's a case to price a little bit higher and pace a little bit behind because those couple bookings that you get at these really elevated prices can then get you some extra revenue, and you won't necessarily have to sacrifice a lot by having to book a little bit more last minute because you're pacing behind, because last minute you're still—you can usually still be able to get a pretty good price, right?

In high season, we don't have to drop our prices all the way to the minimum. We typically can get really pretty decent prices last minute. And when I say last minute, I don't mean like a day in advance or two days in advance. For high season, last minute is really more like a month out, especially with the larger units. You don't want to try and book a five bedroom within seven days or something. Right? So last minute really starts like a month out, six weeks out or something is what I would consider last minute for those seasonal summer markets. But yeah, you can still book at reasonable prices a couple weeks out, 3 or 4 weeks out. You still get a premium price when it's high season just because there's not a lot available. Right?

So I wouldn't worry. If you're looking at your summer pacing now and you're seeing like, hey, my market penetration index is like 20, 30, 40, 50%, as long as the market is still below let's say 20%, most of that is just underpriced properties that are getting booked up.

Wrap Up

So with that said, that was the last question for today. So I appreciate everybody submitting their questions. Yeah. Keep sending them over. Jasper@Freewyld.com. I read every single email. I don't always respond to the email, but I will cover the questions on the podcast. So I appreciate you guys sending the questions. Let me know if there's anything else you want to learn about.

If you want us to manage your revenue, of course you can go to FreewildFoundry.com and we'll create a free Revenue Report for you. And then we'll give you some guidance on where we think the biggest opportunities are for you to increase your revenue. And we'll also let you know if we think that it's a win-win for us to work together. We'll let you know what that would look like as well.

So thank you for listening. We'll see you next time.