What is a dynamic pricing tool?
Dynamic pricing tools can help you generate additional revenue by optimising your overnight rates – and they take time away from you by automating the process of pricing.
You can enter constraints such as minimum rates and minimum length of stay to ensure these recommendations are in line with your overall business objectives. You can also override the recommended rates at any time.
By constantly monitoring market activity, a dynamic pricing tool automatically adjusts your rates to stay competitive. For example, if similar properties lower their rates on a certain date, the dynamic pricing tool will lower your rates accordingly. If availability in your market decreases, the dynamic pricing tool can increase your rates to take advantage of the increased demand.
In other words, dynamic pricing is the frequent review and change of overnight rates and it is absolutely essential to any revenue management strategy for holiday rentals. Revenue management seeks to maximise revenue for a limited and perishable resource (booked rental nights) through a combination of marketing, restrictions and pricing.
Any revenue management programme must adapt to changing market conditions and internal performance. Any dynamic pricing tool should allow property managers to do just that.
Why you should be using dynamic prices?
Regardless of whether you rent out a guest room or manage a portfolio of rental properties, for most people rental marketplaces like Airbnb offer flexibility and income potential.
Many hosts have realised that you can maximise your income potential by changing your rental rates to hit the sweet spot where demand meets availability. The problem is that rental markets are fluid and volatile. Plus, prices can crash – or skyrocket – at any time.
If you try to keep track yourself, you always feel like you are one step behind. This is where dynamic pricing tools like PriceLabs, Wheelhouse, Beyond (former Beyond Pricing), Airbnb and others come in. These dynamic pricing tools have come onto the market in the last few years. They are becoming more sophisticated and better at predicting the best prices for property rentals.
Some of the tools may seem a bit difficult. But just because it’s difficult is no excuse to ignore it. Some case studies have shown that implementing dynamic pricing can increase revenue by up to 40%. There is simply too much money left on the table if you are not using dynamic pricing.
Which tools are available and connected to Smoobu?
PriceLabs is an innovative and easy-to-use revenue management tool for the holiday and short-term rental industry. A revenue management solution for holiday and short-term rentals to automate price and minimum stay updates in your PMS or Channel Manager (and from there to your booking portals – OTAs – and your personal website / booking engine).
A data-driven approach, automation rules and customisations to manage prices and stay restrictions help holiday renters increase revenue while saving hours. PriceLabs has a strong focus on allowing users to create their own rules, making it more independent of market data.
This is also the reason why PriceLabs is the only tool that can be used in any location, even those where there is little market data.
Watch our Webinar with PriceLabs here
Wheelhouse is a revenue management tool built by a team of PhD data scientists and revenue management veterans. The Wheelhouse Pricing Engine analyses over 10 billion data points every night in order to optimise your pricing based on real-time market demand.
Wheelhouse’s recommendations are based on historical booking performance, real-time market activity, seasonal trends and local demand. Wheelhouse updates your rates every night to ensure you are always priced to earn more in high season and book more in low season.
Wheelhouse provides data-driven recommendations for each setting based on an analysis of your rental and the local market. Think of this as an approach to your pricing strategy. You can quickly and easily see what impact each setting will have on your pricing strategy – and make adjustments as needed.
Watch our Webinar with Wheelhouse here
Beyond (former Beyond Pricing)
Beyond is a revenue management tool founded by veterans from the airline and hospitality industry. Beyond offers the a solution that provides dynamic pricing through hyper-local analytics to maximise revenue growth.
Beyond has priced billions of dollars worth of bookings, operates in thousands of markets worldwide and integrates with all major OTAs and property management software systems.
To determine daily rates, Beyond analyses over a billion data points daily, taking into account factors that affect demand in your market such as seasonality, day of the week and local events. All prices fluctuate around the base price you set for your offer in Beyond. Their algorithm creates a competitive daily rate for up to 12 months into the future.
Watch our Webinar with Beyond here
Why you should connect through a PMS / Channel Manager
Pricing tools by themselves are great and they all can integrate with most of the major portals. However, neither Wheelhouse nor PriceLabs can currently integrate with VRBO. Also they never integrate with your own website.
Hence, you can create a much stronger impact hooking those tools up to a channel manager like Smoobu in order to make sure roll out your perfect pricing strategy to all your sales channels. Within most channel managers you will also be able to create markups based on your favourite portal and even more so for your website.
Price comparison: How much do these tools cost?
Beyond and Wheelhouse charge a commission on your booking revenues ranging between .75 and 1.5% based on the plan you book and the region you operate in.
In contrast PriceLabs charges a fixed fee starting at 9.99 USD per month. In the end pricing wise you are better off with Beyond or Wheelhouse if you want to have a low risk strategy and or your rentals are relatively low priced.
Similar to the Smoobu pricing we are friends of the PriceLabs approach as a flat per unit rate means you pay for the product but any incremental revenue brought in goes right to the portfolio’s bottom line with no additional commission.
But what about Airbnb’s “free” dynamic pricing tool?
Airbnb has an internal dynamic pricing tool. If you are using Airbnb only this tool might be a choice you may consider. In the end we cannot recommend to use it as it set the wrong incentive.
That is getting the property booked on Airbnb which means setting the price lower than you would find it on any other platform. In contrast all other tools are platform independent and will eventually assure a much higher margin.
Our personal recommendation
There is no perfect tool for everybody. In the end it depends on your needs and your properties. Whatever your decision, the dynamic pricing platform has to be right for you and your portfolio.
If you are not a Smoobu client yet and you would like to discuss which tool is best for you to integrate with Smoobu, send a comment to our pricing expert Hugo and ask him for his personal recommendation.
Please include a listing link and some info on your needs and wants. E.g. whether you would like to run your pricing super automatically or whether you would like to make changes and adapt the mechanisms with your own knowledge and preferences. Hugo has long been running his units in Portugal and has tried all of the platforms available in the market.