How to convince owners to let you take shorter stays and dynamically manage rates.
Even after years of experience as well as hours spent attending conferences and webinars some PMs still feel intense anxiety when approaching an owner about giving up control over rates and the length of stay strategies for their vacation homes. The fear can be even greater when convincing a well-established owner with years of experience who is sure to have a doubting look and a list of reasons why this isn’t for them. You think, “I know this would be good for our company and the owner, but how do I convince them to allow me to practice revenue management?”
We all know the assumptions owners can make about how to earn income for their properties. But the reason why they need YOU as a property manager goes beyond your ability to coordinate a repair or to create a gorgeous website to collect bookings. Your industry expertise holds the real value and your knowledge of selling strategies can mean the difference between growth or stagnation. You’ve done your homework…so why is it so scary to approach the subject of dynamic pricing and length of stay strategies with homeowners?
Well for one, there is always the owner that already has their mind made up and not much short of a divine experience could convince them otherwise.
Next, what if they DO actually come up with an argument against it that you haven’t thought of? You risk looking and feeling foolish and eroding future credibility.
So how do you make the owners understand that this is something they WANT to do, not just something you want them to give up? And what are the things that you DON’T KNOW that could be lurking around the corner just waiting for you to say the wrong thing or make the wrong move?
First, approaching this topic without data or a clear understanding can mean disaster. NOT recommended! However, approaching this conversation from a data-driven and well-informed place can put you in the role of educator instead of someone who is trying to bring chaos into an otherwise understandable management strategy. So, the first thing a PM needs are reports that allow them to identify the opportunities of using revenue management techniques so they can confidently communicate the need for implementing these techniques to their owners. The goal is to show the owners how flexible and fluid strategies of revenue management can enable their property to achieve the highest overall income during high-demand periods as well as stay at the top of the market in productivity during low-demand periods.
Second, having a revenue manager on call never hurts…we’ve got you there! (Shameless plug!)
So, now that we know what information we need in hand before having this conversation with our owners, let’s look at a few real-life scenarios and how we can approach them in a way that builds owner confidence.
Scenario 1:
Market: Beach location with one peak season and two shoulder seasons. Low market demand during winter.
Goal: PM wants to implement taking shorter lengths of stay during times already identified in advance as difficult to fill. The PM also wants to decrease length of stay requirements for any properties with a 7-night minimum to a 3-night minimum during peak or shoulder seasons if they are still unbooked within two weeks of arrival.
Owner Objection: We’ve always done 7-night minimums for the past 20 years and never had a problem.
PM Approach:
PM can print a copy of an Occupancy Forecast Report for that property for the last 2 years and show how many times the property went unbooked. They can then demonstrate how utilizing revenue management techniques would result in higher sales. The PM suggests to move this property from a 3-night minimum to a 2-night minimum during the off season. This would allow the property to book more Fri/Sat night stays during these historically empty periods.
PM also shows how many unit nights went unsold during the peak season due to expiring week-long stays and multiples that by the average rate to get the value of the lost revenue. For example, if there were 30 unsold unit nights at $700 per night, that’s $21,000 in lost revenue. The PM shows the owner that filling more of those opportunities each summer would significantly benefit the owner.
Scenario 2:
Market: Four seasons southern mountain market with multiple peaks throughout the year.
Goal: The PM would like to open gaps of fewer than 4 nights to be available to sell through all booking channels.
Owner Objection: We want at least 4-night stays no matter when it is.
PM Approach:
PM can print a copy of an Occupancy Forecast Report for just that unit for the past 12 months and show how many gaps of 2-3 nights went unfilled multiplied by the ADR (average daily rate) for that property for the same period to show the owner the lost revenue potential for that property. For example, if the ADR is $700 and there were 15 gaps in the last 12 months, that’s $10,500 in lost revenue!
Coupon strategies can always be put into place for properties who want to offer discounts for a stay of 4 nights or more but still want the rate higher for anything shorter than the 4-night minimum to qualify for that lower rate. (Ask a RevMaxMD Revenue Manager how this is done!)
Scenario 3:
Market: Three seasons market (winter, summer, fall) with strong summer and winter demand and fair fall demand.
Goal: PM would like to dynamically manage rates based upon demand within the market.
Owner Objection: We expect to bring in $500 a night no matter when it is.
PM Approach:
PM explains that the market demand fluctuates throughout the year even if it is considered a “year-round destination”. The PM can provide general data on occupancies by week for the year so the owner can see when there are times that their property will be competing against more available properties in the market. PM already has a plan that identifies these low market demand times and the variance in rate that will be required to capture stays during those dates.
Feeling confident when approaching your owners about implementing revenue management techniques happens when you understand your data and can effectively communicate opportunities to owners. Data is your best tool when approaching these topics from an objective perspective. Even if you don’t get the buy-in from the owner right away, sending follow-up reports and industry trend articles is a helpful way to get them used to the idea that you are working for their benefit. You were brave enough to get this far in your business but you didn’t come this far to only come this far. Remember your value as a property manager cannot be easily replaced, and keep moving toward success. Owners will follow.
The team at RevMaxMD is proud work with many industry leading property management companies. Our programs focus not on an individual booking, but the long term growth of your business. We offer short-term, long-term and customized classes and support. Click here to schedule a free consultation.