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The Risks of Overpricing: Short and Long-Term Impacts

Joa Pascal profile pictureJoa PascalSep 4, 2024

Finding the Right Price for Your Property

Short-term rental prices are always changing—the price that worked a year or even a few months ago might not be the best price now.

In this dynamic market, adjusting your rates based on demand and availability is crucial. When demand is high, prices should rise; when it’s low, prices need to drop to attract guests. And as you attract more guests and fill up your calendar, prices should rise again. This ongoing adjustment is the essence of dynamic pricing.

Why Dynamic Pricing Matters

In the travel industry, dynamic pricing helps hotels, airlines, and short-term rentals maximize revenue by adapting to the market. It allows you to capitalize on peak periods with higher prices while still securing bookings during slower times with lower rates.

One of many reasons we like to continue driving booking activity in the low-demand periods is that we find more people to fall in love with your house so they can repeat booking at higher rates.

Unlike fixed pricing, which sets static rates regardless of demand fluctuations, dynamic pricing continuously recalibrates to strike the right balance between price and occupancy.

The Dangers of Overpricing

Overpricing a rental property can significantly impact your revenue. A high rate might seem appealing, but if it’s too high compared to similar properties, it can deter potential guests. This leads to vacant nights, accruing expenses like utilities and maintenance, and ultimately lost income.

Furthermore, once a guest sees a rate that feels overpriced relative to seasonality and demand, it’s extremely difficult to win them back and get them to take a second look. First impressions matter and pricing is no exception.

The key difference between a top-market Average Daily Rate (ADR) and overpricing is that the former aligns with what guests are willing to pay, while the latter does not.

Our goal is to maximize revenue by finding the market clear price (the maximum someone is willing to pay at that point in time for those particular dates) If your property isn't getting reservations despite having many potential guests visit, the issue likely lies with the price. High ADR is beneficial, but only if it doesn't come at the cost of lower occupancy.

Remember, the goal is to maximize overall revenue, not just ADR.

How Wander Ensures Optimal Pricing

At Wander, we use advanced dynamic pricing tools to adjust nightly rates in real time, ensuring your property is always in sync with market trends.

This technology helps us to:

  • Increase ADR: By charging higher prices during peak demand, dynamic pricing boosts your ADR by 5%-15% compared to static pricing.

  • Optimize Revenue Year-Round: We adjust rates according to seasonal demand, smoothing out fluctuations to maximize revenue across both high and low seasons.

  • Stay Competitive: We monitor competitor pricing to keep your listing aligned with local market rates, ensuring you don’t lose bookings to lower-priced properties.

  • Capture Last-Minute Demand: Dynamic pricing enables us to spot and respond to sudden spikes in demand, securing higher rates from last-minute bookings.

  • Maintain Occupancy: By lowering prices during slower periods, we can attract more bookings and prevent unsold nights, improving overall occupancy by 2%-3%.

How We Track Overpricing

We closely monitor key indicators such as cart abandonment and visits to your property page without conversion to detect any signs of overpricing. This allows us to make timely adjustments and ensure your property remains competitively priced.

In summary, finding the right nightly rate is crucial for maximizing your rental income. Overpricing not only risks lower occupancy but can also significantly impact your overall revenue. 

With Wander’s dynamic pricing tools, you can be confident that your property is always priced optimally to capture demand and maximize earnings.

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