The recent buzz on the meteoric rise and fall of Airbnb has been a hot topic among real estate investors. Sean Radkidvich took to Youtube today with an informative video. Sean was discussing Graham Stefan – another notable Youtuber well-versed in Real Estate!
AIRBNB BUST
He shared his views on this “Airbnb Bust” we’re currently experiencing. A Perfect Storm Of Circumstances Resulted In The “Airbnb Bust”.
Covid-19 Made People Stay At Home and, Landlords Feared Nonpayment From Their Tenants. Travelers Craved Escape That sparked a huge surge in short-term rentals. This wasn’t sustainable when the pandemic faded. This created what has been dubbed “the Airbnb bust”.
The short-term rental industry is seeing a major shift in the supply and demand for listings. Resulting from this, hosts are competing to get bookings by dramatically lowering prices.
REVENUE MANAGEMENT
One of the video’s key points is something I’ve believed in for years. If you want to succeed, you’ll need to upgrade your property pricing strategy. A next-level approach is the only way to make it in today’s competitive market. Revenue management offers a unique competitive advantage with a low entry point. Yet only a few understand it currently.
Hotels use Revenue Managers whose mission is to maximize occupancy and revenue! Contribution margins are used as a tool in achieving this goal, with the aim of having all rooms booked every night. These managers make sure they get the greatest bang for the buck out of their properties.
Maximizing revenue requires a well-balanced approach to hard costs soft costs and, occupancy. Hard Costs represent the bills you’ll pay regardless – think mortgage, cable bill, etc. Soft Costs are expenses needed to get guests checked in; such as cleaning, repairs and, electricity. Treat anything above the soft costs as profit. You have to pay the hard expenses anyway. However, you don’t want to give away the farm.
By using an occupancy-based approach you can be sure you’re not pricing yourself too low. You should be at 50% occupancy based on the average lead time to booking in your area. You book the other 50% at lower prices during the remaining time. If you are below 50% occupancy at your average lead time you’re priced too high. Vice versa if you’re over 50% you’re priced too low. That is a simple explanation. It is a bit more complicated than that. You’ll want to measure several occupancy values based on different times but, that is the gist of it.
Want to make the most money from your property? Then you need Occupancy-based Revenue Management. Automated pricing algorithms are a valuable tool – but they’re not enough. Plugging in software like Pricelabs or Wheelhouse is just one piece of the puzzle. It’s time to uplevel and ensure you get the maximum amount out of every day AND booking! The Short-term Rental Industry Is Still Far Behind The Hotels In Revenue Management Strategy.
CONCLUSION
The Short-term Rental Industry Is Facing An Oversupply Of Listings. This Is Leading To A Price War Or Commoditization Of Short-term Rentals. To Survive The Airbnb Bust Dynamic Pricing And Occupancy Revenue Management Are Critical.
You can watch the video for yourself below.
