Have you ever wondered how property management companies determine what nightly rates to set?
This is a bit of a guide to understanding it more!
Be sure to read our answers to common property management questions, as well.
Factors that impact rate
This list is the starting point, but how each is weighted can be different by company or by system.
The starting point for any property. What’s the upkeep, mortgage, taxes, insurance, utilities, rental company charges, and other items (such as HOA) and the bottom line?
Taking the monthly accrued costs and then dividing by 30 gives a ballpark estimate of a break-even point. But of course, no owner is renting to break even, they’re aiming to maximize profit while they aren’t using the property.
How many open units are typically available matters a great deal. This is supply-and-demand at its most basic: when it’s a peak season, there’s many more people trying to find a rental … and so you can charge more on a nightly basis. But in slower seasons, more properties may be available at any given time since less people are booking them up.
And of course, there’s competition across the island. So staying on top of the full market (including new listings or those now unavailable) is key.
The simplest measure … how many people can you comfortably host?
It’s more complex than this, of course – for instance, how nice and spacious are those bedrooms? Are you counting a bed that’s actually the pullout couch in the living room?
But the basic amount of available bedrooms and bathrooms, just like in real estate, is a key consideration for vacationers – and thus, the price you can offer.
What advantages does your property offer that similar options don’t? For example, if you offer a beach-side condominium with direct access from the back porch, that may give an advantage over another condo that requires a walk to an access point.
Advantages mean a higher price, while disadvantages lower what you can realistically charge.
- Do you have a well-maintained pool?
- Updated kitchen?
- Upscale bathroom(s) with modern designs?
- A “movie room” with surround sound and special lighting? (Hey, it happens…)
- Lack of traffic on the island?
- Convenience to sought-after places on Amelia Island?
The list goes on, but anything that sets your property apart from others makes it more attractive to more renters. That, in turn, allows for some higher nightly pricing.
This is a bit different than the supply-and-demand economics above. This is specific to your property.
If yours is new to the market, you’ll need a lower price to convince vacationers to take a chance on your property vs. something that’s more established and has a bevy of 5-star reviews. (Side note: having a property management company with an established local brand helps with this)
Occupancy rates also factor in. If your unit often gets long-term renters or usually doesn’t have time where it’s unoccupied, that signals a desirable property that’s resonating with the market … and so the price can move incrementally up.
But if there’s often a ton of open dates on the calendar, that may move it down a bit.
How Guest Cottage takes out the guesswork
With plenty of research, you can make some guesstimates on what the set for a price. But even in platforms that allow you to list (hi, VRBO and AirBnB, we see you) … their suggested price technology is known to be less than stellar.
And if you manage the listings yourself, of course, you’re on the hook for all of the communications, review requests, administrative paperwork … and with a need to stay on top of market trends, much less marketing your property.
Advantages with Guest Cottage:
- Unparalleled knowledge of the local market – our sister company, Summer House Realty, is a real estate agency!
- Boots on-the-ground locally. Nobody’s sitting in a corporate call center or HQ 50+ miles away. We’re right here in downtown Amelia Island.
- Upfront communication on rental rates and market conditions. It’s how we start the conversation, with a property assessment.
- White glove service. Whatever it is, it’s handled.
Intrigued to learn more? Get in touch!