In the past couple of years, we’ve seen a significant boom in the vacation rental market here in Banderas Bay, resulting in a dramatic increase in the supply of available properties. While demand has risen thanks to improvements like the new highway connecting us to Guadalajara, it hasn’t quite kept pace with the surge in supply. As a result, many vacation rentals are experiencing lower occupancy rates than expected.
One of the most important decisions for vacation rental owners is setting the right nightly rate. It can be tempting to hold firm on higher rates, hoping to maintain an exclusive price point. However, a strategic reduction in your nightly rate can actually result in greater occupancy and, ultimately, higher total revenue.
Here’s a simple example to illustrate how this works:
Example A: Higher Rate, Lower Occupancy
- Average Nightly Rate (ANR): $350
- Nights Booked: 10 (33% occupancy rate)
- Total Revenue: $3,500
Example B: Lower Rate, Higher Occupancy
- Average Nightly Rate (ANR): $250
- Nights Booked: 22 (73% occupancy rate)
- Total Revenue: $5,500
In this scenario, lowering the price by $100 per night not only results in more bookings but increases the overall revenue by $2,000. This strategy works because guests are more likely to choose a competitively priced property, leading to more bookings and higher occupancy rates.
Key Takeaway
Finding the balance between nightly rate and occupancy is key to maximizing your rental’s success. A slight reduction in price can often lead to more bookings, which not only improves your revenue but can also boost positive guest reviews, ultimately enhancing your property’s long-term appeal.
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