FAQ: Setting Rates

    Q: I'm new to renting and have no idea how to decide what to charge. Where do I start?
    setting vacation rental rates A: The best place to start is on vacation rental listing sites like HomeAway.com, VRBO.com, and VacationRentals.com. Look at listings for properties similar to your vacation home and note how much the homeowners charge per night, per week, and per month and for which particular dates. Pay attention to what amenities the properties offer, as well as their proximity to tourist destinations. For example, if you own a two-bedroom vacation cabin in Big Sky, Montana, your rates should be similar to other two-bedroom cabin rentals in the area.

    Q: How do I set my rates if I'm the only vacation home for rent in my market?
    A: If you're the first vacation rental in your market, you may have to do a bit of research to set the right pricing strategy. First, figure out where travelers vacationing in your immediate market currently stay. Hotels? Motels? Bed and breakfasts? Find out how much these establishments charge nightly and determine the high-end and low-end of the market. Where does your home fall into the mix? Then, research properties in markets within a 3-4 hour radius of your home that attract the same types of travelers as your vacation market. For example, if you own a three bedroom cabin on a small lake that's perfect for fishing and swimming, look at the pricing of three bedroom cabins on nearby lakes.

    Q: What if my home isn't comparable to any of the other rentals in my area?
    A: If your home is one-of-a-kind, setting rates may be a bit more difficult. One tactic is to work backwards based on your property's value. Most homes bring in 5 to 15% of their value in rental revenue each year. Determine your property's projected rental revenue and then divide the figure by the number of weeks you think you can rent (look at the availability calendars of other rentals in your area as a guide) to get your average rental rate. Remember that this number is only an average: you should adjust your actual weekly rates based on your rental seasons (higher for peak weeks and lower during the slower season). Also, consider turning to a pro in your market: Many property managers have years of experience and may be able to guide your pricing strategy.

    Q: How much can I expect to make from rentals each year?
    A: It's hard to make a generalization that will apply to all homeowners and their homes. That being said, as a rule, vacation rental homes bring in 5 to 15% of the home's value in rental revenue each year. The exact percentage depends on your region and your level of effort. For example, a home valued at $300,000 will bring in anywhere from $15,000 to $45,000 in annual rental revenue.

    Q: Is it better to have one year-round rate or different rates for different seasons?
    A: For most markets, it makes sense to charge a different rate for different times of the year based on traveler demand. Setting specific rates for each of your market's rental seasons (peak, shoulder, off-season, etc.), as well as for major holiday weeks, will likely increase your overall occupancy and rental revenue.

    Q: Should I charge a different rate for weeknights versus weekend nights?

    A: Charging extra for weekend nights is common practice in markets that attract a lot of weekend bookings. Since traveler demand soars for weekend nights, you can likely charge a premium during the weekend and then a slightly lower rate for nights during the week. Be sure to clearly state which nights are categorized as weeknight and which you consider weekend nights (Friday and Saturday or Friday, Saturday, and Sunday) in your listings.

    Q: How do I determine monthly rates?
    A: Your monthly rates depends on the rental season. During the peak season, your monthly rate should be your weekly rate times four. Why give a discounts for weeks that will almost definitely book? In the shoulder or slower season, when you might only rent two to three weeks each month, charge the same for the month that you would for two full shoulder season weeks. And for low season months that may or may not rent at all, price the month the same as approximately two weeks of your off-season rate.

    Q: Should I raise my rates each year?
    A: As a rule, most owners raise their rates anywhere from 5 to 20% each year. However, external factors such as the economy, gas prices, or escalating insurance rates may drive rental rates up or down in a given year.

    Q: How much should I charge for a security deposit?
    A: The norm for security deposits is to charge either $200 or 10% of the rental amount, whichever is greater.

    Q: Do I ask for all of the money upfront or do I spread it out?
    A: Payment schedules vary from market to market and owner to owner.

    Sample Payment Schedule
    Upon booking: A reservation deposit of $200 or 10% of the rental amount. This amount is above and beyond the rental amount and turns into the security deposit.

    30 to 60 days prior to rental date: 50% of rental amount.

    14 to 30 days prior to rental date: Remaining 50% of rental amount.

    Regardless of the schedule you arrange with your guest, you should have all monies before sending directions to your home or key codes

    Q: When should I offer a discount?

    A: In general, you should only offer a discount to a traveler if you're uncertain that you'll book the nights or weeks otherwise. For example, during the off-season you may have a tougher time finding renters, so it makes sense to run a special to attract budget-savvy guests. Similarly, if you have an opening that's only a week away during the peak season, you may entertain offers that you wouldn't have considered a few weeks before.
      
    Q: Should I charge extra for utilities?

    A: In most U.S. markets, owners do not charge extra fees for utilities for bookings of less than 30 days. However, in parts of Europe this is quite common. Your best bet is to look at the other properties in your area on sites like VRBO.com to determine the norm for your market.

    Q: If I only rent for 30 days or more, should I still display nightly and weekly rates?
    A: Yes. Even if you're only renting to travelers for 30 days or more, you should still list rates by the night and the week, as well as by the month. When searching for accommodations, many travelers consider a variety of lodging options, all of which display rates differently. By listing your rates by the night, week, and month, you'll make it easier for the guest to compare your home to other options (and to see the value your home provides).

    Q: I'm not getting very many inquiries and bookings. Should I lower my rates?
    A: Before you jump the gun and lower your rates, first take a hard look at your listings. Do you photos showcase what your home offers? Are your descriptions thorough and well-written? Are your rates clear and easy to navigate? If you answered “no” to any of the above questions, you have some work to do. If you answered “yes” to all of the questions, then your problem could lie with your rates; though, not necessarily because they're too high. They could actually be too low, too vague, too confusing, or too restrictive.

    Q. What about "extra person" charges?
    Whether or not you charge by the guest is usually determined by the rental market in which your vacation rental property is located. For example, the first question a potential renter asks about my Tennessee cabins is: "What is the extra person charge?" In this area it is common for vacation rental owners and management companies to charge "extra person fees." The renter expects to pay per guest. In Florida, however, if you ever thought of adding an "extra person charge," guests might tell you to hit the road. They expect the vacation rental property to be priced with the maximum occupancy charges included.

    How do you know how many people really stay? Typically, you have no one doing a head count, since your guests (not the housekeepers) usually let themselves in. You have to try to trust your guests. Have there been ten people in your vacation rental property that sleeps only eight? You would be naive to think it's never happened, but it really should not matter as long as they take care of the vacation rental home. As an extra precautionary measure, you should have the maximum occupancy and extra person charges written into your rental contract.
    Learn more about using our Rates structure here.

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