How to Deal with Other Owners Undercutting Your Prices

    other vacation rental owners undercutting pricesLet’s say you have a 2-bedroom condo in a complex where the majority of units rent for $2500/week in the peak season. What if there are 5 or 10 owners with similar units in that complex who charge just $1500/week for the same dates? Wouldn’t that just make you crazy?

    Well, this is exactly the situation many vacation rental owners are facing. As if the slew of inquiries from bargain hunters during tough economic times wasn’t enough, many of us also have to deal with other owners undercutting our prices. In an ideal world, homeowners would work together, but we know that doesn't always happen. What are you supposed to do when your downstairs neighbor is charging half as much as you?

    If you’re not going to succumb to the bargain hunters, we don’t think you should succumb to your neighbors' ridiculous rates, either. Here’s what we suggest:

    Talk to them. If you know some of the owners in your area personally who have slashed their rates, you might want to try having constructive conversations. (However, we are certainly not advocating that you blindly call owners listed on all the sites where you advertise if you just happen to think their prices are too low.)

    Instead of going into attack mode and getting other owners on the defensive, you could share your rates with them. Explain that they may be doing themselves a disservice by drastically reducing prices, and you may also want to share your own booking history. Although some owners simply want to fill their calendars and be done with the booking season, others might appreciate your assistance.

    Note: Due to antitrust laws, there may be legal restrictions on your ability to take actions against other owners undercutting your prices. We encourage you to consult an attorney regarding your specific situation.

    Be confident in your prices. For the most part, travelers seek accommodations with a certain budget in mind. In actuality, the condo that is priced at $1500/week instead of $2500 might not even be your competition because your prospective renters would likely not even consider homes in that price range.

    Think of it this way: you want to go out for a nice dinner, and you’re craving lasagna. You know you can get lasagna at one of the nearby Italian franchises for a reasonable price, but you had your heart set on a nice evening out at an upscale local eatery. So even though you can get lasagna for less money, you don't think it will be as good and therefore don’t even consider the franchise restaurant.

    Similarly, renters with $2500/week budgets may not even peruse listings for $1500/week. If renters come across a condo that’s renting for significantly less, they might think something is wrong with it. Ultimately, you’re better off holding out for those renters with your price-point in mind.

    Be honest with prospective renters. So what happens when you have a potential booking, and the renters ask why your neighbor is priced so much lower? Instead of complaining about the other owner, you can put your new-found confidence to good use – although this next line is not for the faint-hearted! Simply tell your prospective guests that if price is their #1 concern, they should go ahead and book with your neighbor because your property may not be best for them.

    It might take you a while to build up the confidence in your booking patterns to feel comfortable passing on a reservation, but you’ll be thankful when you end up with renters who have no qualms about your price. (Note: if this was the off-season, you might treat that question a little differently.)

    Make sure you’re not the odd man out.
    It’s one thing to be confident in your prices, but it’s quite another to be charging $1000 more per week just because you have granite countertops. If you’ve priced yourself out of your market, you shouldn’t blame your lack of bookings on other owners’ low prices. If you’re priced higher than the majority of similar rentals in your area, you could be setting yourself up for failure. Do your research to make sure your rates are, in fact, comparable with similar properties in your area before you start trash-talking your lower-priced neighbors.

    Consider the quality of the renters.
    In the end, if you still feel that your neighbor is “stealing” bookings because of his/her slashed rates, don’t fret. Instead, consider what that owner is dealing with! First off, with highly discounted rates, renters might be more inclined to cancel because they have less at stake. Additionally, that owner is dealing with the same amount of work, risk and liability for a booking but bringing in a lot less cash to compensate him/her for the effort. Lastly, many owners have the perception that renters seeking accommodations at drastically reduced prices won’t treat their homes as well as renters who have no qualms about paying full price. So, standing firm on your rates might mean better care for your home.

    Remember: Although your neighbor might be booking faster than you, you can book better. Holding out for the right renters might mean that it takes you longer to fill your calendar, but if your bottom line is higher, you’ll have the last laugh! Taking reservations for your vacation home takes work, so you want to make sure that the dollar amount you receive makes the effort worthwhile. Stand firm on your prices and recognize that there are enough renters to go around.

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