Gosh, I hope you didn't send that.  Sales 101, I never ever trash the competition to make a sale.  You place should stand on it's own merits.  If they choose to go to the other place rather than seeing the value of your place, then I say, "buyer beware."  I'd personally be hesitant to rent from someone who sent me such an email, but that's just me. 

Compared to other nearby vacation rentals, our home is on the higher price side so I occasionally get an inquiry asking for a lower price.  I reply with the various reasons that set our home apart - the extras that we include etc.  I highlight what we bring to the table.  I actually made a bullet point list in our listing descriptions that highlights these differences.

I see that the info you shared is helpful (location, for sale), but I would have omitted the 'by the way, just an FYI, & I'm sure you knew that" - it sounds condescending & not welcoming.  Even great guests sometimes ask for a discount - all the travel articles have them trained to ask.  I won't discount on a site where a guest pays a service fee (VRBO/Airbnb).  If a guest wants to #bookdirect then there's their discount.

You might look at it in another way: these guests would like to rent your house but can't afford it. This should be something which makes you feel good.

People have for the most part champagne tastes on beer budgets but that does not mean that they could afford the champagne when their circumstances change and then they might not choose your brand if they thought you had been condescending or dismissive. Always keep the long term effect in mind, this email might have given you an instant gratification to respond to their affront - but that is where it ends. Keep in mind, that people are far less likely to share positive things about a business than negative. the ratio is 1:11; quite impressive and with social media I might think it is even worse.

The advice you got here is sound and good - take it.

So, after 30 years I can get hooked as well.

Let them know what the benefits of your home and area are.

Then ask them what you are looking for.

Next let them know that there is a perfect fit for everyone, and that you want them to have the best home for their budget.

** Now, I am talking to you, Its your home, your pricing and your business, and no one of any sense of respect would do that or ask that.

    They most likely will nickel and dime you and find fault if you rent to them.

If you do, make sure in your contract, next to the pricing you disclose that you are discounting at their request.

Most of all, don't fall for it.  If they cannot afford you home, they need to budget for a home they can afford.
Only take them is you find them to be amazing.

Good luck.

Bummer that you've erased your original post.  That important context -- vis-à-vis -- (IMO) the thoughtful, ensuing responses of folks who took the time to reply to you, is how we all learn + share.

Glad it is working out for you!

I'm late to the party . . . I would offer the reply I have relied on for many years  . . . "My home is an excellent value".  If you wish you may add a qualifier such as "for its location" or "for the amenities offered".  That's it.  No more . . . Just an affirmative and polite reply when a discount is requested.   Don't engage the traveler with a drawn out explanation.  They don't care . . .