vacation rental pricing strategy

Vacation Rental Pricing Strategy: How to Price Your Property

Finding the right vacation rental pricing strategy for your rental is one of the toughest nuts to crack when you first start out. 

Getting your prices wrong is common among newbie hosts, so in this post, we share some valuable tips for finding the sweet spot for your rental.

Undershoot your market, and you’ll not only miss out on the extra income but you’re more likely to attract the type of guest you don’t want, who may also end up trashing your home. 

Overestimate your rental fees, however, and you could end up with an empty rental during peak season. Another risk is that guests who feel ripped off by your prices are more likely to have unrealistic expectations or complain, which leads to bad reviews. 

Why you need a short term rental pricing strategy 

Once you’ve set the right prices, the job´s not done, sadly. 

As with any other business, if you want to make it work in the long run, you need to plan ahead and have a pricing strategy in place to ensure you stay on top of fluctuations in the market, seasonal changes, and anything else that may affect demand for rentals in your area or in the industry. For example, it’s a great idea to read industry reports, such as our Vacation Rental Q2 2022 Forecast. 

This way you´ll be able to spot trends early and take action to ensure your prices remain competitive.  

short term rental pricing strategy

How to set vacation rental rates in 9 easy steps

You may love your vacation rental, but that doesn’t mean everyone will cherish it as much as you, which is why your rates should not be based on your own assessment, or that of your aunt, best friend, or the holiday home down the street, but should have a more solid foundation. 

Instead of making a guesstimate, here are 9  tips for working out the best rates for your property.

1. Cut down on costs 

Many first-time property owners underestimate how much it costs to run a rental home and have unrealistic expectations for how much profit they´ll make. While mortgages, utilities and taxes are easy to remember, you should not let cleaning services, emergency repairs and landscaping trip you up. 

Also factor in how you plan to finance larger upkeep costs, such as replacing major appliances, painting the house or repairing the roof.

Home furnishings can be another big chunk of your vacation rental overheads. Comfy mattresses, linens, furniture, cooking utensils and minor appliances are the bare bones of any holiday home and if you want good quality, which your guests will love, expect to pay handsomely. 


Ask fellow hosts for recommendations on industry social media forums about where to find more affordable housekeeping and design solutions. Check out accounts such as Apartment Therapy on Instagram, mentioned in our blog post about which vacation rental social media stars to follow in 2022,  for affordable renovation and decoration tips.follow in 2022,  for affordable renovation and decoration tips.

2. Do your research 

Comb the internet, newspapers and real estate listings to get a clear picture of your neighborhood’s rental market.

Be sure to compare apples with apples by taking into account the amenities, location and other qualities that define each property. 

An extra bedroom or ocean view can easily merit several hundred dollars more per week.

The more comparable properties you find, the better you’ll understand exactly where your vacation rental fits in the market.

3. Undercut the competition or offer more 

Always monitor your competitor’s listings, both in terms of price and services.

Put yourself in your guest’s shoes. While surfing the web you come across two similar offers. Same location, the same number of rooms and same services. Which of these properties is the guest going to choose?

You got it – the cheaper one!  Unless you offer something more. 

It is essential that you differentiate yourself from your competitors by defining your competitive advantage, and to do so there are two strategies to choose from: “price differentiation” or “premium pricing strategy”.

The first strategy means you offer a product at a lower price than your competitors, and it is advisable to use this strategy when you want to ramp up the number of bookings. The profit margin will be reduced, but the booking percentages will increase significantly.

As a rule of thumb, pricing low when starting out is helpful in order to build reviews and reputation. Undercutting your competition can get you bookings, as long as you still make a profit.

This strategy requires constant monitoring of your competitors, in order to keep your prices always a bit lower than theirs.

Alternatively, you can adopt a “premium price strategy”, offering guests a better product and a higher quality service so they won’t mind paying a bit more.

For example, throw in breakfast, a concierge service, and 24-hour or late check-in. The more services you provide, the more you can hike the price.  Also, read our article about 10 upsells that won’t annoy your guests. 

A premium pricing strategy has the advantage of producing higher profit margins, as well as creating the perception that your rental must be better quality than the competitors.

4. Plan for peak season

Many holiday homes have a peak rental season when prices are often much higher than during the rest of the year.

It’s not unusual to charge at least the cost of one month’s mortgage for one week’s rental during these times.

Property owners can also offer reduced rates for the month prior to and after the peak season to generate more bookings and increase profits.

For example, in Cape Cod, your peak rental season would start in May and last through to September. Discounted rates should take effect in April and October.

Of course, some vacation properties can be rented year-round. Major cities, like Boston and Los Angeles, attract a new influx of tourists each week.

However, you should still alter your rates to take into account peak periods. Get a calendar from the local visitor’s bureau that lists local events, concerts and festivals that may affect rates in your area.

5. Take vacancies into account

Even in high-demand areas, it’s hard to achieve 100% occupancy throughout the year.

Of course, vacancy rates only apply to the time you can reasonably expect to rent your property.

For a summer vacation rental, where the season may only last 18 weeks, it’s a good idea to plan for approximately five weeks where your property will be empty.

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6. Use dynamic pricing tools to boost occupancy

Dynamic pricing in the vacation rental industry can be a game-changer.  

Software such as PriceLabs and Beyond are revenue management solutions for vacation and short-term rentals, helping hosts to set and adjust the prices of their properties dynamically and intelligently.

Based on machine learning, these tools use a data-driven approach in order to analyze your website and other factors like competition, location or occupancy to help increase your revenue and save you time when defining pricing.

This kind of pricing strategy can help sell out those nights – for example, mid-week – that would otherwise not get booked.

When you connect a dynamic pricing tool to your vacation rental software, you’ll be able to set a simple nightly, weekly or monthly rate in a flash, or offer dynamic rates depending on the length of the stay, the number of guests, the day of the week and other factors.

Lodgify is integrated with PriceLabs and Beyond, to make life easy for clients who want to take advantage of this dynamic pricing approach. 

7. Different prices for different periods

Another common strategy is to set different prices for weekdays and weekends or to offer a lower price for longer stays that fall over a weekend.  With the shift in working patterns, since the COVID pandemic, remote workers tend to look for longer stays throughout the year, so you could also target this type of traveler with better rates for longer stays outside of peak season. 

8. Discounts and deals

Offers and discounts have always been one of the biggest incentives to motivate buyers to make a purchase, and this also applies to the travel industry.

Offer deals and discounts to your customers, but be careful. Always analyze your profit margin to determine what percentage of discount can maximize your bookings without affecting your bottom line.

9. Incentivize repeat guests

Acquiring a new customer has a high cost – in terms of time, energy and marketing spend.

Think about the daily effort that the management of your vacation rental house requires. All the time spent overseeing reservations and guest payments, the energy it takes to organize their stay and ensure an unforgettable experience, in addition to the physical and economic efforts required to define a business plan or a marketing strategy to better promote your property online and offline.

Retaining existing customers costs less and has much higher profit margins than attracting new customers.

An article published in the Harvard Business Review states that the acquisition of a new customer is on average 25 times more expensive than convincing them to return, plus the guest is generally willing to pay up to $25 more than on the first stay.

So, focus on shifting the focus from acquiring new customers to incentivizing repeat guests. It won’t take long before you start to see results!

How to price your vacation rental – find what works for you

There are many different pricing strategies to set rates for your rental, it’s all about finding what works best for your property and your market! 

Don’t be afraid to experiment – as long as you still make a profit

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