How do I decide how much to charge for renting my second home?

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Today we will cover one of the most common questions I get from Holiday Home and Homestay owners – What do I charge for renting out my Holiday Home? I wanted to cover some of the important things to consider before deciding the pricing:-

1. Check on pricing of hotels and resorts located around your property: This is something that every homestay and holiday home owner must do. This information is available by either visiting a online travel website and searching for hotels by name, or else calling up your local travel agent or the hotel directly. If you call the hotel directly, remember that the price they quote to you may be 20% to 30% higher than what they sell their rooms. Remember to ask for the prices for different types of rooms and whether they include meals as part of the rate. If your property is a 2 bedroom apartment, see if they have a 2 bedroom apartment available. It is also best to ask for prices at hotels which are visibly doing well as they would have a good idea of what rates should be charged.

2. Realistic Expectation of your property: Have a realistic expectation of where your property stands in terms of luxury and who its ideal clientele would be. It is important to set a price based on the target audience. Some of us have high expectations from those who come and stay in our homes and if so, it is important that the home must have the luxury amenities AND that pricing is reasonable but not too cheap. If you feel the target audience is college groups then you might want to make some modifications to the property, e.g by adding many extra mattresses, a dormitory etc. and thus bring down the average cost per person yet ensuring that you make more money in total. If the average target is a small individual family – husband, wife and 2 kids then be reasonable – it is rare that they would spend more than Rs. 6000-7000 per night at the maximum.

3. Reduced rates for longer stays: Have rates that reduce for guests staying longer. Remember most guests will stay for 1-2 nights.  In that case, you must have pricing that encourages people to come for 3+ nights and ensures that if a person stays for just 1 night you make 75% of what you would make if they were to stay for 2. Drop your rates significantly for those who want to stay for longer than a week. In my opinion if you are charging Rs. 6000 a night, then if a person would like to stay for 15 days – you should not be charging more than Rs. 42,000 in my opinion – roughly a 50% discount.

4.  Make note of long weekends and festivals: Keep your eyes on the calendar. Note all long weekends due to festivals and school holidays. If you get reservations many weeks in advance for these days you must hold on a little in the bargaining process before discounting as you may get more customer options in the days to come.

5. Make note of limitations in your home: Keep in mind any important deficiencies of your holiday home, compared to a hotel or resort. The primary one I can think of is a Swimming Pool. Especially in the monsoons when going to the beach is not safe, travelers prefer staying in a property which has a swimming pool. If your property does not have one, be prepared to give a slight discount as compared to the resorts. In your marketing, promote other activities that can be done without the pool.

6. Be flexible: Ask every customer where he works and the number of people who are coming along. You sometimes get influential people -who work for very large companies, or you could also get premium travelers who come alone but rent the whole house. In these cases, give them a better deal and get them to visit you again. You could even ask them to post their stay to tell their friends about the place. 

7.  Be alert: Beware of customers coming in very large groups and yet bargaining too hard, or where it seems like they don’t have a budget. If you provide food, be careful if they insist on all meals being inclusive. I have found that some of these travelers can be very difficult to please and may cost you more than what you make to serve them. I would also be vary of customers who don’t seem like they would be good guests to have over. Use the messaging system effectively to interview the travelers. How? That I will cover in another article.