The role of a revenue manager in the hospitality industry, including vacation rental management, is crucial for maximizing revenue and profitability. Revenue managers analyze market trends, competitor pricing, and demand patterns to develop pricing strategies that optimize revenue for their properties. They often use data-driven insights and revenue management software to make informed decisions about pricing, inventory allocation, and promotional strategies.
Although the objective of a revenue manager is the same if he’s managing a hotel or a portfolio of short-term rentals, in practice both use different techniques and strategies. Revenue management has been an important aspect of the hotel industry for many decades but the practice is still relatively new and misunderstood in the context of vacation rentals. One reason is because revenue managers tend to be expensive hire relative to the portfolio size of short-term rentals managers, meaning that only the largest property managers can afford their services.
In this article, we will discuss why revenue management is a growing but still relatively underused practice in the short-term rental industry and what are some key benefits of using an outsourced revenue manager for your home rental business.
An Underused But Growing Practice
Looking at the relative market concentration of large hotel groups and property managers of short-term rentals can be helpful to explain why revenue management remains more common in the hotel industry and is compratively underused in vacation rentals.
In the US, the 10 largest hotel chains account for 50-70% of the market size. In comparison, the vacation rental market is highly fragmented. Home rentals are often managed by local or regional companies, or individual property owners. In fact, there’s no exact figure that reports the market share of the largest property managers in the US, indicating that their share of concentration is likely in the low single-digit percentage points.
Why does this matter? Because market concentration can explain the difference in scale and resources between players in these two industries. While many hotels who operate nationally (or internationally) have centralised functions and can afford to hire teams of highly-skilled specialists like revenue managers, in the fragmented market of short-term rentals only a handful of property managers can afford to have their in-house revenue manager. In fact, it wouldn’t make sense for anyone managing less than 50 properties to hire a full-time revenue manager – it’s simply too expensive.
This lack of resources in the home rental industry has created an opportunity for many companies offering “do-it-yourself” pricing tools by marketing their products directly to property owners and managers (e.g. Pricelab, Wheelhouse or Beyond). While those tools can be effective when used well, they offer limited benefits when they’re not applied along with proper revenue management strategies.
It’s for this exact reason that Helio Hospitality was created – to provide outsourced revenue management services to short-term rental entrepreneurs, so that they can benefit from the advice of a professional revenue manager at a fraction of the price.
5 Benefits Of Using An Outsourced Revenue Manager For Your Short-Term Rental Business?
1. Increase Revenue And Profitability
Revenue management offers the advantage of increasing revenues and profitability for property owners and managers. Through the dynamic adjustments of prices and revenue management strategies (e.g. minimum length of stay, event-based pricing ect.) a revenue manager can optimize the revenue per available room (Revpar) and overall income in response to changes in demand and competition.
For instance, during periods of high demand, employing the right revenue management tactics allows hosts to raise prices and maximize their revenue. Conversely, in times of low demand, these strategies facilitate price reductions and promotions to attract more guests and increase occupancy. By employing a revenue manager, property managers will find it easier to attain their financial objectives while meeting homeowners expectations.
2. A Cost Effective Solution With A Positive Return On Investment
Using an outsourced revenue management service allows you to benefit from the advice and strategies of an expert but without the costs of hiring a full-time revenue manager.
Outsourcing also gives more flexibility and less to lose, as you don’t need to add someone on your payroll and can assign to the revenue manager a limited number of listings in a trial period if you wish to do so.
Helio Hospitality, for example, has a track record of improving clients revenue by more than 25% and would typically charge a small percentage of Revpar for its services depending on the size of the client’s porfolio. This means that we can generate a strong return on investment for our clients.
3. Enhance Guest Experience
Hiring a revenue manager can help you to improve guest experience directly and indirectly.
By using revenue management techniques to optimize prices, the revenue manager can ensure that guests are getting the best value for their money. For example, if short-term rentals in a particular location are experiencing low demand for a period, he can reduce prices and offer value-added packages to attract more guests.
In addition, hiring an outsourced revenue manager can help you to save precious time to focus on guest experience. Adjusting present and future prices to market changes on a daily basis can be complex and time consuming. Outsourcing this function allows the property manager or homeowner to focus on its guest experience instead.
4. Gain A Competitive Edge
A Revenue manager can further increase a property manager’s competitive edge in the market. By fine-tuning prices and monitoring competitors’ behaviour, the revenue manager can provide competitive rates drawing more guests and helping the property manager to secure a larger market share.
A good revenue manager can also help to improve the level of reporting and market insights. This can be a key differentiator which helps property managers to retain clients and reduce their churn.
5. Improve Market Insights And Reporting
A Revenue manager uses strategies and tools which require a deep understanding of their market, guests, and competitors, as well as the ability to collect and analyze data in real-time.
This means that a good revenue manager should be able to provide insights and reports covering market trends, demand patterns, guest behavior, which ultimately inform pricing and decision-making.
Helio Hospitality offers tailored portfolio analytics to make sure that its clients can stay informed at all times and stay one step ahead of their competitors.
Conclusion
Revenue management is not only a critical component of the hotel industry but also of vacation rentals.
A good revenue manager doesn’t only increase revenue but also offers market insights and a competitive edge against other players in the market.
The high fragmentation of the short-term rental industry and the relatively high cost of hiring a revenue manager have meant that today unfortunately only the largest property managers can afford their in-house revenue management teams.
Fortunately, outsourced revenue management services like the ones provided by Helio Hospitality are an excellent solution for property owners and managers with small to medium size portfolios.
If you think you could benefit from our services do not hesitate to get in touch with us. We work internationally and pride ourselves in offering the best revenue management services there is for short-term rentals.
