As a vacation rental owner, you will encounter several key performance indicators that are critical to property management. These KPIs indicate a company’s performance and assist business leaders in making educated and strategic choices.
Using KPIs will result in far more precise results, whether you want to concentrate on revenue management, competitive benchmarking, or occupancy trends.
What Is the Daily Average?
One of the most important KPIs for measuring the operational success of your vacation rental is the average daily fee. The ADR, known as one of the finest measures of room quality, reflects the average income an occupied room might make in a day. So, why is it significant, and what can you do with it?
Knowing your vacation home’s ADR might help you identify critical faults in your business strategy and optimize your earnings. It enables you to compare your rates over longer periods, examine significant patterns, and discover how well your rivals are doing.
Studying and understanding your rates over time is a valuable skill that may help your organization. It will not only alert you to major concerns but will also lead you to critical strategic choices.
How to Figure Out Your Average Daily Rate
Calculating your ADR is simple! Simply divide the entire money produced by rooms occupied on a certain day by the total number of rooms occupied.
Consider the following example. Assume you leased out 25 rooms and earned $4000. To calculate the ADR, divide $4000 by 25. As a result, the ADR would be $160.
Remember that you’re dividing by the total number of occupied rooms, not the total number of rooms. This is a typical error that produces erroneous findings.
How to Increase Your Daily Average
It’s no secret that there are several operational fees associated with operating a vacation rental. With expenditures mounting, raising your income (and hence your average daily rate) is the greatest way to balance the books.
However, there is no one optimum approach to raise your average daily rate. To accomplish so, you must continually enhance several parts of your company. Here are seven strategies for increasing your average daily fee and propelling your vacation rental to success:
1. Determine your price.
Your average daily rate is heavily influenced by price. You will not attract enough visitors if your charges are too expensive for your target demographic. If you set your pricing too cheap, you will likely receive more reservations, but your profit and average daily rate will suffer.
Finding the proper pricing for your holiday rental might be difficult if you don’t know what aspects to consider. Begin by examining your costs, rival pricing, and occupancy rates over various seasons.
Consider implementing dynamic pricing, an algorithm that may help you optimize your prices and enhance your profit. The challenge is to be flexible with your price since demand will fluctuate throughout the year.
2. Provide discounts
Discount management might be difficult, but if done correctly, you will be able to attract a large number of new clients and generate income. Be smart and evaluate all choices before making a move, whether it’s giving discounts on prolonged stays or promotions during the low season.
3. Enhance the passenger experience
According to research conducted by Chris Anderson, a professor at Cornell University, hotels may raise their prices by 11.2% (while keeping the same occupancy) by doing one easy thing: increasing their review score by only one point!
Improving the visitor experience may be accomplished in a variety of ways, including improved communication, giving relevant information and facilities, arranging a welcome basket, and delivering a unique and customized vacation rental experience. The delighted your visitors are, the more likely they are to return and suggest you to their friends and family in the future. The result? More reservations and a better daily average rate!
4. Concentrate on brand promotion.
Your brand image is the impression that your consumers have of your company. It’s your personality and the impression people get of your firm when they consider or hear about it.
How can you make your brand promotion more effective? Here are a few suggestions to get you started:
- Examine your target market and competition.
- Rename your business
- Alter your slogan
- Rebrand your design, including the logo, color palette, typography, and so on.
- Participate more in social media and interact with your audience.
Once you’ve found what works for you, stick to it and ensure that everyone on your team shares the same vision and knowledge of the brand! The better your placement, the easier it is to charge greater fees.
5. Begin upselling services.
Upsells are a significant source of cash for most vacation rental operators. Upselling is a sales strategy that pushes customers to spend more for services that will enhance their entire experience. This allows your customers to improve their stay and dramatically boosts property income.
It may surprise you, but many visitors are more than prepared to pay for the following:
- Early or late check-ins or check-outs
- Pick-up at the airport or transportation throughout their stay
- Storage for luggage
- A basket for a birthday or an anniversary
- Local excursions
- Delivery of groceries
The list goes on and on! Consider what services you might upsell for your particular company based on where you are and what your target market is interested in.
6. Keep an eye on your rivals.
Keeping tabs on your competition is always useful, but it’s critical to know what comparable companies charge their visitors when it comes to typical daily rates. Let’s assume your prices are cheaper than your rivals, but your overall ratings are considerably higher – this is a strong indicator that your pricing approach should be reconsidered!
7. Create your vacation rental website.
There are many advantages of having your vacation rental website, but the option to take direct reservations stands out. You’ll be able to improve your average daily rate quickly since you won’t have to pay the additional fees or commissions that most online travel firms impose. Furthermore, having a vacation rental website enables you to customize and manage every area of the site while enhancing your trust and reputation.
Use a channel manager to keep track of your appointments and eliminate human mistakes. By synchronizing your calendars and pricing from numerous online travel companies such as Airbnb, Expedia, Booking.com, and Vrbo, this wonderful solution may take your company to the next level. A channel manager handles the job for you instead of you having to manually update your calendars every time there is a booking on one platform.
What to keep an eye out for
Average daily prices exclude staff-occupied rooms, unoccupied accommodations, free rooms, and canceled reservations. While calculating it is incredibly beneficial for operating your property, it is also critical to keep a watch on other key performance indicators (KPIs) such as revenue per available room (RevPAR) and occupancy rates to get the complete picture.