COVID-19 Vacation Rentals / Hospitality Industry Update April 3, 2020 – How to manage your rates during COVID-19
COVID-19 Vacation Rentals / Hospitality Industry Update April 3, 2020 – How to manage your rates during COVID-19 April 3, 2020 Updates on COVID-19 / Corona Virus updates for the Vacation Rentals / Hospitality industry from Micah Berg Founder & CEO of https://www.thevru.com/ and Justin Jones Founder and CEO of IMEG this update we talk about how to manage your rates during and after COVID-19.
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Justin Jones 0:05
All right, welcome. Here we are, again on another episode of the podcast for the vacation rentals update with Micah Berg from real joy vacation rentals and vacation rental University and myself, Justin Jones, with internet marketing expert group. And today we’re going to talk about how to manage your rates during this it whether you’re open or close. So kind of what are you going to do if you’re open during this if a few of you are and if you’re not open? How should you be managing your rates when the pent up demand that we predict comes out? And then also managing channel managers and I think there’s some signals that you alluded to in previous podcasts that channel managers are going to give us to know when the markets back Yeah, yeah, for sure. So let’s dive into that and you want to get started.
Micah Berg 0:54
Yeah. So if you’re open, if you’re open now, the way we’ve approached So we’re down on the beaches Northwest Florida beaches the way we’ve approached it is any bookings a good booking the beaches are closed so theoretically, the value of your booking is diminished a little bit I mean you can have the view properties are still nice etc. So we’ve actually lowered our rates to try to attract bookings now to winter rates, which for us are our lowest rates. And that’s about for like a two bedroom condo say 99 bucks a night, something along those beachfront 99 bucks a night so pretty low because our summer rates for that same condo could be 250. So drastically low. And you know, I don’t I don’t want you to get yourself and throw you know, throw rates all the way to the bottom. We kind of did I mean there’s still little more room I think like per contract. 75 is the bottom. But at the end of the day. We’re hoping people want to book and so Even $100 a night is $3,000 I can get somebody for the month. That’s a solid deal. And actually, if they booked the whole month, we probably let him do it for $2,000. And so we’re rolling out as of a week ago Snowbird rates, which is our winter booking rates or month long rates. And so if you’re still open, and you can’t have people coming and really all they’re going to do is drive down and stay in a condo or stay in a house or something. I mean, you kind of got to look at it, like your lowest lowest rates, and some markets don’t have those. So that’s kind of where I would err to you Justin is like, your experience with the Smokies is key. I mean, there’s really not like a low monthly rate that you guys ever really get to I mean, you kind of had activity all the time so we can bottom out we know what that looks like. What do you what about those markets that can’t
Justin Jones 2:50
Yeah, we some markets are really shut off in the local government saying hey, don’t bring people here and they bought calendars but but but prior to that, kind of what we had been recommending was go with your lowest rate your your lowest season rate, and then give to 20 to 25% discount on that. So the lowest rate and then offering you know, 2025 30% off to do that, because really the only value is the property. And while a lot of owners normally are like you better not rent my cabin for that low because it has books all the way up. I can’t even pay my mortgage back.
Micah Berg 3:28
Yeah, well, now they’re not paying their mortgage.
Justin Jones 3:30
But since they’re deferring their payment, if you’re if your mortgage is five and you got to make five grand, but you deferred that you can only make 2000 to 2500 you’re up 2000 to 2500. Yeah, so I’m not recommending doing that in a normal time but with deferments that most people are doing, you know, $2,000 is huge.
Micah Berg 3:51
Plus the risk of having a vacant property you know, with water leaks, stuff like a refrigerator ice maker line or something leaks just a little bit and the whole place fills with mold or the floors are damaged. You know, things like that. So, in a way Yeah, you get the money but you also have somebody there to look after the property.
Justin Jones 4:12
We haven’t seen this happen, but I wouldn’t be some hope it doesn’t but but yes, uh, what you’re alluding to, we see in some markets to where when it’s off offseason, the locals know that and that’s when you get TV stolen, you get all that kind of stuff. So busy times deters that theft. So I agree having having people in the property even at a reduced rates good for just overseeing the property.
Micah Berg 4:39
Yeah. Yeah. What about so I wanted to talk about the, as we come out of this, the rates there I think are the most important. Everybody knows to cut your rates when times are slow and so we don’t need to spend any more time there. But, you know, one thing that I did talk about earlier, I think it was in our various first podcast the really long one that probably made people not want to watch this ever again because we talked for an hour like idiots. Maybe we can break that out. But anyways, I alluded to in there that we’re waiting for what we know is a recovery is when our channel managers start giving us half or more of the traffic that we used to get. I mean, we have about 30% of our bookings come from our website. So you know Destin is very Octa dominant, it just always has been vrb has been a big thing down here forever. So I’m looking at if booking com and Airbnb and, and vrb o start generating 50% of what we are expecting them to do. Before probably before my website, I would just say I mean, it takes a lot of work. You guys actually do a lot of work to help make those bookings come in. That’s not always super easy. And so I’m looking for the easy indicators And to me, that’s one when the channel We’ll start delivering half or more of the traffic that I’m expecting. I say that’s recovery. And that’s when I turn on all the pay per click and the email campaigns, all the stuff we’ve been talking about, like hardcore, and then increase rates. So first, let’s talk about those indicators. Justin, and then we’ll talk about rates going into like June July.
Justin Jones 6:18
Yeah, what we’re going to be doing is we should see, I’m looking at Google Trends every day. Most markets are down 50 to 60% on search volume, but Google Trends is a free tool, put in the keywords that people are looking for in your market and kind of watch those daily. We should see cuz that’s the people looking and intent. We should see that peak, but how do we know that we don’t have a increase in lookers, but not Booker’s? Yeah, channel management. So we should see a glimpse by Google Trends. And we’ll know if that’s accurate data, and let the big boys the Expedia is the Airbnb ease the vrb O’s once you start seeing more reservations, coming in from them, then start turning on your actual marketing that you’re paying for. Yeah. So you don’t have to go like, Is it time and throw on some marketing and go Oh, yeah. Right. Because right now what we’ve seen in several markets is convert one traffic’s cut in half. And then conversions cut in half. So people are still looking going, Oh, I can’t wait till June. But I’m not going to book yet. Oh, I can’t wait to October, but I’m not going to book yet. Yeah, you don’t want to buy that traffic yet? So yes, Google Trends be first. It’ll be confirmed by the otas. And then turn on your marketing and full full on at that point. And then the rate part, which I think is going to be the most interesting is, if you’re managing rates manually, you got your work cut out for you. I’m thinking how this works. Yeah, because there’s an opportunity to make some of your money back because if there’s pent up demand, you’ll have more demand than supply. Yeah. And I don’t know and I don’t want to speak because I have no You know, I’m not against these companies or their products or services at all, but like the wheel houses, the beyond pricing and all that. If you’re using Ma’am, I’m curious to see how the algorithms adjusted for this anomaly of data that’s happening. Yeah. Is it spots patterns and trends, and there has to be a lot of data for AI to learn stuff. And there’s not man. So I’m curious how that does. So I’m just going to send out saying, don’t use those products that are not good. I’m gonna say, watch those. Because there are some anomalies in that data now with this. And they may be a little interesting. Yeah, could be a little too high, a little too low. I think it’s a great time where humans step in, even if you’re using those and make sure that it’s doing that correctly. Because of the data. It’s been fed has a lot
Micah Berg 8:47
of anomalies in it with this. And I’ll say something that I want spread maybe through the rest of it’s something that I’m thinking about from my own business and would be great for the whole industry to do but You know, there is going to be a limit to how much overseas and cruise travel and so leisure destinations that are drive to or domestic flights will get a boost. There’s going to be pent up demand. There’s now all this stimulus in the economy with the which is interesting. I wonder, you know, our average booking is like 12 to 1400 dollars, which means for 20 $400 you can take your whole vacation to Destin, or Panama City. I wonder like couples that get like your typical couple with two kids, they get the 20 $400 but plus another thousand for the two kids. I mean, they can take like a world class vacation to Destin, Florida. I wonder when those checks start going out and people are either on unemployment sure they’re going to get their job back or still kind of working, just working from home. I wonder if we see an uptick in bookings from that, you know, that alone just like hey, this is free money. I’m going to go ahead and book because rates are low or perceived to be low. And that that’s gets me to my point. Wonder if if we look at last half of March, April and May. And we look at it from a profitability standpoint and we’ve lost X dollars I don’t even know right at this point what we’ve lost. But then we look at June, July, August, September, October, November. Many markets have very busy seasons until October, some straight through the end of the year, like our St. Pete branch. Maybe raising rates just 9% or 8%, from what we had them listed out before, literally writes the ship, right? Or maybe there’s a little fee that you haven’t added before that is negligible, but 19 $20 booking fee, little things like that, can we sell into this demand because supply and demand doesn’t work the same for vacation rentals as it does for toilet paper, right? I mean we literally have to pre price it because to Typically, by the time we know, we have too much demand for our supply, we’ve been idiots and pre booked our units. And so early on in my career, I was like, Oh, this is like playing chicken like, or, you know, your booking window is like playing chicken, you’re gonna look headlong into this car with your high rates. And you can’t like, you gotta be the last beer because they want your property and you want a discount and whoever moves first loses. And so I literally got to this point where you get so used to your rates and so used to your, your rates being high or higher than maybe it feels like is okay that you weighed out the competition. And because there will be a lot of people who sell out for June, July and August at crazy discounts, 25% discounts because they’re freaking out about their cash flow. But if you’re like, hey, wait, if I just make I know that this is going to come back. I know the future looks really good for the rest of the year. I know people just got a ton of money. I’m going to increase my rates 9% and stick it I’m going to stick the landing So that when I get to the end of the year, I recover everything I lost in the two months I was closed.
Justin Jones 12:05
Yeah, um, the, the thing that people forget sometimes, especially with a lot of our clients is that you know, as you said, toilet paper is not a perishable item. I write all that forever. Yeah. journals are perishable, very perishable, they expire, they
Micah Berg 12:22
all of them went away that weren’t rented. So,
Justin Jones 12:25
yeah. And another interesting one of like, a, I tell the story, quite frequent. Ryan, who actually works with you, his dad, Jim Owen, who’s well known in the vacation rental space, but as years ago, I asked Ryan, I was like, Man, you’re sold out this weekend. He’s like, No, I’m an
Micah Berg 12:41
idiot. I know. I’m an idiot.
Justin Jones 12:43
Yeah. And I was like, and I was like, What do you mean? And he was like, Yeah, my dad. He’s like, when I first started working in property management, I call him as a dad. We’re sold out this week. And he’s like, way to go, you dummy. He’s like, What are you talking about? You’re just excited. He’s like, No, you gave them a you know, you should have one or two left because that means rates are too low. Yeah. And I hadn’t really thought about it, but I love the non percents a great place and we’re not alluding to gouging people and taking advantage. But there is a supply and demand thing and i think that you know, not percents not
Unknown Speaker 13:13
Micah Berg 13:15
I mean, I gotta stop you, how do you gouge people on a vacation? Like screw that whole mentality? Like, like we got, I mean, I want to drop the F bomb but you said I couldn’t because you would judge me. Like f that mentality like dougs the shit out of them for their vacation, because we just got hammered. Like, you raise your rates as high as you want to raise your rates and if you know your inventory, you know your raise as
Justin Jones 13:41
long as you can sell it and the market will tell you the market Oh, don’t
Micah Berg 13:44
don’t if you know you can sell your your inventory for 18% sell your damn inventory for 18% above what it would have been To hell with gouging like if you got nice stuff. I mean, there’s competitors in my market like 360 blue that has properties you cannot get and now Now you can go get them. They should be raising. I hope Jason and his staff are watching this. Like, you should be raising your rates like crazy. You got these houses that I mean, I’m his friend, and I can’t even walk in them because they’re so booked. Like, he likes me and I can’t rent these properties. You have a freaking cabin that, like literally is vacant for the first time ever. Like the booking window is a year and a half out. Is that unique? I mean, dude. Right? Yeah, anyways, sorry. I totally like derailed your whole thought pattern because I’m like gouging on toilet paper. Sure. Don’t do it. That should be illegal gouging on a vacation like, scrape that. Well, everyone
Unknown Speaker 14:44
predict that? Oh, yeah. raise your rates too high. You just won’t book
Micah Berg 14:48
we just won’t book but it’s not gouging. You’re not taking like, from babies or anything?
Justin Jones 14:53
Sure, sure. Sure.
Micah Berg 14:55
Sorry. I feel like a jerk for like totally derailed. Oh,
Justin Jones 14:57
no, no, no. That is about point though, because of the fact that well, one the market won’t let you. Yeah. And two, it is one of those things where I mean, it is a, like not a necessity. Maybe we shouldn’t price gouge necessities but a vacation is not a necessity.
Micah Berg 15:15
I just don’t want people to think I’m like some expert and they kept their rates at 910 percent. I get like, you know what I mean? Like, I really don’t know. I’m hoping it’s 30%. I’m hoping people feel not
Justin Jones 15:27
as a good place to start and watch.
Micah Berg 15:29
Yeah, ninth grade nine is not 12. Like I might go to 12 I think nine is safe five is a guarantee, I think 5% over your sub your peak rates, probably a guarantee you’re going to be fine. I think you can add a booking fee honestly, like for all the internal losses. And now that I’m bashing our owners, but a lot of our owners are going to lose very little in this timeframe, because they’re going to defer their mortgages, some a lot of ours are coming to us their properties, stuff like that. You know, I’m not trying to throw them under the bus, I want them to make money, we’re going to make sure they make a lot of money, but add a little fee here to help you recover from this. Because what people don’t realize about the disasters that we deal with the hurricanes and this and that, that is not only to our businesses get hammered from a financial perspective, but so does our morale. So to our people. And the workload is tight, like you were, we were just talking about prepping for this. You know, you’re the CEO of your business, and you used to work 13 hours a day, and now you’re working 32 hours a day, right? And it’s March 97th, a couple of days ago is March 97th. Like those days are long as hell, but you’re not even getting paid for it. Like you’re getting penalized to work harder and
Justin Jones 16:46
you’re you’re working twice as hard for a fraction if any of the money if any or for a loss and so,
Micah Berg 16:52
you know, don’t be afraid to roll out a fee that may not be totally fair and you get an extra 2030 bucks per booking. And just you know, take it off at the end of the period at the end of the year, whatever when you when you’ve kind of caught up, but start doing that math. Now, if you’re not paying attention to your rates, you’ve got time now to kind of figure that out and look closely every single day. Look at what you were talking about with the Google Analytics, look at the bookings look where they’re going, look at what they’re paying compared to last year, and maybe start raising your rates. Now we’re getting ready to because when we come out of this, people are going to want to travel, we know that and they’re going to have to travel local.
Justin Jones 17:33
Yeah. And also, we talked about this in some previous episodes, but every business’s landscape, not every that’s a big word. The majority of biggest businesses landscapes are going to change. Some are going to be small and some are going to be huge. We were talking about how business travel could take a hit a long term like maybe forever because of a paradigm shift. And then also international travels. definitely gonna take it Is that a paradigm shift? I don’t think so. Is it a year or two thing? Maybe? Yeah. But also realize that if these international travelers, which I think is solid logic, start staying more national, there may be areas you typically haven’t marketed that you need to market to now. Yeah, the watch your analytics and Google e commerce are in your property management system showing you where the bookings are coming from. Watch that closely. And go, Wait a minute. Our average bookings 1200 dollars, our average booking from this location we normally don’t get bookings comes 3600 and try a little marketing there to see if you can get more of those.
Micah Berg 18:41
Justin Jones 18:42
Because international traveler also typically is not looking for a weekend right
Unknown Speaker 18:46
now looking for at least two weeks.
Micah Berg 18:48
Yeah, two weeks and $10,000 in your local destination average booking is 1500 you know, I mean, what
Justin Jones 18:54
what’s the patterns in your trends in your business to see like, there might be some new opportunities In this to go, Oh, we’ve never marketed there. In fact, we avoid marketing there. But now we need to because they’re coming here, like VRM Intel, give them a plug because I really like what they do. But you did wrote that article couple weeks ago about how you know, I forgot the name. I’m gonna butcher the name of the title, but something about how the rich and fluent are taking their private jets to vacation rentals to self to social distance themselves. Yeah. Um, I could see that being not for social distancing later, but maybe just they’re like, well, we can’t fly to you know, we’re not going to go to Europe this year, but we are going to go to some of the higher end vacation rental or which areas you know, Denver, Destin, for example. Yeah. Those areas where there’s time vacation rentals, and let’s just go there.
Micah Berg 19:45
Yeah, yeah. I mean, Jerry Jones from the Cowboys, flies to Destin all the time Britney Spears. I mean, there must be something about it. I’m not sure what it is, but there’s something about it. We have a private jet, please come see us. real joy, calm and You with private jets watching this I’m sure you’ll book with me that’s gonna be great. As as a side note, then to wrap up you know Justin has been great gracious to offer to pay for vacation rental University for all you guys that want to learn during this downtime or have your staff learn so anybody that signs up for the Masters monthly and uses coupon code Cova 19 CLB ID one nine gets the Masters monthly for free so www.ev.com sign up for that. Take advantage that learn it download all our stuff, you know, go in there and you can change your business right now and you should we cover I cover personally a good amount on rates and the theories behind it, how I think about it, how to track it, paste reports, Justin, you do some stuff in there for me which is great on advanced marketing. Really good stuff about how to bring value In your marketing and not just sell and what that means and those sorts of things. So, anyways, I encourage you guys to do that. Look at your rate, start researching this stuff when you have some downtime. Hopefully the call volume slows down from a negative perspective and picks up from a positive perspective soon. You need to be ready for that. So thank you for your time today. Y’all be safe out.