Do you own a rental chalet that is not bringing in enough annual revenue? You might be considering increasing your rental rates to remedy this. But is this the right solution?
In this article, the OVO Network team looks at the different factors you need to consider before you make your decision. This will enable you to implement the best strategy and optimise your profitability!
When should you increase your rates?
A good sales rhythm
The first thing to consider is the rate at which your property is selling. If your property is renting faster than the rest of the market, then it makes sense to increase your rental rate. This is because demand is very high, so increasing the price should not reduce the number of bookings.
However, if your property rents later than the rest of the market, then demand is rather moderate. Raising the rates could discourage potential guests from choosing this chalet. In this case, raising your rates could reduce your income.
It’s a good idea to do your research into the market and competing chalets, to get a good idea of your rate of sale.
Positive feedback from your guests
A second thing to consider is the feedback from your holidaymakers. If reviews are predominantly negative, with disappointed tenants, then it’s not wise to increase your rental rates. The first step is to address the feedback problems and do everything you can to improve your reputation. This includes improving the guests’ experience.
Renovations or new facilities
Finally, it may be strategic to increase your rental rates following renovations or the addition of new equipment. Installing a hot tub, sauna, or other wellness equipment can really add value to your property. This can justify increasing the rental rates of the chalet.
However, if your property was not renting well before the addition of the equipment, its installation would improve its occupancy rate. In this case, it is not a good idea to increase the rental rates as this would not result in more bookings.
Things to consider before raising your rates
Why do you want to raise your rates?
Do you want to increase your profits? Or perhaps you are unable to cover your costs? Don’t forget, it’s important to consider your floor price (the rate at which your rental becomes profitable). Your rental rate must be higher than this. If it is not, it is essential to increase your prices.
If you are above this rate, your income might still not be as high as it could be. OVO Network can help you to reveal the real potential of your property, why not try our short-term rental income calculator below?
In the current economic climate, where many costs are rising significantly, it may be necessary to increase your prices to ensure that your business is profitable. You should also study the prices charged by your competitors to see where you stand.
Is it the only solution?
There are many ways to increase your income. You can either look at prices or the number of bookings. If one of the two increases, your income increases! There are many business strategies that can help you fill your calendar: increase your visibility, open your calendar to shorter stays, review your marketing strategy, etc.
This is why you need to look carefully at your business, your strengths and weaknesses and the market, so that you can choose the solution that works for you.
Don’t hesitate to contact OVO Network – our property advisors are here to help you with these problems.
The consequences of raising your rates
© Canva
Positive results
Increasing your rental prices can be the right solution to improve your income considerably. As we have seen, if your property was already doing well before implementing this strategy, increasing prices would not adversely affect demand and would therefore allow you to increase your turnover.
Negative results
If your property is not selling well or has a poor reputation, the increase in rates could only make the situation worse. You might need to develop new rental strategies, such as special offers on last-minute bookings. This could mean you end up renting the chalet at a lower price than before the increase, which would be completely counterproductive.
In addition, too large an increase in rates can have very bad implications for your bookings. It can put off your returning guests and tempt them to switch to one of your competitors. You could also raise your prices too high, compared to the rest of the market and the demand of holidaymakers. So we advise that you increase your rates gradually to find the right price.
It is important to know where your property stands in relation to the rest of the rental market so that you can develop a suitable pricing strategy.
If you are thinking of increasing your rates, keep in mind the reasons for doing so. These can help you to understand whether it is better to generate more annual income through a rate increase or by increasing your occupancy rate.
If, after considering these questions, you are still thinking about increasing your prices, you now need to know which weeks to implement the new rates. It may be worthwhile focusing on the high-impact weeks when demand is high and holidaymakers are prepared to spend more.
The implementation of a pricing strategy in line with your expectations, those of your guests and the evolution of the market is a complex process. If you have any questions, please do not hesitate to contact our expert advisors at OVO Network:
If you’d like more ideas on making the most from your rental property, here are some more articles that might interest you:
