‘The Pacing Factor’: when times are tough, remembering to keep your eyes on the big picture is key

In a wave of ongoing cancellations, refund discussions and lockdowns, one can easily be forgiven for feeling helpless and nervous about the future of their short-term property rental business. But the truth is, our industry is one with a long tail – it bounces back fast, recovers (and surpasses) lost income even faster and adapts. One key way Felix is helping our property managers recover quickly and adapt to this climate is through the new pacing factor in our dynamic pricing tool.

It’s hard to see it when you’re in the thick of it, but as Australia’s vaccination rates increase and our country opens up for more extensive, restriction-free travel, the short term rental industry will be in for a lucrative boom. We already saw that over the past year – lulls in travel were countered with huge peaks of domestic regional travel, often under higher rates than the norm. And from what figures in the US (who are in the middle of their summer holidays since the country more or less ‘opened up’) are showing, that’s just the beginning. 

In the US, vacation rental rates are up more than 50% from 2019 in some locations, according to the website TripstoDiscover.com. The travel website analysed Google Trends data and short-term rental bookings in locations tracked by AirDNA, a company that mines and analyses STR booking data from Airbnb and VRBO.  “Average daily rates on Airbnb and VRBO are up 23% nationwide in the first quarter of 2021 over 2019,” says the analysis. 

There’s no doubt we will/are seeing the same pattern in Australia.

With that in mind, it’s absolutely vital that property managers set their pricing rates strategically. It can make all the difference in your business success. Felix already offers it’s clients with the best data-driven dynamic pricing integration tool in the industry, and now it’s even better, with the introduction of the pacing factor to help ride the COVID rollercoaster wave of demand.

The pacing factor is an additional market factor we apply – along with seasonality and demand – which is calculated at a market level (e.g. Sydney, Auckland, NSW Coast etc). The pacing factor takes into account the growth trend, for a given market, during the same period from the previous year/s. So a pacing factor of say +5% would imply that the market of 2021 is generally up by 5% as compared to the same period in the previous year/s.

Why is the pacing factor applied?

As COVID-19 restrictions eased in some areas, markets saw periods of pent-up demand, extending well beyond their typical high season. The pacing factor accounts for such released demand. On the flipside, where COVID-19 restrictions have not been eased, the pacing factor accounts for the curbed demand, and adjusts the prices accordingly. The pacing factor gradually decreases with time and becomes zero by a fixed date, which we estimate using market data. We update the pacing factor and the fixed date on which it expires every week to take into account changing market dynamics.

Pricing strategy is so important to the short term rental industry. Felix is proud to be a market-leader when it comes to effective rate management for our clients. The pandemic has thrown a lot of curveballs, but nothing we can’t hit. To find out more about our pricing and rate management, and how we help our clients navigate the unknown, please get in touch with us .

 

 

Felix is Australia’s first truly integrated software ecosystem for managing your short term rentals.

Want to get in touch with us?

Email: [email protected]
Phone: +61 2 8503 4192

Leave a Reply