How to define the optimal price of tourist accommodation?

The tourist season is approaching, and it’s time to get your accommodation ready for the first guests of the year. Beyond paperwork and the property preparation, it is essential to update your availability calendar and to set nightly rates. Determining the optimal price is often the ultimate challenge for hosts. But, we bring some tips to help you set prices effectively for your rental property.

What factors influence the price?

The nightly rate for a particular accommodation unit is individual and depends on several factors. Location, capacity, amenities, competitors prices and value for money are the main points to consider when setting the price for a tourist accommodation.

Here’s how these factors impact pricing:

1. Location -Affects demand, which in return influences the accommodation price. This means that the properties in attractive locations, such as city centres, can command higher prices than those in remote areas.
2. Capacity -The accommodation capacity, the number of guests the property can accommodate significantly influences the price.
3. Amenities -Includes all features the property has to offer, depending on the equipment, the price can be adjusted. The number of bedrooms, bed types, household appliances, pool, barbecue and other similar amenities contribute to a higher nightly rate.
4. Competitor’s price -As a reference when setting up your own nightly prices. Consider competitors with similar capacity, equipment and location; prices shouldn’t be compared with properties offering significantly different features.
5. Value for money -Refers to aligning the property’s offerings with the price, or adjusting the price with the amenities, ensuring there’s no significant mismatch.

How to set the price?

After taking into consideration all the factors mentioned and doing the market research, you can start creating a pricing list for the upcoming season. The question arises: “How to determine the optimal price that’s acceptable to the market and also meets the host’s expectations?”.

Given the pronounced seasonality, many private hosts aim for quick profits by setting excessively high prices, but this isn’t a sustainable solution. High initial prices may not align with the offerings and can result in decreased interest from potential guests.

However, setting very low prices isn’t the solution either. While lower rates may attract more guests, they can quickly undermine the profitability of maintaining and renting the property. It’s true that budget pricing can draw attention, but it rarely delivers the best long-term results.

When first entering the market, it’s reasonable to offer accommodation at a price that reflects its true value. As the quality of the property improves, that can serve as a solid justification for raising prices over time. In fact, enhancing the overall guest experience and upgrading the accommodation is far more likely to lead to sustainable profit than simply lowering rates.

Additionally, offering discounts on existing prices creates a more favorable impression of the property and often boosts the performance of listings on sales platforms, which is far more effective than setting very low prices from the start.

But, before implementing such strategies, it’s necessary to determine the value, i.e., the daily rental price of the property. This means taking into consideration all of the operational costs to ensure they don’t exceed revenues. Don’t forget to account for cleaning, maintenance, utilities and all other expenses related to the property that could influence the daily rental price. Once the expenses are covered and depending on the additional amenities, you can build upon the sales price.

When researching the market and comparing with others, it is important to pay attention to the category, location, amenities and the size of other property, and compare your property with similar ones. However, regardless of the competition, the nightly rate should primarily be adjusted to the values your property offers for the stated price.

Even with that, the price sensitivity to the dynamics of the tourist market is certainly present. This means that the nightly rates are subject to adjustments in line with changes in supply and demand in a particular area at a specific time period. Given the seasonality, it’s not reasonable to maintain the same nightly rate during peak tourist season as in the pre- and post-season, considering the different demand intervals during these periods.

We advise regularly monitoring current events and tourist happenings in your destination, as well as the overall tourist market, to regulate price levels considering the appropriate time intervals.

Defining the nightly rate starts with analyzing your own accommodation, followed by market and competitor analysis. By observing your property through these tips, you’ll easily define optimal nightly rates that will result in a successful tourist season.