Charging premium prices for your holiday cottage could reduce customer demand for bookings. Meanwhile, pricing your property at a discounted rate could impact your profit margins.
The subject of holiday let pricing can be a minefield. Whether you're new to letting or an experienced holiday let owner, our handy guide features advice from one of our trusted letting experts to help you create the best pricing strategy for your holiday rental.
What to Keep in Mind When Pricing your Holiday Let
It is important to take into account a number of factors when deciding how to price a holiday let. Considering the where, what and when in advance can help maximise your rental income.
Where is Your Cottage Located?
If your property is located in a tourist hot spot, rental rates can often be higher than neighbouring towns and villages.
Equally, if your holiday home is near a beach, lake, mountain or other natural attraction this can increase demand and therefore price.
This also extends to man-made attractions. Cornwall’s Eden Project, North Wales’ Zip World and Blenheim Palace in the Cotswolds, are all prime examples.
What Features Does Your Cottage Have?
Does your cottage have any unique or quirky selling points?
Is your property dog-friendly, or offer high chairs and cots for families?
Does your holiday let have views of the sea, a river, lake or a local landmark?
Hot tubs, enclosed gardens, modern kitchens and bathrooms, are all features that can improve rental rates.
When Are You Focussing On?
Each season can command a different price dependent on your property location. For example, summer in Cornwall will see higher rental rates than low season bookings.
Is it a school or bank holiday? Don’t just focus on summer holidays, rental rates can be lifted over February and October half term too.
Local events can cause an uplift in demand. Check if there are any local festivals or celebrations occurring over the year near your property.
Andrea manages our Revenue Management Team. She has taken some time out to answer our questions on how to price a holiday cottage.
Why is it Important to Market your Holiday Let at the Right Price?
Cost is always an important factor for potential customers when choosing how to price your holiday let. Price the property too high and you risk losing a booking. If priced too low, your property could sell too quickly leaving potential revenue on the table.
From our point of view, people are looking up to two years in advance for their ideal holiday cottage. This means we have to make sure we price holiday homes at the right rate, to ensure we maximise the opportunity of selling as much of a property’s availability as the Owner wants us to.
Expert Tips for Pricing Your Holiday Let
When choosing how to price your holiday let, make sure to think about the following:
What standard is your property and who are you looking to market it towards? i.e. Luxury, budget, family-friendly etc.
Think about your property’s selling points; is it dog-friendly for example, or could you class it as wheelchair-friendly? Does your property have any unique or desired features? Think hot tubs, enclosed gardens or sea views. What is the bathroom to bedroom ratio like?
Your property location is a very important factor too. Is it near the coast or in a National Park? Is it in a popular town or village? Is it in easy walking distance from a shop or pub?
Make sure to look at similar holiday properties in your area and take note of how much they are charging.
Our Pricing Structure video explains how we price your holiday home in further detail:
At Sykes we closely watch the holiday market and use a tool called “Income Maximisation” to manage our Property Owner's Prices.
What is Income Maximisation?
It is an advanced Revenue Management system, designed by leading pricing and revenue management specialists.
In basic terms, by opting into Income Maximisation our Property Owners give us the discretion to vary their agreed prices up to a certain percentage.
We will increase or decrease prices dependent on how well similar properties in the area are selling, trends in website searches and previous years’ data.
This system is managed by a team of experts who review every recommendation before prices are changed.
Why Sykes Have Created Income Maximisation?
The thought process behind Income Maximisation was twofold:
We knew our Owners could earn more income in busier periods and in such situations, time is of the essence. We could spend a few days contacting an Owner only for that demand to have dropped again.
We also saw an opportunity for Owners to increase their occupancy rates. It is often better to have a week booked at a slightly lower price than the property remaining empty with no income for that period.
How Income Maximisation Works
Once activated, we will monitor changes in the market and make price changes quickly.
If one of our Owners decides to opt into Income Maximisation there are four options for them to choose from:
Super Income Maximisation
This is our most popular option and the one that we would generally recommend.
Owners opted into Super Income Maximisation would give the Revenue Management team at Sykes the discretion to vary the agreed prices upwards (without limit) or downwards (limited to a 20% discount in the high season and 10% in the low season).
Full Income Maximisation
Full Income Maximisation means that our Owners would give us the discretion to vary the agreed prices upwards (without limit) or downwards (limited to a 10% discount).
Partial Income Maximisation
This option allows us to increase a property’s current prices by 25% where demand allows. We wouldn’t lower prices, however, we may contact the Property Owner with other pricing initiatives.
Partial Plus Income Maximisation
This option allows us to increase a property’s current prices by up to 25%, where demand allows and decrease prices by up to 10% within 4 weeks of the departure date.
Why do You Recommend Super Income Maximisation over the Other Options?
The honest answer is that it makes our Owners more money. In 2022, properties on Super Income Maximisation earned, on average, 42% more revenue and 44% bookings than those on Fixed Prices or Partial Income Maximisation.
For properties that don’t opt into any Income Maximisation option, this was 53% more revenue and 67% more bookings.
It may be better to explain through an example. We will use the fictitious Rose Cottage as our case study here:
The Owner of Rose Cottage in the Peak District has decided to opt into Super Income Maximisation.
Through searches and bookings, we are seeing a higher demand for a week in May. Our Revenue Managers and our advanced system will see this and look to make price increases relative to that increased demand. We react quickly and get 15% more for that week than the standard price.
It’s mid-December and the demand for January is lower than expected. We reduce the price of the property by up to 10% and secure a booking in a week that would have otherwise remained empty.
Short Breaks
According to Sykes' data, short breaks are in higher demand and offer strong earning potential for our Owners, with 10% of short break bookings for super peak being short breaks compared to 14% this year to date.
Our Short Breaks allow customers to easily find the holiday they are looking for and by accepting Short Breaks at your property, we can help you secure more bookings and income.
Short Breaks give you the opportunity to increase the amount your property earns per night and expose your property to a wider range of customers.
Each year we see a higher proportion of searches for Short Break bookings. We would recommend accepting all of the below Short Break types in order to make the most out of this increasingly growing market.
To make sure you get the most out of every week, customers will be encouraged to start their Short Break on a Friday/Saturday (depending on your usual changeover day) or on a Monday. Our Revenue Managers will constantly review performance in order to maximise the potential bookings and revenue that Short Breaks will bring to your property.
It is important to note that we constantly try to get the best possible rate for each booking. Therefore, Short Break prices will always start high to encourage a full week booking.
As the arrival date approaches, we will then make the Short Break prices more competitive in order to capitalise on demand.
The below rules for each Short Break type are the minimums we will go to within the given timescale. We have different Short Break types for different times of the year, giving you the option to decide when you want to offer Short Break discounts.
Once a property has taken a Short Break booking and achieved at least 75% of the base price, the Short Break price for the remaining part of the week may be lowered below the minimums mentioned above.
Peak Season Short Breaks (PSB) – August
Property sizes 1-3 bedrooms can see reductions no lower than 85% of the weekly price within 3 months from the arrival date, dropping to no lower than 75% within 1 month of the arrival date.
Larger properties (4 or more bedrooms) can see reductions no lower than 85% within 6 months, 75% within 3 months and 65% within 1 month.
Off Season Short Breaks (OSB) – April - October
Weekend short breaks during this period can be reduced no lower than 75% of the weekly price, dropping to 65% within 1 month of the arrival date. Midweek short breaks can go slightly lower, to 60% of the weekly price as a minimum.
Winter Short Breaks (WSB) – November - March
This Short Break type offers guests a set price for a stay of up to 3 nights. If they stay for 4 nights or more, the guest pays the full weekly price. We usually recommend the WSB price is set at 85% of your lowest Winter week.
This Short Break type is not restricted by standard changeover day, meaning prices are not inflated when crossing 2 weeks. If a Short Break booking crosses a Saturday a small increase may be applied where demand allows.
The WSB price is also the Floor Price, and acts as the minimum amount we can sell any break at your property for in the same calendar year.
Christmas and New Year Short Breaks (XSB)
These Short Breaks can be reduced to no lower than 85% of the Festive week price, dropping to 75% within 2 months.
Last Minute Breaks (LMB)
Last Minute Breaks mean a Short Break can be reduced to no lower than 60% of the weekly price but will never go below your property’s floor price. This discount is only applicable to a booking made within 14 days of the arrival date.
LMB is not restricted by the standard changeover day, in the same way as the WSB Short Break type.
Enhanced Short Breaks (ESB)
Enhanced Short Breaks follow the same rules as OSB, PSB or WSB depending on the season. The difference is once you’ve taken a Short Break booking the price for the remaining section of the week is optimised.
We do this by making the remaining days more flexible by not inflating the price when crossing your changeover day. This helps fill any gaps in your calendar.
Flexible Short Breaks
Flexible Short Breaks is a daily pricing option that, when used in conjunction with other Short Break types, fills gaps in availability and maximises Short Break booking potential.
Flexible Short Breaks works by assigning a percentage of the weekly price to each day.
More popular days such as Friday and Saturday are assigned a higher percentage than the quieter weekdays. A guest can book any number of nights (minimum of 2), with the percentage of each night being added together to give the price.
Need help with the next steps of your holiday letting journey?
If you're thinking of buying a holiday let or just need some advice, our property experts can help answer any queries you may have.
Owen, Holiday Let Content Writer
