5 Tips How to evaluate your local vacation rental market
Do you know what the first step is that you must do BEFORE you put your listing online?
If you said Market Analysis, you get a gold star!
Not many people would get this right, but if you want to stand above the competition, this is how you get started.
Even if you have a listing already, you can (and should) still do this!
This is also something I like to do with my unit once per quarter, just to check out any market changes.
Doing this has literally made me $1000s of extra dollars, as I have been able to raise my rates to match my competitors several times.
If I hadn’t done this, I would be out a lot of money. But more on that later, lets take a look at the nuts and bolts of a basic market analysis.
5 Steps for a Basic AirBnB Market Analysis.
Please note: this works equally well on other platforms, but this terminology is geared towards AirBnB
1. Start a property search
I would search for your specific neighborhood when possible, like Waikiki Beach is better than Honolulu in my case.
The more specific, the better as prices can vary widely even several blocks away.
If you can’t find your specific neighborhood, then search for your city, and just drag the map over to your exact area and make sure you have click on the option to update results as you move the map.
The Best practice is actually to do this both ways, and take note of any difference between the results. Sometimes the neighborhood search may not be super accurate, you know your area better
2. Book a Date in the near future
With your search complete, choose to book a date in the near future.
I usually start with about a month away. Also, choose a unit like yours: If you have a 2 bed 1 bath, search for that.
If you can’t find an exact match, search for something similar. Ideally, if you are in an urban area, you can even find listings in your same Building!
Now those will be a very accurate gauge of what kind of prices you can charge. But don’t just look at those, as who knows, they could be all listed by one owner who doesn’t have the pulse of the market so you always need more data points.
3. Review the results and fill out a spreadsheet
Now with your location area picked, and date chosen, start reviewing the results.
The goal here is find the 10 MOST similar listings. Order then from most similar to least similar in your spreadsheet (download our sample free).
Browsing the spaces in your area, start with properties in your same building and ones very close to your unit.
Create a pricing grid, and record the results. We want to be analytical here, not just anecdotal. Note the differences in prices and amenities.
Also note that some streets may be pricier than others due to neighborhood amenities, like in Waikiki, the streets actually ON the beach is more costly than the street one block from the beach, go figure!
Other things like the subway on your street, or ocean view, etc can have a big impact. Even though differences may be small, price impact can be large. Make sure to evaluate your market, private room, 2 bedroom, etc to try and compare Apples to Apples where possible.
4. Review Competitor Quality
Next, take a look the production quality of your top similar listings.
We want to try and gauge their popularity, they vacancy rate, and the host quality. Record things like how nice are photos? How long is description? How long and how many reviews do they have? Long reviews mean hosts are putting a lot of time and effort into the unit or the interaction.
You can tell the type of host by the photos. Taken on an iphone? Hot tubs or roof decks, or others without even linen service.
Does description go “below the fold” – it should. If not, then description is very short and not much thought went into the listing.
Look at amenities list? How popular is the property? Are there a lot of reviews? You can’t always tell by the calendar to see how booked are they, so take it with a grain of salt. But it also can be a good indication when taken across several units.
Also, did they get a lot of reviews this month? Or are reviews old? Multiple reviews per month often shows that the listing is very popular or unique.
What are the reservations taken several months out? Are they pretty fully booked? Or are only weekends booked?
Knowing all these details for several units can help you figure out your market and if you should raise prices at certain times. What sticks out? Are they all booked out several months in advance?
Make sure to look at several units and look for trends. Most popular is usually Xmas and New Years eve.
Lastly, lets look at Host metrics. What is their response rate and average time for response. Also did host put effort into their profile? How are the reviews, do they respond to negative reviews? If the host is not responding to negative reviews, then this host isn’t taking their very seriously. That means there is opportunity.
Are there any trends in the reviews that can be capitalized on. The standard is 100% response rate. This will give you ideas on what you should do with your space, ways to improve your listing and your position.
5. Put your knowledge to good use!
OK now that we have drilled down on your 10 most similar units and learned everything about them that we can from their listings, its time to test out this knowledge to use!
How does your unit stack up? For instance, if there is a unit in your building the exact same size, but with very nice professional pictures, 50 5 star reviews, and a ton of extras included like a welcome gift of wine, free surfboard, etc, then you probably can’t charge as much as them if you are just getting started.
On the other hand, if there is a unit that looks worse than yours in the photos and has no reviews while you have a handful, you can charge more than them quite easily.
You just have to see where you fit in the overall market place, and pick a price from there.
OK that about wraps up our simple market review and pricing strategy! Besides pricing, the other thing that this review should have done for you is give you a better sense of your competition, and perhaps some ideas about how you can improve your unit to be the BEST in your local neighborhood.
Don’t forget to download our analysis template FREE: