Dynamic Pricing for Vacation not Apartment Rentals
Dynamic Pricing is best known by Americans through the travel industry. Revenue Optimization is a concept long known to savvy business owners that push high-profit rather than high-price products. Escapia is bringing dynamic pricing to vacation rentals through their “Last Minute” pricing engine, which suggests rental prices based upon a local availability, focusing upon the last minute deal. In the property rental industry, income for a rental-day is lost whenever it is not being purchased. Profit is lost when the total income for a rental period is less than the pro-rated fixed costs (such as property tax and interest on borrowed money) and variable costs (such as costs associated with ratifying the rental contract, average additional utilities used, and housekeeping). This multi-variable formula is relatively more simple to determine than the renter’s Willingness To Pay (WTP). WTP takes either deeper understanding of an individual or a greater sample size of a population. One may accept that the person sitting next to them on an airplane paid less 10% than them, but become irate when they find out that the identical apartment next door pays 5% less per month. This is why conventional apartment rentals will stick to relatively static pricing for some time to come.