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When can you raise the rates at your vacation rental? The St Barths Case.

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How do you know when it is OK for you to raise the prices for a week at your vacation rental? There are online tools around that help you automate rental pricing, such as BeyondPricing and Everbooked. They work quite well if your rental is listed on Airbnb and is located in an area where these services are available. My St Barths vacation rentals are indeed listed on Airbnb, but the island is not yet served by either of these pricing automation companies. So, what can you do if you are in the same boat as me?

Launching a new vacation rental from scratch

When I launched my luxury designer rental for 2, BelAmour, in January 2015, I decided to use a new commercial strategy:

  • List my rental on the likes of Airbnb, HomeAway and Flipkey,
  • Go direct and build my own website,
  • Create a luxury package, with concierge services provided by Eden Rock, the most famous 5-star hotel on the island (Package sold by me and by the Eden Rock).

Most visitors to St Barths book their villa through a luxury vacation rental management company, they are not used to booking direct. So, I was a bit under stress, starting with an empty client list.
9 months later, I am quite happy to say that the villa was full from January to May, about 20% full in June and July, and again full in August. I have already had 2 guests rebook the villa and 1 new guest booking the entire month of February 2016 in advance. Great!
Now, is it already time for me to raise my prices? In order to have an idea of what to do, I talked with the most seasoned vacation rental manager in St Barths. He’s been renting out villas for the last 30 years, so he knows a few things about the rental market. I thought that I would share his rule of thumb with you, as you can compare it with the way you move your own prices.

When to raise rental rates in St Barths

First, some context: St Barths is a Caribbean island. It is a winter destination. The high season starts in December 15 and ends in April 15. The peak season is around Christmas and New Year’s Eve, when rental rates are multiplied by 3 when compared with the low season. For instance, my bigger St Barts villa, Domingue, rents for $30,000 a week at Christmas time.
The low season in St Barths is then from April 15 to December 15, with almost no booking in September / October (hurricane season).
St Barths is also a place that people fall in love with and come back to yearly.
Now that you know about the seasonality of the rental business on the island, you can understand the recommendation from this vacation rental manager:
– A vacation rental owner should make 85% of their money during the high season (peak season included).
– When 40% of the bookings is coming from repeat visitors, it is time to raise the prices.
So, in my case, it means that I have to wait a bit before raising my prices, even if I am starting to get some repeat business for this villa. When I am doing, though, is reducing my costs by not systematically offering complimentary car rental for my guests. This way, my rates do not move, but my margins do go up.
I can also probably lower a bit my rated in the soft months (June – July) until I get repeat visitors in that period. I am thinking about creating a special offer for that time of the year, with a lower price and a bit less services, to keep my margins good.

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Rental Scale-Up

Thibault is the founder of Rental Scale-Up. He owns vacation rentals in St. Barths and Bali. He also leads innovative projects for companies within the vacation rental industry. Feel free to reach out to Thibaut Masson on Linkedin.

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