Optimizing Rental Revenue

We are often asked just how revenue management actually works. In short, the answer is in many ways. The art of revenue management is to market the right site at the right rate to the right guest at the right time to achieve an optimal balance of ADR and occupancy.

One of the strategies our revenue management team implements is to monitor occupancies across all site types and increase the rates of the best performing site types to encourage bookings in the lower performing (and assumedly cheaper) site types. This may seem like common sense, but it’s counter to what most operators in the outdoor hospitality space follow: discounting. This age-old school of thought that you should discount your lowest performing sites to encourage occupancy. That mentality essentially requires you to compete against yourself and create value through lowering rates, and as a result your ADR.

Instead, increasing your top performing sites to a somewhat uncomfortable level creates an inherent value in the lower performing sites based on the rate relative to your best performing sites. And don’t be too concerned about being unashamed about those new higher rates you created for your top performing sites. Remember, it takes only X of people to think your rates are reasonable for the offering. If you lower your occupancy of these best performing sites by dramatically increase your average daily rate (ADR) while increasing the performance of your lower performing sites, you will substantially increase your revenue.

Here’s an example from an established property Horizon manages, using actual January 2022 vs. 2021 performance:

You’ll note that while ADR for each site type (except for Entry, the lowest performing sites) was increased, we increased those sites that performed the best in 2021: Deluxe, Premium, and XL sites, with XL sites ADR being increased a whopping 81.57%.

The result? Occupancies for Entry and Standard sites, our lowest performing at this property, increased by 26.63% and 20.01% respectively while also maintaining or increasing ADR. However, occupancies for the sites we increased rates substantially for (Deluxe, Premium, and XL) maintained or decreased slightly. However, overall ADR increased by 14.35% and resulting rental revenues increased an astonishing 28.82%!

While we’re thankful to have a revenue management team to manage this for our clients, individual operators can easily adopt this same strategy. Take a good look at your occupancy on a monthly basis for every site type on a year-over-year basis and combine those data points with what your guests share with you about their experiences in each site type. Once you identify your top performing site types, consider a more substantial rate increase for those site types (consider 30% or more) and a more moderate rate increase for your lower performing sites (consider 5-15%) and then closely monitor your booking trends. If the average number of bookings you usually receive doesn’t decrease and folks continue booking at your new rates, allow this strategy time to make a positive, meaningful impact on your occupancies. Remember, you can always adjust your rates!

For peak demand periods, don’t be afraid to try new rates outside of your comfort zone to improve your lower performing sites. The results will surprise you!