After attending the first day of DARM 2021, I’m left with this overwhelming thought that something is missing from the conversation. As property managers search for a silver bullet to solve all their problems and vendors search for leads to justify their booths there’s very much an us versus them mentality.
Vacation rentals versus hotels. Property managers versus home owners. AirDNA versus Key Data. Direct bookings versus OTAs. PriceLabs versus Wheelhouse versus Rented versus Beyond. The Francis Marion versus electricity.
But it doesn’t have to be that way. Much like the team in Remember the Titans, we can put our differences aside, come together, and be better for it (and hopefully win a little too). We just have to understand the game a little better and figure out the roles we all play.
I understand that not everybody has the same knowledge of revenue management or football that I do, so I’ll try to keep it light. But I also understand tons of people know more about revenue management and football than I do … and to those people I say don’t get too technical and appreciate the analogy.
“Now, I ain’t saying that I’m perfect, ‘cause I’m not. And I ain’t gonna never be. None of us are … but this team is perfect.” – Julius Campbell, Remember the Titans
Why Revenue Management Is Like Football
Whether you’re a casual fan, a Super Bowl winning coach, or a seasoned GM, there’s disagreement about what makes a winning football team. Some say a good offensive/defensive scheme wins games. Others say great players win games. Coaches get hired to win games. Given a choice, anybody would take a good scheme with great players led by an awesome coach.
And that could be your vacation rental business.
The truth is that all of them contribute to a winning team. The right scheme gets the most out of your players. Players can make the most out of your plays. And a top-notch coach knows how to put the two together to get both.
And that’s why revenue management is like football. Great players don’t win championships alone. The best game plan falls apart if the players can’t execute it. And without a coach that can adjust on the fly and make the tough decisions the team won’t go all the way. Revenue management needs multiple components too.
Debating whether humans or dynamic pricing tools are better, whether direct bookings or OTAs are more important, or whether scraped or fed data is best only leaves money on the table.
Every person that says pricing algorithms are worthless has developed some sort of algorithm (defined as a sequence of operations, a systematic way of calculating something) to price themselves. Anyone touting their direct bookings is definitely taking bookings from OTAs. Each person that doesn’t trust scraped or fed data is leaving key insights on the table they wish they had.
Revenue management is like a football team. Anybody should choose pricing algorithms and a revenue manager, direct bookings and OTAs, scraped and fed data. They all have a role to play.
The Roles
OTAs are your wide receivers. Giving them the ball can be costly but there’s also a huge payout when it works. Like a wide receiver picking up a lot of yards on a play, OTAs bring lots of bookings. However, like an all-pass offense it’s going to be boom or bust. When the going is good its really good but any dry spell can really slow down the offense and a vacation rental’s revenue.
Direct bookings are your running backs. Running backs reliably pick up much needed yards and help balance out an offense. Direct bookings do the same for vacation rentals. They bring in key repeat business and balance out OTA bookings. Its what you trust to punch it in on the goal line and score.
Good properties are your offensive line. Good offensive linemen set the stage for any play and with a good offensive line any run or pass is more effective. Good properties position your portfolio to be successful in everything you do. Whether your listed on the OTAs or count on direct bookings, good properties make it easier to pull off both. It’s the foundation of your revenue offense.
Market data is your scouting report. A good team prepares for the teams they’re competing against. Knowing what they’re doing, when, and how all help a team prepare for the game ahead. As you battle it out with other vacation rentals knowing what your competitors are doing gives you an edge on the competition and help you develop a winning game plan.
Dynamic pricing tools are your plays. Dynamic pricing tools draw up the most effective plays to run to get the yards you need given how your other players have performed. A good play positions your players to succeed and a great pricing tool sets up your listings to do what they need to do to get more revenue.
Finally, a good property or revenue manager is like a good coach and quarterback. A good property manager lists on the best OTAs, drives direct bookings, scouts the other team, and uses the best plays. They line everything up to have the best team possible. But even then, the team still needs direction. A revenue manager knows how to use market data like a coach views a scouting report. They know when to rely on OTAs and when to push direct bookings like a quarterback reads a run-pass-option. A revenue manager makes a strategy and sells nights at the right price, at the right time. They make a game plan and call the right play, at the right time.
USC @ Texas
Once upon a time I revenue managed a multi-unit property in Austin right by the University of Texas. For that particular football season USC was playing at Texas in an epic rematch of the classic national championship game. Normally the property saw a 10% increase in ADR on football weekends, but I knew this was going to be big. While a normal matchup usually only brought some drive-to traffic this was going to be a nationally important game. The ticket resale prices only confirmed this.
However, after checking my market data, nobody else in the market was raising their rates. I knew that our direct bookings guests would be interested but a whole new demographic would look to the OTAs to accommodate their travel. I also believed that the other professional revenue managers didn’t really understand how big of an event this would be. They were pricing based of their historical bookings which really weren’t comparable. I knew our normal pricing play wouldn’t cut it and decided on a hail marry. I raised rates to almost twice their normal amount. With my wide receivers and running backs in place I made the call to go for it.
The results were amazing. All of the competition booked extremely fast, once the football season hype started, at extremely low rates. My stakeholders were worried everyone else was booking fast and we were not. But the competition sold out and soon we were the only game left in town. We booked those nights and our RevPAR was twice as high as the market. Even with the best team assembled, I still had to make the gutsy call and use all of it effectively.
Go Big (at DARM) Or Go Home
You need to make the call.
Every property manager is looking for the silver bullet and every vendor seems to have it. But the answer is a bit more complicated than that. If you’re seeking a silver bullet than you’ll be disappointed by anything less, even if it’s useful. And if every vendor promises silver bullets but never delivers than property managers will grow skeptical of any bullet they see. It’s a lose-lose for the industry.
Rather than write off the OTAs we should think of the benefits they bring and how that fits into our larger strategy. Rather than say that the data is bad quality we should think of how to properly use it. Rather than think a tool can 100% optimize pricing we should think of the work it takes off our plates. Rather than think that a property manager always knows best or never knows best we should think of what they bring to the table that a service provider cannot.
Everybody has a role in this industry. We just have to figure out what it is. And I’m hoping at the second day of DARM we can do just that.
“Whatever kind of ambition it took to do what you did around here, this would could use a lot more of it.” - Carol Boone, Remember the Titians