How much should I charge for my holiday apartment?
Deciding how much to charge for a holiday apartment can feel overwhelming for an owner.
That is why the team at Alehost shares the approaches that have helped us throughout our work in holiday apartment management, so you can optimise pricing and pursue the best financial outcome for your property.
STEPS TO WORK OUT WHAT TO CHARGE FOR A HOLIDAY APARTMENT
1. Understand the marketing channel
First decide which channels to use. Airbnb and Booking.com are familiar options, but compare their audiences, operation, costs and suitability for your property rather than assuming one is always best.
Once you choose a channel, understand how pricing works on it. For example, Booking does not use the same promotional methods as Airbnb and its base rates. Also analyse commissions and other costs.
2. Calculate a rate that covers your costs
First calculate the operating break-even point: the income needed to cover fixed and variable costs. Recovering your initial investment is a separate analysis, also dependent on capital invested, financing and operating duration.
3. Research competitors
If Airbnb is your chosen channel, it may suggest a base price using your property’s characteristics and prices for similar accommodation.
However, at Alehost we recommend that you do not simply accept the suggested figure. You know your own property and should assess the price it can justify.
Research prices for holiday apartments nearby, their features, facilities and services, and use all the information available to decide your price.
Be realistic: overvaluing your property can reduce its perceived value for money and therefore its appeal and guest satisfaction.
4. Understand your guests
Consider your city, neighbourhood and the type of accommodation you offer.
Are visitors travelling for culture or business? Alone or with others? Are they families, younger travellers or couples? With that information, you can focus on a particular audience.
Building a complete profile of prospective guests helps you offer a better service and assess average nightly spending when they choose accommodation, allowing you to adapt your prices.
5. Establish a base rate
Using the previous steps and considering your break-even point, competitors’ prices and what your target audience typically pays, set a base nightly rate for the property.
Choose a pricing strategy for launching your apartment:
- Price skimming: set an initially high price, backed by suitable marketing investment, to reach a niche with strong purchasing power.
- Penetration pricing: a competitive introductory rate may help secure initial bookings, but it is not always the best approach. Define its duration, discount limit and minimum margin so a launch promotion does not become a recurring loss.
6. Review your prices daily
Do not make the mistake of setting a base rate and then forgetting about it. Optimise prices daily, considering the many factors affecting demand in your destination and the apartment’s particular area.
Key factors to consider include:
- Seasonality
- Day of the week: weekday or weekend
- Non-working days, long weekends and public holidays
- Major sporting events
- Major arts and entertainment events: concerts, music festivals, theatre productions, awards ceremonies and film premieres
- Conferences, trade fairs and business events
- Local celebrations
7. Stand out from competitors
Identify your distinguishing feature: the element that gives you a competitive advantage over other properties.
A real advantage in location, layout, equipment or service may justify a different price. Check its effect on conversion and reviews; an improvement does not ensure demand will hold at any price increase.
8. Additional services
Costs such as cleaning, repairs, maintenance and accommodating additional guests should already be included in the variable costs used to estimate the base rate in step 2.
You can still offer additional services that enhance the guest experience. Anticipate requests and prepare a complete list of services with detailed prices.
Decide which services are included and which are optional, considering their cost and value. A welcome gift may be a reasonable commercial choice; budget for it and communicate additional charges before booking.
9. Discounts and special offers
Whether you market through Booking or Airbnb or another platform, each may allow special prices at particular times or under conditions such as:
- Limited-time promotions.
- Weekly-stay discounts.
- Monthly-stay discounts.
- Advance-payment prices.
- Prices linked to cancellation policy.
Setting an appropriate rate is central to the success of your holiday apartment and deserves regular review. Daily research and optimisation are important parts of the process.
Analyse and forecast prices well in advance. Otherwise, a booking for a busy August holiday weekend could come in at an old base rate, costing you potential income.
Today, many tools can help, from features within booking platforms to standalone software and businesses dedicated to this work.
At Alehost, our revenue management professionals continually optimise property prices alongside comprehensive management, seeking the strongest returns the accommodation can offer.
A simple break-even price example
Assume monthly fixed costs of €1,200, 20 sold nights, variable costs of €20 per night and marketing costs equal to 15% of revenue. These are calculation assumptions, not market averages.
Break-even price = (1,200 / 20 + 20) / (1 − 0.15) = €94.12 per night.
With the same assumptions but only 15 sold nights, the break-even price rises to €117.65. This shows why pricing cannot be separated from expected occupancy. Add or separate per-stay cleaning, taxes, management, financing and other costs for your situation carefully to avoid double counting.
After calculating break-even, work out your target margin and compare it with demand. A price needed to cover costs does not guarantee the market will pay it.
Alehost can help review the marketing and pricing strategy for your property.
