Revenue management: A glamping property’s guide to an effective pricing strategy

BY NATHAN MAYFIELD, VICE PRESIDENT OF RESNEXUS

INTRODUCTION TO REVENUE MANAGEMENT

Any business owner who sells a product knows the importance of pricing it appropriately. This means evaluating the market’s demand for the product and the business owner’s supply of the product. If the inventory vanishes quickly, this is an indicator that the product was priced too low. If the seller had charged more, then they would see greater revenue. Conversely, if the inventory is untouched by consumers, then it may be priced too high.

“Economic equilibrium” occurs when a product is priced low enough that all the inventory is purchased, but high enough that the demand doesn’t exceed the inventory. In other words, it’s when the customers pay exactly what the product is worth to them. Note however that this is not necessarily the target you’re aiming for. A general rule of thumb is that 90% occupancy indicates that you’ve set your rates appropriately.

Even if you price a product appropriately for the time though, that doesn’t mean you can just “set it and forget it.” The market isn’t static; supply and demand are constantly changing. But reevaluating a product’s ideal price at every conceivable moment isn’t efficient or even feasible. That’s where revenue management comes in.

In a nutshell, revenue management is the science behind pricing goods for maximum profit over time. It involves market predictions, monitoring customer habits, and adjusting prices based on current inventory and demand.

The laws of supply and demand apply to glamping site availability just like any other

“If you’re chiseling your prices on stone tablets, you’re not taking full advantage of the tools available to you.”

product. If you find that your property is polarized in terms of occupancy depending on the dates, then there may be opportunities to better manage your pricing. If you’re chiseling your prices on stone tablets, you’re not taking full advantage of the tools available to you.

Let’s discuss three categories of revenue management: Variable Pricing, Dynamic Pricing, and Yield Management. By carefully applying the principles and methods described here, you will be better equipped to form an effective pricing strategy for your glamping property and maximize profitability.

VARIABLE PRICING: NOT ALL UNITS ARE CREATED EQUAL

The first aspect to pricing for effective revenue management is to recognize the value of your glamping units compared to each other. If one unit has access to more amenities than others, or is more spacious, has a built-in bathroom, or is closest to the lake, then those are factors that add value to the unit. And if one unit has more value to the guests than others, then it should be priced as such. Not all glamping experiences are created equal.

DYNAMIC PRICING: HITTING 100% OCCUPANCY TOO SOON?

Being knowledgeable about your busy, shoulder, and off-seasons can go a long way towards efficient pricing. After all, if a product is in greater demand during a certain time period, then the price should increase to reflect that. And when demand is low, you still want to make use of your inventory, so a decrease in price will keep the guests coming in.

Perhaps the most common example of dynamic pricing is “weekend rates,” which charge guests slightly more for booking outside of normal weekdays. Remember, a unit on a Tuesday is a different product than the same unit on a Saturday. Sliding rates and minimum nights are also excellent ways to incentivize people to book longer stays.

“Remember, a unit on a Tuesday is a different product than the same unit on a Saturday.”

OCCUPANCY-BASED YIELD MANAGEMENT: SAVE TIME AND INCREASE REVENUE

Think about it: the higher your occupancy, the more exclusive the remaining available units are. With a smaller supply sample comes higher value. Guests who are late to book are vying for a highdemand product, since there are only a few left. And where there’s high demand, the price should reflect that.

Conversely, if your availability is largely open, then it’s a low-demand product at the given price.

Accounting for these occupancy variations with price adjustments is called yield management. This can be put into effect with a few simple rules. Here’s an example. When your occupancy is at 30% or lower, decrease your rates by a certain dollar amount or percentage. When your occupancy is at 70-80% or higher, instead increase your rates.

It’s a very simple method, but shockingly effective. This can help to account for the shifts in demand that you can’t predict. So when there’s an unexpected surge in glamping interest on a particular weekend, you’re remaining competitive and pricing appropriately.

Using automated yield management software is a time-saving and reliable way to incorporate rules like these, especially if it allows you to adjust your rates relating to unit class, occupancy percentage, day of the week, and number of days booked in advance.

CONCLUSION: EXPERIMENT, MEASURE YOUR RESULTS

In many ways, utilizing revenue management is much like the scientific method of hypothesis, experimentation, and measurement. You might have a hypothesis that you could enhance your profits by requiring a 3-night minimum for the weekends, and put such a rule into effect. But you shouldn’t neglect the final step to measure your results. Experimentation is nothing without data to go with it!

It’s important to measure your results logically, and without bias. Look at your profit margins from the previous years in the same date range as comparison, and try to eliminate any external variables. For example, you might feel as though you’re less profitable because your occupancy is lower, but your revenue might be higher overall. Conversely, it might seem like you’re giving away your units too cheaply, but the data might show a profit improvement over the previous year.

Organize and record your results monthly, and keep trying new things. Small adjustments can go a long way towards calibrating the most optimal pricing method. Be creative and think outside the box. If something doesn’t work, you’re not beholden to the same methods.

Remember, your prices don’t have to be written in stone, but should instead flow with market demands. An effective revenue management strategy is one that evolves over time, and there’s no better time than the present to start.

About Nathan Mayfield, Vice President of ResNexus

ResNexus Vice President Nathan Mayfield has over 20 years of marketing experience spanning multiple industries. He has over 12 years of operational experience ranging from a large billion dollar company down to a small local business. Nathan has worked with ResNexus for over 8 years and truly believes in their mission statement of “Elevating Industries, one business at a time, through service, innovation, and education!” In addition, Nathan Mayfield is a member of Forbes Business Council and regularly contributes articles and other important information for the hospitality industry on that platform.

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