How low will you go?
Tuesday, May 6, 2008 @ 11:35 PM
When the market is saturated with rental apartments and there is a credit crunch in the UK is it worth reducing your prices to bring yourself into the competitive rental market?
I was with some owners the other day and they commented on the fact that I am currently about 300 euros more expensive than other properties in the same complex. The owners phoned another agency and they said they were fully booked for peak season, i.e. August but when they compared rental prices they were a lot cheaper.
So many owners look at rental weeks but not rental prices v costs incurred. There are times when you can make more money on fewer weeks at a higher price than more weeks at a lower price. Don’t be blinded by your weeks booked. Remember weeks booked have to work with service costs, utility costs, commission rates. At the end of the day you need to look at the money you receive in your hand rather than the money you envisage per rental week. If the price is too low and the guest don’t respect the property who will pay for any damages? If you have every week booked at a low rate who will pay for the electricity when the guests leave the air con on all day? Just bear in mind that sometimes less weeks at a higher rate can mean less utility costs, less maintenance fees as you have a different clientele.
Rather than reduce your rates have you considered giving good discounts for second or third week bookings? The more weeks booked at a decent rate, the more money made as you normally only pay for service costs per booking. So if it is one week, don’t reduce, if two or three weeks then be more flexible with your prices. Offer more discounts for returning clients.
A lot of agents/people are offering cheaper rates to get the bookings in but is it always the right decision. I am holding out at the moment, I will offer discounts on longer rentals but for a week I think if they want a quality apartment with a quality service they can pay for it. Luckily for me, other agents have folded and gone for cheaper rates and now they are booked up I can offer my apartments at the rates I want. At the end of the day – supply and demand! I want my owners to have a decent return for a decent property so will price accordingly.