New Reduced Rental Rates
February 1st, 2005 | Published in Announcements
We’ve reduced our rental rates. The new rates are:
- Winter: $169
- Summer and Holidays: $215
The previous rates were $189 for winter and $245 for summer. The rate reductions are based on a better understanding of our costs now that we’ve owned the house for a few months.
If you are interested about how we determine the rates that we charge, we’ve provided a detailed explanation below.
When we bought the beach house, we didn’t know how much it was going to cost and more importantly, how much to charge to rent the house. We analyzed 44 rental houses located in Rockaway Beach or neighboring beach communities.
The most surprising thing we found during this analysis was that there seemed to be little correlation between the features that a rental house offered and the price charged. With few exceptions, the price of the house seemed to be determined by the number of people that the house could accommodate.
It makes a lot of sense that the number of people a house sleeps would determine the price. Usually the owners of the houses are trying to help pay their mortgages and costs. The size of a house has a lot to do with the costs.
The average rental price per person a house could sleep was $17 in the winter and $22 in the summer. After we removed the outliers from the analysis, the price per person was $16 in the winter and $21 in the summer.
Our house can sleep up to 15 people in beds alone. Based on the median price of $16 and $21 per person in winter and summer respectively, the rental price would be $240 per night in the winter and $315 per night during the summer.
Those prices seemed far too expensive so we decided to price our house based on sleeping 12 people which seemed like a very comfortable number of people for the house. Basing the price on 12 people gave us $192 for winter (12*16) and $252 (12*21) in the summer. We adjusted the prices down to $189 and $245.
We felt like those prices were competitive given our research. In fact, we were offering many more ammenties for the price than the other 44 houses in the area.
However, our goal has never been to make a lot of money on the house. We’re merely looking for a way to assist us with our morgage so that we can continue enjoy the house that we have fallen in love with.
We planned to review of our pricing after a few months when we better understood our costs. The current rate reduction is based on this review. We’re not renting the house to become vacation rental mavens so we’re basing the price on our costs not desired profits.
By the same token, we’re new to vacation rentals. It may turn out that our estimates for how often we can rent the house are incorrect. If a few months from now, the new rates aren’t working, we may have to adjust them again.
The new rental rates are a tremendous bargain. The new rate is $11.26 per person in the winter and $14.33 per person in the summer.* Both prices are about 30% less than the market price. And you get all of the great features that our house offers.
So book the house now while it is still available.
NOTES:
If you remember earlier, I calculated the price based on sleeping 12 people instead of 15 because we felt that the price for sleeping 15 seemed far too expensive. You might be curious how the new pricing structure holds up if we use 12 people as the metric instead of 15. I was curious too so here it goes:
Calculations based on sleeping 12 people. Winter rates: $169 / 12 = $14.08 / $16 (median rate) = 88%.Summer rates: $215 / 12 = 17.91 / $21 (median rate) = 85.3%.
Not too shabby eh? We’re still 12 to 15% under the median market price per person.