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Minimum night stay as a tool for revenue management for the short term rental investor

I have taken over management of many short term rentals that have a flat 3 night minimum stay. Owners have argued with me that this is “The way it’s always been done!” To that I say, “What about Saturday to Saturday bookings only? I thought that was the way it’s always been done…” This usually ends the conversation, as that model went by the wayside decades ago. The only thing constant about short term rentals is that they are constantly changing. As a short term rental host myself, I find that I enjoy these changing dynamics. Two days are never the same, both in how we run the business and in what our guests will think of next.

Minimum stay requirements fall into the “there are no rules” mindset very nicely. I use revenue management to raise and lower prices daily. I also use the same structure to raise and lower the minimum night stay. Please be aware that this is very market specific. There may be times in your market where a two week minimum stay would be appropriate (shout out to you, Augusta, GA). For the average short term rental market (please use this term very loosely), I recommend the following strategy:

6 months before the stay or longer: 4 night minimum stay

1 – 6 months before the stay or longer: 3 night minimum stay

5 days-1 month before the stay: 2 night minimum stay

Less than 5 nights before the stay: 1 night minimum stay

The concept is that the highest revenue would be achieved when the house is booked for a longer stay at a higher rate. If the host allows someone to book their home for two nights for a wedding 9 months from now, this closes off the calendar for a potentially longer booking, which would bring in more revenue. Once the home is booked for the most valuable nights, Friday and Saturday, the host is left to try to fill the weeknights and may have to discount them to fill the calendar. Guests who need a place for longer stays generally tend to book in advance since they are aware that homes are unlikely to be available for a long stay at the last minute. This can also make holiday bookings more profitable since they are in higher demand and tend to get booked months in advance.

Guests who only stay a night or two do plan in advance, but also tend to fill in a calendar with less notice as the guest is not worried about finding a place if the stay is very short. Setting a longer stay further out and then reducing the minimum stay as the date approaches gives the host every advantage with regards to revenue. It also provides a service to the guest needing the home for longer, because the home is available for them.

Another great way to increase revenue using the changing minimum stay requirement is to reduce the minimum stay requirement when what we call “orphan days” appear on a calendar. Let’s say Friday through Sunday are booked and the following Friday through Monday are booked, This leaves four nights unbooked between two profitable weekends. Hosts are either earning money or losing money, as unbooked nights still require utilities, so it is to the host’s advantage to grant a one night minimum stay for the orphan nights, no matter how far out the weekends are booked. This could appeal to business travelers or others who may just need Monday night but not the rest of the week, for example. Since many hosts use the “set it and forget it” two or three night minimum stay requirement, hosts who are aggressive with this form of revenue management can really serve the needs of guests. They can also get a bookings for nights that would normally be left empty.

Are you looking for creative, out of the box management for your short term rental home? Give Sid Was Here a call anytime.