Why Your Pricing Tool Isn't Working (And the 5 Fixes)

Jasper Ribbers:

What's up, everybody? Welcome back to another episode of Get Paid for Your Pad. It is Monday, so we're doing an episode of RevUp, where I provide advice and insights of our revenue management operations behind the scenes, sharing what we're learning, what we're seeing. And today, what I want to talk about is the five most common mistakes that we see operators make in revenue management.

We are now, we manage over 50 portfolios now worldwide with over, I think it's close to 120 million in managed revenue. And we've had hundreds and hundreds of companies apply for our revenue management service. And when a company applies for our service, what we do is we create a revenue report. So we get access to their pricing tool and we go look underneath the hood of the pricing strategy. And we figure out where the biggest opportunities are. And then we communicate that to the company. And then based on what we find, sometimes they will sign up for our service. And sometimes they're doing a great job. And we just tell them, hey, here's a couple of things that you can improve on. But otherwise, you're doing a great job. Keep doing what you're doing.

So today, what I want to do is I want to go through the five most common mistakes that we see as we're doing these revenue reports. So we're doing like several of these reports every single week, sometimes even every single day. And so we get to see a lot of hosts pricing strategies, right? And there's a number of things that just kind of keep coming up. And so I made a list of the five most common ones that I see.

And so I think it'd be good if you manage your revenue yourself. I think it'd be good to go through your portfolio and make sure that you're not making these mistakes. Because sometimes they can be quite costly and with the current market circumstances where we're not seeing any growth really in terms of revenue year over year. In fact, it seems like the start of the year has been a little bit slow. And so in that environment, it's extremely important that you don't leave any money on the table.

Mistake #1: Setting a Maximum Price

So I'm going to go through these five here. The first is setting a maximum price.

So I see a lot of operators set maximum prices. And I'm not a fan of setting a maximum price. There are some rare occasions where it may make sense to do that. But most of the time, it's not a good idea to have a maximum price. And so why is it not a good idea to have a maximum price? Because we don't want to limit ourselves to a certain price if demand suddenly increases a lot, right?

I think the reason why people put maximum prices is, well, the first reason, because I've been asking these operators, like, hey, why are you putting a maximum price, right? Well, the first answer I got was kind of surprising was, well, I figure I thought I had to fill everything out, and there's a place where you can put a max price. So I thought I have to put a max price, and that otherwise the tool wouldn't work. And I'm talking, as always, I'm talking about PriceLabs, but other tools probably have a max pricing functionality as well.

But I thought it was interesting. So this person thought, hey, because there is a space where you can put a max price, I am required to put one, which is not the case. You do not have to put a maximum price in PriceLabs, at least. And I don't think any other tools either. Now what happens if you don't put a maximum price, PriceLabs will still have a safety maximum. So it's not going to put your price at $200,000 a night. It does have an upper limit.

And also has a lower limit as well, right. So if you don't put a minimum price, then PriceLabs will have a safety minimum price that I think it's a percentage of your base rate, but minimum prices are very important because you probably have a price in mind where you don't want to go below because the quality of the guests might go down or it's not worth your time, right. So minimum prices are definitely important, but maximum prices I would stay away from.

Now, the second reason why people put maximum prices is because they put a base price and then they look at the pricing over the year and they'll see that for certain peak demand dates, the price is extremely high, right? And they feel like, hey, that's not realistic. I don't think anyone's going to book at that price. So let me just put a maximum price. And then they come up with a number that they think is the most that anybody would ever pay based on historical data, based on their gut feeling.

If PriceLabs or any other pricing tool, if peak dates or certain dates are priced way too high and you think it's unrealistic, that's a sign that you need to look at your settings. It could be that your demand sensitivity is too high. It could also be that maybe your base price is too high for that time period. And so it's a clear signal that there's probably something wrong with your pricing setup. So instead of putting a max price to cap those prices, I would recommend go and look at all the settings and ask yourself, hey, why is PriceLabs jacking up these prices that much?

Also, I would challenge yourself on the idea of what people are willing to pay. We're going to be doing another episode about the World Cup, but I've already seen some bookings coming in. I saw a booking come in for a three bedroom at $1,800 a night. I saw a booking come in for a two-bedroom in Seattle for, I think it was 12 or 1300 a night. And so for peak demand dates, like there's no real way to know what people are willing to pay except for actually putting the price out there and seeing what happens, right?

So yeah, that's my first recommendation is if you're using a max price, like really ask yourself, challenge yourself on your idea of like what people will be willing to pay. And then secondly, you know, check to see if you really think it's overpriced and check your settings and see why PriceLabs is putting the price so high.

Now, if you do come to the conclusion that there are certain peak dates where, and this happens sometimes, because the way that PriceLabs demand sensitivity algorithm works or the setting, how it works is when PriceLabs sees a lot of demand come into the market, like more than usual, it's going to increase the price based on how much demand is hitting the market.

Well, sometimes when a lot of demand hits the market, let's say a concert was announced and we suddenly see a big influx of bookings coming in. I think PriceLabs tends to be on the safe side of raising the price a little bit higher versus a little bit lower because the risk is more on the downside with these type of, especially if it's far out, the risk is more on the downside, right? The risk that you get booked at a price point that's too low is larger than the risk of putting the price too high and not getting booked because you're so far out, you still have a lot of time to bring the price down and get a booking. Versus if you just get booked at a price that's too low, then that damage is done right away, unless you're going to cancel the booking, which has a lot of negative consequences, of course.

So I think if you do feel like the price is too high for certain dates, I would much rather put a manual override to bring that price down a little bit instead of like putting a max because when you put a max price, that's going to apply to the entire year. Not even to the entire year. If your calendar is open for more than a year, it's going to apply to any future date that's open. And that's not a great idea because if demand suddenly increases a lot for certain dates, you're going to be maxed out. You might hit that max, right? And you might be missing out on revenue.

I think there's better ways to, first of all, you've got to challenge yourself, do I really need? Is the pricing really too high? And if so, it's better to look at your settings and if you think you should decrease it, which it does happen sometimes. We also have some portfolios where, for some peak demand dates, the settings are great for the whole year, but just there's a couple peak demand dates where the factor that PriceLabs is putting on that demand is just so high that the price just becomes really unrealistic. I'm talking about, let's say, the highest you've ever gotten for a place is, let's say, 1,000 a night. It's unlikely someone's going to book it at 3,000 a night, unless there's something crazy going on, like Taylor Swift concert or whatnot. But anyway, if you do think that it's too high, then just put a manual override on those dates.

Mistake #2: Unbookable Nights

Now, second mistakes that I see, and this kind of surprises me because I thought by now, most people, I mean, pretty much everyone is using a pricing tool. And one of the benefits of a pricing tool is dynamic minimum night stay settings, right? But I still see operators who have a static minimum night stay profile. So for example, let's say they have a two night minimum night stay for bookings that come in within 30 days of check-in. And then they'll raise it to like a three or four or five farther out. But there's no orphan logic set up.

So if you have a five-night minimum night stay and there's a four-night gap, that gap is unbookable. And you'd be surprised how many PriceLabs accounts I see where I find unbookable nights. And sometimes they're not as obvious. Sometimes they're very obvious. Sometimes they're not as obvious.

If it's a lack of orphan gap logic, then PriceLabs will typically put that little warning signal on your calendar. But not everybody has that turned on. So I guess that's a quick tip as well, is if you go in your multi-calendar, make sure you toggle on the warning signal, the warning sign for unbookable nights, because otherwise you wouldn't be aware of it.

Now, there are situations where that unbookable symbol doesn't show up, but it's still unbookable. I've seen scenarios where there's, for example, a check-in or a check-out restriction. But when you look at the multi-calendar and PriceLabs, it doesn't tell you that the night isn't bookable. And then if you actually go and try and book, it is actually unbookable because there is some type of restriction around check-in or check-out.

So that's my second tip is that's a big mistake. Unbookable nights, obviously, is not a good idea to have because nobody can book them, right? So pretty simple, but I do see it quite a lot. So I do recommend and make sure that you check your entire calendar. Make sure there's no unbookable nights whatsoever.

Mistake #3: Static Minimum Prices

Number three, yeah, one mistake that I see is people tend to have one minimum for the entire year, which is that's not a great. I mean, in some markets, that's fine. But if you're in a market where you have some really high demand dates, especially for peak demand dates, you want to make sure you don't just raise that price, but you've got to make sure you raise your minimum price as well for peak dates.

Because imagine, let's just talk about the World Cup since this is coming up. Now imagine we have our prices at $1,500 a night for let's say a three bedroom or something. And normally this unit will sell for like $300, $400, $500 a night. Now, if somebody books that property and they cancel last minute, that unit is now going to be available. But because during the World Cup, there's going to be such a short supply of inventory in a lot of instances, you can probably still sell that unit at a really high price point, maybe not the original price point that you got.

But you can definitely still sell it at a premium price. Now, if you have aggressive last minute discounts set up, which a lot of operators do, or maybe you have occupancy-based adjustments, either way, like last minute, the price is probably going to be pushed down. So if you don't have an adjusted minimum there, it might push it down all the way or close to your global minimum. And that would be a bargain for a peak demand date, like when there's a game for the World Cup.

And this happens sometimes. Actually, the way that I learned about this is because it happened to me. And so the moment that that's usually how things like this go, you make a mistake and you see the impact and you're like, all right, we got to avoid that.

So make sure that any of your peak dates on your calendar, make sure that you have your minimum prices adjusted. The best way to do that in PriceLabs is on the seasonal profiles. Right, typically for peak demand dates, you would have a different base price as well. But even if you don't have a different base price, if you have one global base price that works well for you, I would still go and create a seasonal profile and create a profile for each of your peak demand dates and make sure the minimums are, let's say like at least double, maybe triple, depending on how high demand the dates are.

But if you don't put an elevated minimum, then you run the risk of getting a last minute cancellation and then booking your property at a much lower rate than you would want to.

Mistake #4: Overly Restrictive Minimum Night Stay Settings

Number four is too restrictive minimum night stay settings. I see this probably in two thirds or maybe even three fourths. So like 75% of the portfolios that we analyze. I don't know why, but for some reason there seems to be some consensus around in the industry that our minimum night stay settings should be more restrictive further out. And in some situations, there might be something to be said for that.

For example, in another podcast, I talked about these long weekends, like these long holiday weekends, right? It may make sense to put like a three night minimum night stay to try and capture the whole long weekend, the holiday weekend, also for Thanksgiving or for Christmas. It might make sense to have a higher minimum night stay than you usually, than usually is the case.

But just by default to say, hey, if somebody books more than 30 days out, I want a three night stay. If they book more than 60 days out, I want a four-night stay. That doesn't really make sense, because now you have a rolling window that where, no matter what season you're in, those settings are going to apply just because they're far out. That doesn't really make sense, because for two reasons.

Number one, if you're going into your low season, no matter how long in advance people want to book in your low season, that's the hardest part to get bookings. So we should allow as much flexibility as possible for people to book those low season dates.

So right now we're in January. Let's just take a market where the summer is kind of low season. I think some of the hotter areas of the states, like Florida, certain areas in Florida have a weaker season. Maybe probably in May is already a pretty weak season. And then I think July and August, now we have the World Cup, so July is going to be a bit elevated. Anyway, let's look at May, for example. May is a weak month in Miami. So if we can get any booking that we can get now, we should take it.

So you definitely don't want to have a three, four, five, night minimum night stay for May in Miami, because there's very little demand. So you want to get as much as possible. So that's why it doesn't really make sense to have that rolling window.

What makes more sense is to either say, OK, we're going to have a flexible minimum night stay strategy across the entire calendar. So typically, it would be like a two-night minimum night stay, right? Unless you want to do one-night stays, which if you can, is beneficial. But typically, we don't really want people to book these one-night stays too far out. But if you're comfortable with it, if you're not worried about any challenges with one-night stays, then it actually could be very profitable to just have a one-night minimum night stay across the entire calendar. It depends a bit on the market.

But anyway, a two-night minimum night stay across the calendar is typically a pretty good starting point. So instead of starting from, let's be really restrictive, let's just start with a two-night minimum night stay across your calendar. And then ask yourself, really challenge yourself, OK, where do I need to restrict this more? Do I need to restrict this more in the summer? Do I need to restrict it more on the holiday weekends? But really challenge yourself and only put that restriction if it's very clear to you that it's going to help revenue.

So outside of operational concerns. But just to have a three night, minimum night stay, 40 days out, or four nights, 50 days out, or 60 days out, and then five nights, 90 days out, it just doesn't really make sense. There's no way that that's going to be the revenue maximizing strategy. Because it's going to apply to every single season, the same. But the seasons are different.

And in general, more flexibility gives more revenue because people are willing to pay higher prices for shorter stays.

Mistake #5: Ignoring the Early Booking Window

So last but not least, a very important point. If you've been listening to this podcast for a while, then you've probably heard us talk about pacing quite a lot. I would say pacing is probably the most important metric to pay attention to because in the end of the day, you could run close to 100% occupancy, but still be missing out on a lot of money because you're booking too last minute.

And we've seen this multiple times with clients that have joined our service, where they are like, hey, I don't think that you're going to be able to improve a lot because I'm 90% occupied. How much room is there? Well, if you were booking earlier in the booking window, we might still get 90% occupancy, but we might be able to get a higher ADR.

Right. So that's why pacing is so important. It's not just about like how much occupancy do you achieve. It's like, when are those bookings coming in? Because if they're all coming in last minute, you're going to have a really low ADR, right. So controlling the booking windows and making sure that you're getting your fair share of the demands that's hitting the market is extremely important.

And this is a mistake that I see over and over and over and over again. When people apply for our service, I go into the PriceLabs and whatever I see, I see last minute price management. So I see overrides, last minute in the next week, the next two weeks, maybe even the next three weeks. But when I look two months out, three months out, four months out, it's pretty clear to me that no one's really looking at that.

And this is very typical for operators who do like founders or CEOs that do the revenue management as a side, as one of the many things that they're responsible for in the business. If you have like one or two hours a week to look at the pricing, you're going to look at next week, right? You're going to look at next week, the next seven days. I got some units that are not booked for the weekend. All right, let me lower those prices a bit. Let me put a discount, a promotion, or whatever it is.

Oh, next week, my weekdays look a little empty. All right, let me check down the prices a little bit for that week, right? By the time you've gone through your last minute inventory management, time's up, something else going on, cleaning issue, maintenance issue, you got to send out your owner's statements, you got a phone call, you know, you're going to get distracted at some point with something.

And I think that way, yeah, the early part of the booking window, like three or four or five months from now is usually ignored. And it's very obvious to me when I look at these pricing tools because I see that pacing tends to be way off. Usually, people are pacing behind from what I see early in the booking window.

And the rationale is probably like, hey, this is five months out. I'm not too worried about it. I'm worried about next week. I'm worried about two weeks from now. That's the more feels like the more urgent thing to fix.

But that's questionable because when you miss out on those early bookings, you miss out on some really good ADR potential that you could book at. And now if you don't get your fair share of the bookings early in the booking window, now you're going to have to fill up more last minute. And obviously, you're going to get those lower prices.

We work with a company where literally their pacing was pretty much the only thing we changed. They already had a revenue manager, you know, who's doing a pretty reasonable job, but they weren't looking at the pacing. And just by changing the booking window, we were able to increase their RevPAR in 2025 by 35%, just the pacing. I know it sounds crazy, but like we presented on this at the VRMA actually. And so I created all these screenshots to show.

And compared to last year in the summer, we were like exact same occupancy, but our ADR was just like 30, 35, 40% higher because we were booking earlier in the booking window.

So controlling that booking window and not ignoring the early part of the booking window, right? So when you go in, at least in PriceLabs, if you go on the neighborhood data or you go into your market dashboard, you can see when people are booking units in your market. You can see on the graph. It's very simple to see. You're going to see a red line on the neighborhood data graph. You're going to see a red line. It's probably going to come down. One month from now, you might see like 20%, 30%, 40%, 50% occupancy a couple months from now, depending on what market you're in, of course.

But you're going to see a red line that goes down. And where it hits the x-axis, that's obviously the end of the booking window, because people are not booking beyond that point. Sometimes you'll see a couple little spikes for Thanksgiving next year or Christmas next year.

But what you really want to do is you want to look and see, hey, what dates are people booking for right now? And make sure that your prices are competitive. And don't ignore that first part of the booking window thinking, oh, I have plenty of time to fill that unit. It's not just about filling the unit. It's about getting the best price possible for the unit.

Recap and Next Steps

So those are the five most common mistakes I see from analyzing, at this point, hundreds and hundreds and hundreds of PriceLabs, Wheelhouse, and Beyond Pricing accounts. The five biggest mistakes I see, these are fairly easy to fix. I mean, managing pacing is arguably the hardest part because it requires the most attention. It requires the most focus and time.

But not setting a maximum price, not having unbookable nights, make sure you have higher minimums for your peak seasons. Don't be too restrictive on your minimum night stay settings. And definitely don't just have a minimum-night-stay strategy that puts you further out. You're just making it more restrictive for no real reason other than, like, it's nice to get a longer booking. Yeah, it's nice to get a long booking. It's also nice to get a very short two-night booking at a really high ADR, right?

And then don't ignore the early booking window. So those are the five things that I recommend you focus on. Make sure you don't make these mistakes because they can be costly.

And of course, if you are interested in talking to us about your revenue management, we can do a free report for you. And then we can point by point, where you have the opportunity to improve. So we'll give you a report.

If we think it's a win-win, and we have a very specific client in mind that we want to work with, they have to do at least a million dollars in top-line revenue, but they also have to be good operators. We want to work with good operators. So we don't work with anybody. We are picky with who we work with. And so should you be, by the way. Everybody should be very picky in who they work with. Don't just work with anybody because they want to give you money.

But if we think it's a good fit, we'll make you an offer to join our service. But either way, you're going to get that report. So either way, you're going to get the feedback, which I think is very valuable.

So if you want that revenue report, go to freewyldfoundry.com/get-started or report. I think both those things work. And if you're a smaller operator, like again, we work with operators that do a million plus. But if you're slightly below that and you're growing, then that could be an option for us as well. We do make exceptions sometimes.

But yeah, with that said, I hope you enjoyed this podcast, this episode of RevUp. Of course, we'll be back next week on Monday with another episode about revenue management. So have a great week and we'll see you next time.