While hiring an Airbnb revenue manager is less popular than hiring an Airbnb property manager, these professionals are becoming more and more in demand as competition grows in the short term vacation rental industry. Smart and efficient revenue management is at the core of a successful Airbnb business, so owners need to find the best way to boost the income that their short term rental generates. There are two basic ways to do this: To develop your own pricing strategy or to hire a professional who can do Airbnb revenue management and pricing for you.
This article goes over the main tasks that go under Airbnb revenue management and how it works. We'll look at what being a DIY revenue manager entails and what hiring a professional means, along with the pros and cons of each option. By the end, you should feel more confident in making the right decision for your property.
What Is an Airbnb Revenue Manager?
An Airbnb revenue manager is a short term rental property expert who specializes in developing and implementing strategies for maximizing the income that a vacation rental produces. This is a professional who has in-depth knowledge of the local short term rental market as well as superior financial and analytical skills to devise and apply an efficient and profitable Airbnb pricing strategy.
The money that a vacation rental makes is the product of two main factors: 1) the average daily rate (ADR) and 2) your occupancy rate. This means that Airbnb revenue management is all about striking the right balance between nightly prices and occupancy. As daily rates go up, bookings slow down, and vice versa. The ultimate effect on rental income depends on both factors. So, it's the job of an Airbnb revenue manager to find the rates that will achieve the highest income for a property.
The specific responsibilities of Airbnb revenue managers include:
- Analyzing the market and the competition: First and foremost, you have to study the local Airbnb market and understand competitors before you are able to work out a revenue management strategy for a short term rental property. Everything you do needs to be based on the specifics of the area in terms of supply (other Airbnb listings) and demand (number of visitors and trends in visitations). This requires access to reliable Airbnb data to know what daily prices your comps are advertising, what occupancies they are achieving, and how much revenue they are earning.
- Setting up a revenue target: Next, you have to decide on a target for the monthly and annual income of the property that you're managing. This has to be a reasonable, yet effective number to optimize the performance of the rental and your own earnings. This target needs to be based on the performance of competitors while taking into account the upgrades and challenges of your own property.
- Applying a dynamic pricing strategy: A revenue manager often needs to design and implement a dynamic pricing strategy to reach their target revenue. Being part of the hospitality industry, short term rentals should be priced dynamically. This means that nightly rates need to be different each day depending on a wide range of factors including but not limited to travel and tourism trends, property performance, seasonal changes, competitor behavior, economic factors, and more.
- Accounting for seasonality: Seasonality is a major driver behind revenue in the vacation rental business. Guest demand changes significantly across seasons depending on the nature of your location (a beach resort vs a skiing destination vs a major city vs a national park, etc.), on weekdays vs weekends, around public holidays, local events, and other factors. An Airbnb revenue manager should be familiar with these trends and adjust the pricing strategy accordingly. Generally speaking, prices can go up during high season to maximize revenue, and go down during low season to capture more bookings.
- Taking into consideration operating expenses: When managing Airbnb revenue, it's important to account for the running costs of your property. The income that you generate should be more than enough to cover all expenses and leave positive cash flow.
- Incorporating other pricing factors: To optimize revenue, the pricing strategy should take into consideration additional factors besides seasonality including days of the week, duration of stay, lead time, special occasions, cancellation policy, pet policy, extra guests, additional services, and others. It's also a good idea to offer special discounts and promotions for extended stays, low-season reservations, repeat customers, and more.
- Actively working on ways to enhance revenue: While a good Airbnb revenue manager will work out an effective pricing strategy, the best ones will provide recommendations and take steps to increase the income potential of the property. This includes adding more amenities, optimizing the listing, enhancing their vacation rental marketing strategy, strengthening guest experiences, collecting guest reviews, and more.
- Constantly improving and adjusting: Finally, coming up with a pricing strategy once and setting it up on autopilot is not enough. You need to continuously keep an eye on competitors, track trends in supply and demand, and analyze performance to identify new potential ways to improve pricing and increase revenue.
Now that you know how many things go into the management of vacation rental revenue, you understand why it's so important to find the best way to do it - whether on your own or by hiring a professional.
Airbnb Revenue Management: DIY Approach
The first way to handle the revenue optimization strategy of your short term rental is to become a DIY Airbnb revenue manager. This means that you have to understand how the local Airbnb industry works, devise a strategy based on this, and execute it yourself.
How to Be a DIY Airbnb Revenue Manager
The steps that go into becoming the revenue manager of your short term rental are very similar to performing the responsibilities outlined above. They include:
- Getting access to short term rental data and analytical tools
- Conducting a detailed local short term rental market analysis
- Learning about travel trends and seasonality in supply and demand
- Identifying listings that are similar to yours and studying their pricing strategy and performance
- Analyzing how your property compares to comps to adjust pricing up or down
- Setting up a dynamic pricing strategy to optimize your Airbnb occupancy rate and income
- Identifying factors that might help grow revenue
- Continuously learning and optimizing your strategies over time
While performing this job on your own entails a lot of data collection, calculations, and active work, the good news is that there are software and automation tools that can help with this crucial aspect of managing an Airbnb property.
Some key features of Airbnb management software that focuses on revenue management and optimization include:
- Dynamic pricing tools: The best Airbnb pricing tools can virtually replace an Airbnb revenue manager by analyzing your property and comps, recommending optimal daily rates in line with your local market, and automatically publishing them on Airbnb and other listing websites. Still, it's a good idea for owners to check suggested prices and make sure that they are reasonable compared to competitors and season. Some top pricing tools include Summer, Wheelhouse, PriceLabs, Beyond, and AirDNA Smart Rates.
- Airbnb data and analytics tools: Short term rental data and analytics platforms provide Airbnb hosts with access to big data and readily available analysis that would require weeks of work to gather manually. Owners can use this data to analyze the strategies and performance of competitors, study the local market, and make data-informed decisions about their own pricing strategy. Some examples include Summer, AirDNA, Mashvisor, Rabbu, and Airbtics.
- Channel management tools: The best Airbnb channel managers can help optimize your revenue management by bringing together and unifying all active listings of a property. Ensuring that the same level of detail is provided on each listing (whether on Airbnb, Vrbo, Booking.com, or other more niche platforms) and that the same pricing strategy is applied to all listings helps achieve better results through enhanced marketing. Moreover, it helps to avoid double bookings and consequent poor reviews which can have a major negative impact on income. Some top vacation rental channel manager tools include Guesty, Hostaway, Hospitable, and Lodgify.
Using these tools, DIY Airbnb revenue managers can streamline processes and significantly decrease the time and effort they need to spend on this task.
Pros and Cons of DIY Airbnb Revenue Management
Being the revenue manager for your own vacation rental comes with some advantages and disadvantages that need to be taken into account when deciding if this is the right strategy for you and your property.
The main pros of DIY Airbnb revenue management include:
- Full control over the pricing strategy and the performance of your short term rental
- Fully customized pricing strategy (while professional revenue managers might apply a one-size-fit-all model)
- Focus on a single listing or a couple of listings
- In-depth knowledge of the local market and competition
- Prompt responses to changes in supply and demand
- Access to various tools
- No conflict of interest (while professional managers might have a few similar listings in the same area)
- No monthly fees or revenue sharing
The most considerable cons of DIY Airbnb revenue management are:
- Time- and effort-intense process
- Lack of expertise on the industry
- Competition from professionally managed properties
- Dependence on access to powerful software tools
- High Airbnb revenue management software subscription fees
- Little time left to spend on other aspects of your Airbnb rental business
- Inability to achieve passive income from vacation rentals
The benefits and drawbacks of DIY revenue management show that this could be a good approach for owners of one or few rentals who have experience in the hospitality industry and strong analytical skills. Meanwhile, this is not the right strategy for investors with multiple listings in different markets who have stressful and demanding full-time jobs and who are not good at business management, data collection, and math.
Airbnb Revenue Management: Hire a Professional
If you think that DIY revenue management is not for you, you can resort to hiring a professional to do the job. This is an expert who will work on optimizing the income that your property earns based on their hospitality knowledge and experience in exchange for a fee. Airbnb revenue managers can charge a flat monthly fee or a percentage of booking revenue.
You can choose from a few different types of professional Airbnb revenue managers:
- Full-time Airbnb revenue manager: You can hire a full-time person to work on your short term rental pricing strategy. This is a professional who specializes in the revenue management of vacation rentals and has a proven track record of being able to boost results for hosts. This person can become an indispensable part of your short term rental management team. Having a full-time revenue manager usually makes sense if you own a portfolio of multiple properties and/or work with luxury vacation rentals that make thousands of dollars per night.
- Part-time contractor: You can hire a freelance Airbnb revenue manager who has experience in pricing short term rentals, has access to the right data and tools, and is familiar with your market. While they will not be fully devoted to your property, you will need to pay significantly less than a full-time manager. This is a good option for hosts who own a couple of listings in the same market and who would like to remain personally involved in their management but do not have the resources or the skills to price them correctly on their own.
- Full-service professional Airbnb property manager: A short term rental property manager or a vacation rental management company can also take over the management of your property's revenue. Indeed, this is one of the main responsibilities of the best Airbnb management companies. In this case, you can choose between a local property manager or a national company. The most important advantage is that this professional will take care of everything related to the management of your Airbnb business, not only revenue. Moreover, they can significantly boost results. Properties managed by Summer, for example, earn more revenue than at least 95% of comps in each market.
- Half-service Airbnb manager: Finally, you can opt for a half-service property manager like Evolve or RedAwning. This is a short term rental management company that focuses on automation to streamline processes such as dynamic pricing and revenue management, among others.
When selecting an Airbnb revenue manager for your business, you should consider your specific situation and what arrangement makes the most sense in your case.
How to Find a Professional Airbnb Revenue Manager
To select the best revenue manager for your vacation rentals, you should go through the following steps:
- Evaluate your business and your needs: Before you start looking for someone to fill in the position, you must understand what would work best based on your specific needs and requirements. If you own a single property in a market that's not excessively competitive, using Airbnb revenue management software or hiring a part-time manager will work fine. If, on the other hand, you have multiple properties in a highly competitive location, you might need to hire a full-time expert to manage revenue efficiently and drive the best profits for you.
- Set up a budget: Depending on the number of listings you have and their profits, in addition to current operating expenses, you have to decide on a budget for the revenue manager. This will tell you whether you can hire a full-time professional or should go with a freelancer.
- Ask for referrals: Once you know what type of manager you want to hire, it's time to look for available options, and the best way to do that is to consult with other Airbnb hosts. You can reach out to your network of fellow investors to ask for recommendations, what results they have been able to obtain, and how satisfied they are. This is an easy and efficient way to find the best Airbnb revenue managers in your market.
- Research options online: Simultaneously, you can search for the top revenue managers in your area online too. Check out articles on websites that list available options as well as online real estate investing forums.
- Check out host reviews and experiences: As soon as you identify a few viable options, conduct deeper research on them. A good place to do that - other than their own websites - is online review websites. There you can see not only their average ratings but also the main strengths and weaknesses of each option in individual customer reviews.
- Schedule an interview: Next, it's a must to arrange an in-person or phone interview with short-listed revenue managers. That's the right time to learn more about their business, their practices, their expertise, the results they've been able to drive for other hosts, their plans for your property, and their pricing structure.
- Get an estimate performance report: As a final step, you should ask short-listed managers to provide you with an estimate of the boost in performance that you can expect as a result of their work. At the end of the day, you should hire the professional who can generate the most revenue for you, considering their fee as well.
There are a number of factors that need to go into the selection and the vetting of the right Airbnb revenue manager for your portfolio, including:
- Proven track record: Hire someone who has been able to bring tangible results for short term rental property owners, and there should be previous and current customers who are willing to testify to this.
- Online reputation: Your selected professional needs to have good ratings (4+ stars) on third-party review websites.
- Customer reviews: Online customer reviews and in-person customer testimonials should demonstrate the skills, expertise, and trustworthiness of the revenue manager.
- Estimated results: You should go for the Airbnb revenue manager that not only promises the highest income (within reason) but is also able to show how exactly they will drive this income.
- Fees and costs: You should select a manager whose fees make sense for the results that they will bring. It's a good idea to pay a few extra dollars if this will result in significantly more revenue.
- Contract terms and cancellations: You must ensure that you can easily let go of a revenue manager that you are not happy with, without having to pay high termination fees. As a host, you have the right to build the best possible team for the management of your property.
- Value for money: Ultimately, you need to choose the revenue manager that offers the best value for money, that is, the best balance between revenue potential and fees.
Hiring a professional is not enough to guarantee the optimization of your Airbnb revenue management process. You need to make sure that the expert you select is truly the top choice for your needs.
Pros and Cons of a Professional Airbnb Revenue Manager
Working with a professional manager rather than managing the finances of your Airbnb on your own brings important benefits and drawbacks.
Some major pros of professional Airbnb revenue management include:
- Expert knowledge of hospitality and short term rentals
- Access to advanced data analytics and tools
- Supply and demand forecasting capabilities
- Understanding of the entire short term rental market
- Real-time tracking and adjustments
- Regular reporting and accountability
- Scalability
- Hands-off approach and passive income for you
The main cons of professional Airbnb revenue management include:
- Limited to no control over your Airbnb pricing strategy
- Risk of over-automatization and over-reliance on software tools
- Less customized strategy (based on big data rather than microdynamics)
- Limited outreach and missed opportunities (in case the revenue manager works with certain listing platforms only)
- Risk of conflict of interest (if the revenue manager works with a few properties in the area)
- Expensive fees (that exceed gains)
All in all, working with a professional to manage the revenue of your Airbnb makes sense if you lack advanced analytical skills or simply don't have the time and the knowledge to implement a dynamic pricing strategy. In this case, it's crucial to carefully vet the revenue manager to make sure their work will be aligned with your priorities. And if you realize that's not the case, you should not be afraid to let them go and look for another Airbnb revenue manager.
Bottom Line
Airbnb revenue management is an important aspect of owning and managing a short term rental. In brief, this entails setting up the right daily rates to maintain strong occupancy in a way that boosts income. Owners can choose between managing their pricing strategy on their own, relying on software tools, or hiring a part-time or full-time revenue manager. Your choice should depend on your portfolio, skills, availability, budget, and preferences.
