Peak Season ADRs: Get Them Right the First Time

As property managers, we all understand and have a great sense as to when our listings will start taking bookings for the peak season. And oftentimes, our peak season makes or breaks our entire year, which means we aim pretty high when it comes to setting our peak season rates at the top of the booking window. At Beyond Pricing, we believe this is not the greatest approach.

Here's why: the higher you set your rates at the top of your booking window for peak season, the farther you will have to discount as the peak season draws near.

Allow us to demonstrate. In reviewing Hilton Head, an island off the Atlantic on the East Coast of the U.S., we analyzed the reservations with check-in dates in July 2019 for two (2) bedrooms and here is what we saw: the further out the booking, the higher ADR. Makes sense, right? And this is in line with what we'd expect. As the booking window draws closer to the peak season, the ADRs start dropping. Again, this is what we would expect, as the listing manager is aiming to drive bookings.

Now here is where it gets interesting — just as the ADR starts to drop, booking pace picks up significantly. In fact, a third of all bookings are taken within 30 days of the peak season, and at a crazy discount of 27 percent!

So, why is this happening? It seems like listing managers are far too ambitious when setting peak season rates, which means they have to drop those rates to hit desired occupancy levels.

In the case of the example above, the property managers would have been far better off by setting a more realistic ADR from the outset, and thus would have avoided having to significantly discount as the season drew nigh. For example, if they would have aimed for a one (1) percent increase in ADR year over year versus a six (6) percent increase, they would have saved most, if not all, of the 27 percent they had to discount.

The moral of the story is this: be realistic about your peak season rates. Look at your prior year ADR and seek a slight increase, not a huge jump. This way you can be sure to capture a higher ADR over the entire booking window for your peak season.

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