We have briefly discussed KPIs in previous conversations but today we are going to dig deep and provide some valuable insights on which KPIs are most important for vacation rental managers. Let’s start by defining exactly what KPI is and what it does.
KPI stands for Key Performance Indicator and does just that. It is data that will show how your organization is performing against strategic goals in specific categories. A KPI report will show trends, recognize patterns or relationships and uncover weaknesses and strengths of the property or the company. This data can drive action and better results within your property management. In short, it will show where you are successful and where you are falling short.
KPI data can also be very valuable for showing your owners their property performance within individual categories. It will help to drive investments and growth strategies that might otherwise be a challenge to convey while promoting a data-driven culture of data-driven decision-making based on tangible numbers or insights.
What to Track and What to Trash?
The industry agrees on one thing about KPI and that is that all data collected can be valuable. However, it is also important to filter and use it efficiently. The industry also agrees that comparing data needs to have a consistent basis from which to compare. The apples-to-apples metaphor is key here. For example, using data from VRBO and Airbnb will never compare with what you are doing as a property rental manager. It is comparing apples to oranges. So, those metrics will not be productive or accurate, and there is no point in using them.
All analytics can be good for something, but it is vital to look at data in segmentations not necessarily as a whole. Too much data can be overwhelming and unproductive. Look at specifics. Look at which home is having trouble as well as the ones that are over-performing. Subset your portfolio to see the details.
Segmentation cannot be stressed enough. ADR isn’t ADR unless you’re comparing apples to apples. Compare 4-bedroom homes this year to the performance of 4-bedroom homes last year. Keep amenities in mind when doing this. By knowing how units and groups compare, you can optimize ROI and make more money.
So, while there are not necessarily data you should trash, it’s important to understand what you are using and how you are using it. Measuring data within specific categories can be a remarkable way to increase revenue, and while there are obvious indicators from things like occupancy rate and revenue per unit, there are other categories (some even anecdotal) that can produce KPIs not to be taken for granted.
Top 8 Vacation Rental Management KPI Categories
1. RevPau and Occupancy Rate KPI
Occupancy rate and revenue per available unit (RevPau) are the best way to ensure you are charging the right price. These metrics are essential for property managers as it gives a complete picture of the revenue coming in. How much revenue are you actually generating per unit will inform occupancy rate metric analysis. Revpau is all about how to make more money just by tracking and watching unit revenue.
You can learn more about some situations through tracking KPIs for revenue and occupancy. Some situations can even be informed by these revenue and occupancy KPIs. For example, how long to hold a property off-market until you get better pricing. The truth is that creating scarcity will drive the price up. So, by keeping a house off the market, you create more demand. From there, you can charge more and double, or even triple, your payments. Use automated tools from companies like LiveRez to measure the base rate increase. Set the ADR high to see if it will be accepted and increase the nightly minimum depending on demand. Always optimize booking through automated tools.
Treat return customers for long-term gain. Empower reservationists to negotiate pricing discounts for repeat guests. Marketing to guests within the home can also be successful in occupancy rate and RevPau. Waiving small fees for return guests can go a long way for loyalty and conversions. Automated tools can work to book the following year and increase ROI + brand perception.
When you have repeat guests, you want to increase their prices to match dynamic pricing numbers, but you also want them to continue coming back. By increasing prices over a few years, you can maintain rapport while maxing your prices. An alternative is to offer discounts to repeat guests to book the next year.
2. Property Acquisitions and Amenities KPI
The first priority for acquisition is assessment – what we have and what we need or want, and which are performing. Picking and choosing which property and owners you want can be critical to your success.
When acquiring property, consider what the market demands are. Do visitors want 4-bedroom homes? 2-bedroom? Make sure you have properties that meet demands. Consider cross-over KPI data like lead management, reservation sales, and marketing demand. They will all influence property acquisition KPIs
Where is the market and what is it doing? Consider the competitors and act on that.
Use analytics based on competition. Market to it for leads based on responses. And as always, consider revenue in average daily rate (ADR) and average per unit (APU).
Amenities should be broken out as well. This approach will allow numbers to show the potential for more revenue. KPI on amenities can help in educating the owner on upgrades that could make more money through data analysis. Hot tubs can increase revenue by 18%. Air conditioning and pets are also potential revenue increases so measuring KPIs on amenities is key.
3. Marketing KPI
Much of what is important to property acquisition is also important to marketing. If you organize your data based on specifics, the KPI data will work harder for you.
ROIs will track how much you are actually making and will drive your marketing strategy.
Conversions, calls, leads, and website clicks are probably the most important KPIs for marketing
Don’t forget a pick-up report that shows what homes were converted during marketing campaigns. Which were the homes that converted? Is there inventory you should be focusing on that is not converting. This analysis will show you the conversions as well as the needs. It will show dates, which unit, and other things that inform decisions.
Consider acquisition costs and lead sources when figuring the cost of marketing. Sometimes it’s about the cost of booking and where the bookings come from. If the bookings come from VRBO, or Airbnb, then take into account how much you paid to market there. Compare that to your direct bookings.
Also look at Web costs, emails, newsletters, and direct mail, and track those costs.
4. Owner Behavior Profile KPI
While owner behavior offers anecdotal data, nonetheless, it is worth tracking and understanding in the context of ROI. A culture index on every person can inform current and future revenue. Property managers can understand the situation and work to solve problems through this KPI. If the behavior is bad, sales will suffer as will brand perception. Owner behavior can also have a negative impact on the staff. When the staff suffers, the culture breaks down and none of it is good for business. It is okay to trim owners if they are not meeting ROI based on behavior. Set boundaries that are clear and detailed to determine fit and firing.
5. Length of Stay and Dynamic Pricing KPI
The average length of stay is important to track because too many short stays can increase your operating costs and decrease profit. However, the length of stay can also be driven by dynamic pricing.
To optimize ROI, utilizing dynamic pricing to get the max amount of money out of units is key. Educate and negotiate with owners that don’t allow pricing flexibility. Teach them how this flexibility can increase their revenue.
Additionally, increase ROI by focusing on LOS. If you have an unbooked week between booked weeks, send an email to guests offering a discount to book an extra day ahead or after their initial stay. This can be automated for convenience. Personal calling or texting are effective ways to get those extra days booked while building the relationship and combined with automation for efficiency can be even more successful in revenue increases.
6. Reviews KPI
We know that reviews can be critical in occupancy and daily rate, so we cannot overstate how vital it is to look at stars, read reviews and respond immediately.
Put questions into buckets – owner, housekeeping, etc. for efficient responsiveness.
Organize data and units into groups and input them into LiveRez, spreadsheets, or other software to maintain the insights.
Share your positive reviews and 5-star ratings with the property owners. Owners will then see what guests have to say and might be more open to making appropriate updates to their properties which will lead to even more great reviews. Use reviews for internal motivation and publicize reviews within the community for even more brand awareness and perception.
Use the survey report in LiveRez to target specific goals. Sort by 5-star ratings and leverage for Google reviews. Asking each 5-star respondent to provide a Google review is usually successful and just good business practice. Reviews are here to stay and using LiveScore’s surveys will help to guarantee great feedback and the 5-star ratings you work so hard for.
7. Staff Incentives KPI
Any marketer knows that incentives are one of the most successful tactics out there. The same is true when it comes to staff and it doesn’t take much.
An unspoken incentive should be a healthy culture. If the company culture is positive the staff will be happy and want to contribute as part of a strong team and successful business. With that though, there are other ways to motivate the internal team to help with ROI. Incentivize conversion rates, up sales, early check-in, and late check-out charges. Incentivize the conversion of non-booked leads. Incentivize the number of bookings based on hours worked. Track and incentivize calls, emails, and conversions. Share referral fees for things like upselling travel protection, 5-star reviews, longevity of an owner in programs, etc.
Important to note that while incentive programs work well, it is essential to make them simple. If not, they won’t be embraced or as successful as they could be otherwise.
8. Competitive KPI
It might be a challenge to get deep details from the automated tools used to track competitive data, but there are still tools from companies like LiveRez that will show performance in general as well as some specifics.
One of the best ways to mine competitive data is to go shopping. Put yourself in the shoes of the guest planner. You will find what is available, and what they are offering. You can measure communications performance and services. You’ll learn how competitors think and how they operate. You can learn to be better from this kind of experience. So, while the KPIs may not be measurable in the way some are, the data can still set you apart and give your team confidence in knowing you are doing it better.
Realistically, how can you track KPIs?
There are many ways. It can be as simple as using an Excel spreadsheet for ADR or RevPau, segmentation, and delegation, but the most important thing that will enable you to generate relevant and effective KPIs is modern technology. Automated software like LiveRez will organize your data so it will work hard for you leaving you to focus on the needs that the KPI insights uncover.