It’s an exciting year for short term rentals in Toronto! With tourism increasing at an unprecedented rate we’re seeing more and more people from around the globe flock to the city to see and experience everything it has to offer. In 2017, Toronto cemented itself as one of the world’s top metropolitan cities for short term rentals in terms of earnings potential. The high rental demand, minimal growth in number of hotel rooms, and weak Canadian currency relative to the U.S dollar, Euro, and British Pound have combined to create a market that will benefit those who have an effective Toronto Airbnb price optimization strategy.
Despite the favourable conditions, very few Toronto hosts are able to achieve their property’s earning potential. The main reasons for this include a lack of market knowledge, time, understanding of property optimization and booking platforms being used (e.g. Airbnb, Expedia, Booking.com etc). This is actually a good thing! While most hosts sell their calendar at low rates, the opportunity to achieve premium bookings by effectively managing pricing, availability settings, and rule sets is very real.
This post will give some insight into an effective Toronto Airbnb price optimization strategy for your listings. Given it’s already February, there’s no better time than now to make sure you set yourself up for a year of high short term rental income. Of course, how you set up your property and market it is going to have as big of an effect on your success, so make sure you invest in getting that part right.
So lets take a look at 2018 from an Airbnb price optimization point of view!
After a record breaking winter in terms of temperature, many Torontonians can’t wait for the cold to end. Luckily for short term rental hosts, the demand is starting to pick up following a slow December and January. The most important dates to note in February are the 16th through the 20th. With Family Day in Canada and Presidents Day in the U.S., there is lots of traffic on all booking platforms for the long weekend. We recommend setting a three night minimum for this weekend as you’ll want to capture the highest rate possible for at least three nights. Also, note that the weekend after is when peak traffic comes through for the Canadian International Autoshow so any property near the convention centre can likely maintain the previous weekends high rates.
February is a great month to implement Airbnb’s newly launched rule sets feature. Rule sets, which require an install (contact us for a free instruction guide), allow you to have different pricing rules (e.g. multi day discounts, early bird) for various days, months, or seasons. This is a great tool, and it overcomes some major flaws in the original approach including having the same discounting rules apply across all seasons. We recommend using a tiered multi day discounting rule set (e.g. 3 days / 5% off, 5 days / 8% off, 7 days / 12% off) to get occupancy in those lower demand February weekdays as you march your way out of low season.
March brings the first sign of light at the end of the winter tunnel for many short term rental hosts. The first few days are the strongest and can resemble the summer peak season when mining companies around the world come for the annual Prospectors & Developers Association of Canada (PDAC) International Convention. The actual conference dates are March 4th to 7th, but because Toronto is a major hub for mining a lot of executives come a few days early to start the business meetings and networking. Given the extremely high demand combined with the tenancy for people to come early, for downtown properties we recommend a four or five night minimum between March 1st to 8th. Hosts who list on Booking.com and Expedia partners have a big advantage for this conference and will undoubtedly benefit from the highest rates possible. Because hotel rooms and short term rentals will be almost sold out as the conference nears we recommend holding tight on high prices even if it means waiting until very close to the days.
As for the rest of March, up until about mid-February we recommend keeping it at a three night minimum with multi day discounts that are less than the ones set for winter. A lot of families come to the city for their kids March break and given the overall demand is still not as high as later in the spring the best strategy is to capture the as much as the longer term bookings as to keep occupancy strong and minimize turnover costs. Once we get into the second half of February change your March availability settings to a two night minimum to fill in vacancy gaps as much possible. We also recommend a one night minimum during weekdays (Monday to Thursday) once March has started to keep occupancy rates over ninety percent.
There are no major events in April but as the weather starts to warm up the demand picks up and we start to feel the transition to high season. The weekends in April have high demand but the weekdays are much more moderate. The overall strategy should be similar to March with a three night minimum and discounting rule sets in place for multi day bookings. As mid-March approaches change April to a two night minimum in order to decrease likelihood of vacancy.
In April, we want to leverage the high weekend demand and bundle in the weekdays (using our multi day discounting rule sets) to get strong back to back bookings from people staying four nights or more. What you don’t want to do in April is sell every Friday and Saturday night in advance and then be forced to lower your weekday prices more than you would have had you bundled those days in with the weekend. The best way to do this is to have your weekend rates about 15% higher than the market rate. That way as we get closer to April and weekend inventory starts to disappear all the guests looking for longer bookings which include weekend days will have less selection to choose from, increasing the probability you get the reservations you want. If you do end up selling your weekends (with a three night minimum) above market rate, then it compensates you for having to discount your weekdays.
The summer is almost here! May is when we start seeing demand pick up across the board. We want to keep our three day minimum but remove multi day discounting, outside of perhaps a small discount to factor in your turnover (cleaning) costs. In May, there is strong demand for both weekdays and weekends and the market starts to really favour the supply side. Similar to March / April lower the minimum night requirement as we get closer to vacancy.
The first weekend there is a convention for Health Care professionals happening on May 11th to May 13th, which provides an opportunity for properties near the convention centre to sell to some price insensitive doctors who can afford to pay a premium for convenience and comfort.
The next two weekends we have consecutive long weekends for Canada (Victoria Day) and then the U.S. (Memorial Day). It’s important to note that the U.S. holiday brings in more demand than the Canadian one and should be priced accordingly. These holidays occur on a Monday, so make sure your weekend rates last into the early week for these dates.
Another thing to note is that it’s more important for bigger properties downtown to use their advanced booking window for May and the following few months than smaller properties downtown. A lot of the high margin bigger bookings for the late spring / summer happen in advance (definitely not all of them though) so you want to try to capture the early wave. As we move into high demand season, smaller properties should feel comfortable holding tight on high prices even if their calendars are completely open past the next week or two. There is so much demand in the summer that for hosts with one bedrooms and studios, watching competing properties get sold should be a source of excitement and not anxiousness. Ultimately, when supply is low and demand is high the accommodations provider holds the pricing power.
Airbnb Price Optimization for High Season
Two words: Conference Season! June is when the dreams really do start to come true for short term rental hosts with a winning formula. A continuous sequence of back to back conferences in June means hosts can make a nice chunk of change if they hold their prices high while the hotel rooms and short term rentals get sold out. June is a popular month for business conferences because the weather is good and a lot of people with children take their vacations in July and August (hence the need to schedule before).
If we go on the convention centre’s events calendar, any dates with conferences that are international in nature tend to eat up all the hotel rooms. The biggest event in June will be Rotary International 2018 which will happen on June 24th to 27th. We recommend a four night minimum for this event starting from the 23rd of the month. Do not be afraid to “overprice” these dates as you can always lower them later without needing to discount last minute.
Depending on the property, June can be a very lucrative month on the hotel platforms (Booking.com, Expedia, etc.) because of all the business traffic. Just be extremely careful if you are new to them as they are much more complex than Airbnb and during these prime dates you don’t want to make amateur mistakes on these platforms and learn the hard way. As a general rule for people who choose to manage everything themselves (not our clients), use to winter to learn the hotel platforms as you have the least to lose.
The fun continues for short term rental hosts in July as the vacation travel season enters its peak. Toronto has become a leading destination for tourists coming from around the world and for most there’s no better time than the summer. Our recommended strategies are very similar for June, except we would say the advanced bookings are slightly less important in July. A lot of tourists plan for their trips much later than conference goers and unlike most companies there’s no limit to how much price insensitive customers will spend if the supply is limited and the property suits them for their summer vacation.
Similar to every other month past March, use a three night minimum for your advanced booking window and then adjust to fill gaps as time moves closer. For people who are very advanced, we recommend using rule sets to set your summer calendars up for three day weekend bookings starting Thursday and Friday. What we want to avoid is check ins on Saturdays. A Saturday check in forces us to discount Fridays because the demand is not as strong for people who want to check out Saturday (i.e. have Friday night be their last night). It also allows the guest, who is booking at a three night minimum, to lower their average nightly rate because their third night will be Monday, which is priced lower than the weekend (outside of holidays). This last point doesn’t apply to people who do one night minimum on Fridays, which we advise against due to the increased likelihood of irresponsible guests bookings.
August kicks off very nicely as Caribana comes to town for the first weekend of the month. August long weekend is without a doubt the most important weekend of the year and a hosts revenue can vary quite significantly depending on how they price it. Using our advanced booking window, we’re going to set up a four night minimum from Aug 2nd to 7th. With such incredible demand, we want to avoid renting our units out for two or three day reservations when we can command astronomical rates for at least four or five nights. Not only will you make more money, but you’ll almost eliminate your risk of irresponsible guests. It’s a winning formula.
The best booking you can position yourself for is someone who is coming into town for ten days at the beginning of August. In the past, we would price the Thursday through the Monday of August long weekend very high and the days before and after would be slightly underpriced so that the average nightly rate for a longer booking goes down while still keeping the peak days at incredible prices. The challenge with this strategy is that there is a high likelihood that someone takes those before and after days, prior to your big booking coming in. Now with multi day rule sets, we can keep prices through the first ten days of August very high and provide discounts for a week long stay without needing to underprice individual days. This can sound very complicated, and so for Toronto hosts who are not our clients feel free to contact us and we’ll provide a free consultation on how to set up your property’s August long weekend.
Outside of the first third of the month, the August strategy is very similar to July. August has historically been a slightly better month so feel free to increase your prices by 10 percent relative to July.
For anyone who was a host in September 2016, last year was a bit of a disappointment. September was an incredible month in 2016, with numbers rivaling August. What makes September so special is the Toronto International Film Festival (TIFF) which kicks off the second weekend of the month. In 2017, the properties located close to the TIFF tower still did well, but those further away struggled to achieve the numbers we saw the year prior. While we don’t pretend to be experts on the film industry, we were told the festival was more low key last year and didn’t attract as many visitors. We don’t have insight into what things will look like this year, so we recommend managing the risk of last minute discounting with a more conservative approach in 2018 if you aren’t near the TIFF tower.
The rest of September doesn’t rival August or July, but still brings in good demand at high rates. There is a health conference happening from the 23rd to 26th so be sure to watch out for that. Approximately 7,000 will be attending this international conference which should have a noticeable impact on the downtown accommodations inventory.
October 2017 was a record breaking month with extremely high demand through the first twenty days of the month. It’s hard to say whether that will repeated this year. Unlike last year’s SIBOS event there doesn’t appear to be any major world conferences happening which could mean October will go back to its historical average. However, with the travel industry growing so quickly in Toronto anything is possible and we recommend watching the market inventory closely in order to identify what demand looks like.
Airbnb Price Optimization for Low Season
The preliminary data is telling us November could be a good month relative to years past based on the Parliament of World Religions conference that is happening from November 1st to 7th. Over ten thousand people are expected to attend the conference and the bookings are already coming through. Unlike May through October where demand is high, November is generally a slower month so keep rates high for this event but don’t take too much risk in order to avoid discounting last minute.
In general, we recommend using your advanced booking window to sell November dates early as much as possible. Ideally most of the days would be booked by the end of September with week long bookings that are made at modest but respectable rates. Your pricing rules must be set up to encourage these longer bookings but still allow people to book weekends at a premium as weekend demand is still strong in November.
The first fifteen days of December are some of the lowest demand days of the year, and similar to November you want to sell them out in advance. This is the time of year where a risk adverse approach will pay off. Again, set your pricing rules up to allow people to book at a premium but reward them with good discounts for bookings of 5 days or longer. What you don’t want to happen is walking into December empty or with short term bookings (1-2 days) that result in hard to fill gaps all over the calendar.
The second half of December is a completely different game altogether for Toronto Airbnb price optimization. The holidays are an interesting time because while demand is not nearly as strong as the peak season (May – October), there is a sizeable number of price insensitive travelers still booking. Therefore the opportunity for big reservations exist but unlike the summer you can’t wait for everyone to sell out and then sell at a premium. This is especially the case with properties two bedrooms or smaller. As early as September you should aim for a ten night holiday booking a good rate. If you truly have a unique property that can accommodate a large family, it’s worth overpricing the holiday season up until the end of the summer just in case you get lucky. After that, move the rates back to a reasonable price with your discounting rules set up to ensure people are booking for at least a week or paying a premium.
There will be a huge surge of demand coming through for New Years Eve about a week before the night. While you can make a lot with a one night minimum, you could lose just as much or more with the wrong guest. We never do one night minimum on New Years and recommend keeping it to at least a two night minimum (ideally three) and sell it in advance.
So there you have it. The short term rental market is booming in Toronto and there is so much opportunity with the number of overnight travelers increasing quickly every year. We understand that some of what we’ve written may sound complicated or confusing, so feel free to reach out and we can answer any questions you have about Toronto Airbnb Price Optimization.