Discounts are one of the most powerful tools available to vacation rental owners and managers, but they are often misunderstood and underutilized. Many short-term rental operators see discounts as a revenue loss or a devaluation of their property. However, in reality, when used properly, discounts will increase occupancy and drive more total revenue.
In this guide, we’ll walk through why discounts matter, how they fit into a larger pricing strategy, and how to deploy different types of discounts to maximize revenue.
How to Measure Performance
Before getting into how discounts can be put to work, it helps to take a quick step back and look at some of the key metrics used in the vacation rental industry to measure performance. Nightly rate is often the first number owners and managers focus on because it is front and center every day.
While it is an important driver of revenue, it can also become a limitation if you get too locked into a single price and are unable to consider other factors. A higher nightly rate does not always mean higher revenue. What matters more is how much revenue a property generates across all available nights.
Here are a few commonly used metrics in the vacation rental industry to consider:
- Average Daily Rate (ADR): Reflects the average price paid per booked night. It provides a general sense of how a property is priced when it is occupied.
- Occupancy Rate: Measures how many available nights are booked over a given period. Occupancy is a key factor for many vacation rental operators because it helps inform pricing and availability decisions.
- Revenue per Available Night (RevPAR): Combines rate and occupancy into a single metric. It is calculated by dividing total booking revenue by the total number of available nights, including nights that remain unbooked. RevPAR provides a more complete picture of performance because it accounts for both price and occupancy.
RevPAR has become a widely used metric because it helps inform better revenue decisions and allows for comparisons between properties in different price brackets. It also highlights an important concept: a slightly lower nightly rate can still produce stronger results if it leads to higher occupancy.
This is the context in which discounts should be evaluated. Not in isolation, but based on how they affect overall business performance.
Discounts Affect More Than Price
Another important factor to consider when setting discounts is how they may impact your visibility and placement within OTA search results. Industry-leading booking platforms like Airbnb, Vrbo, and Booking.com work hard to show travelers listings that are most likely to convert into bookings.
Each OTA uses its own algorithm, and the specific factors that determine the order are not publicly disclosed. However, it is widely understood that when a property is discounted, it will signal to the platform that the likelihood of conversion is higher, prompting the algorithm to place that listing toward the top of search results.
While this can be difficult to measure directly, it is still an important benefit to keep in mind when using discounts as part of a broader revenue strategy.
Utilizing Discounts to Maximize Revenue
Now that we’ve covered how discounts should be evaluated and some of the additional benefits they offer, let’s take a look at several of the most common discounts in the short-term rental market and how to leverage them effectively.
Longer stays are often more efficient to operate and can contribute to stronger overall performance. Weekly and monthly discounts provide an incentive for guests to extend their stay. While the nightly rate may be slightly lower, the additional nights booked often result in higher total booking revenue and fewer gaps on the calendar. Longer stays can also reduce turnover and help stabilize occupancy during slower periods, making these discounts a common foundation for many pricing strategies.
Small gaps between longer reservations are a common challenge for many vacation rental operators. Gap night discounts are designed to target these specific openings rather than applying discounts broadly across a date range. By offering a modest incentive for those nights, owners can convert dates that might otherwise remain unbooked into revenue. This is an excellent way to improve RevPAR performance.
Some guests prefer to plan well in advance and are willing to commit earlier in exchange for a small discount. Early-bird discounts reward that behavior and can help secure occupancy farther out on the calendar. This provides more visibility into future demand and reduces reliance on last-minute bookings to fill dates.
Not all bookings happen far in advance. Last-minute discounts are used to attract guests who are searching close to their arrival date. These discounts are limited to a short booking window, allowing owners and managers to drive increased traffic to their listings without permanently lowering base rates. This approach helps preserve pricing further out while still maximizing occupancy.
Discounts can also be used to foster guest relationships. Discount codes and other targeted discounts allow operators to offer incentives to past guests or those booking direct. Over time, this can help encourage repeat stays and reduce dependence on the OTAs.
Together, these discount types provide a flexible set of tools that can be used to address different booking scenarios. When applied intentionally, they help improve occupancy and support stronger total revenue without relying on across-the-board price reductions.
How OwnerRez Supports Discount Strategies
As owners and managers begin to implement discount strategies across multiple properties and multiple booking channels, it can quickly become time-consuming and difficult to maintain over time.
A property management system is a practical way to support a long-term discount strategy. A good PMS, like OwnerRez, provides a centralized place to create and apply discounts across multiple listing sites, helping handle much of the day-to-day work for you.
In addition to the discount types covered above, OwnerRez supports a wide range of other discount options, all designed to help vacation rental operators, whether they manage one property or hundreds, operate at an elite level.
Conclusion
Maximizing revenue with discounts means using them intentionally as part of a larger revenue strategy, not just simply lowering the nightly rates. When vacation rental owners and managers focus on the right metrics and apply discounts in the right situations, they can be an effective way to improve occupancy and overall performance.
Having a system in place that supports this type of approach makes it much easier to execute and maintain a strong discount strategy. If you are not yet using OwnerRez, get started today by signing up for a 14-day free trial or by signing up to join one of our weekly live demo webinars.
FAQs How to Maximize Revenue with Discounts
Q: Do discounts hurt my vacation rental revenue?
A: Not when used correctly. While a discounted nightly rate may be lower, discounts can increase occupancy and drive more total booking revenue across your calendar. Discounts should be evaluated based on overall performance, not just the nightly rate.
Q: What metrics should I use to evaluate discounts for my short-term rental?
A: Revenue per Available Night (RevPAR) is a great way to evaluate discounts. RevPAR accounts for both price and occupancy, helping you see whether a discount is improving total revenue across all available nights.
Q: Why can a lower nightly rate for my rental still produce better results?
A: A slightly lower rate can attract more bookings and increase occupancy. When more nights are booked, total revenue often increases even if the average nightly rate is lower.
Q: Do discounts affect visibility on the major booking channels like Airbnb, Vrbo, and Booking.com?
A: Yes. When a property is discounted, it can signal to the OTAs that the listing has a high chance of converting a guest into a booking. This is likely to improve placement in search results and increase traffic from potential guests.
Q: When should I use weekly and monthly discounts for my vacation rental?
A: Weekly and monthly discounts are useful for encouraging longer stays. Longer reservations reduce turnover, help stabilize occupancy, and often result in higher total booking revenue.
Q: What are gap night discounts, and why are they effective?
A: Gap night discounts target small openings between longer reservations. Offering a modest incentive for those nights helps convert otherwise unbooked dates into revenue and improves RevPAR.
Q: When do early bird discounts make sense?
A: Early bird discounts reward guests who book well in advance. They help secure occupancy farther out on the calendar and provide better visibility into future demand.
Q: How should last-minute discounts be used?
A: Last-minute discounts attract guests searching close to arrival. They help fill last-minute availability without permanently lowering base rates.
Q: How can discount codes support repeat bookings?
A: Discount codes allow you to offer targeted incentives to past guests or those booking direct. Over time, this can encourage repeat stays and reduce dependence on OTAs.
Q: How does OwnerRez support discount strategies?
A: OwnerRez provides a centralized place to create and apply discounts across multiple properties and listing sites. This makes it easier to manage weekly, monthly, gap night, early bird, last-minute, and other discount types as part of a long-term revenue strategy
Q: How do I get started with OwnerRez?
A: You can get started by signing up for a 14-day free trial or by signing up to join one of our weekly live demo webinars.