While the last-minute discounting strategy detailed above works well for individual STR units, we have learned that for multi-unit properties (hotels, or premium STR buildings), an effective pricing strategy requires a much different approach.

To handle increasingly professional portfolios in the STR space, the Wheelhouse Pricing Engine developed the concept of ‘unit types’. Unit types help properties with similar rooms (such as multiple studios, 1BR, 2BR, 2BR/2BA, etc.) to leverage a ‘portfolio’ approach to pricing. Similar to how hotel pricing works, this approach allows us to make pricing decisions based on the performance of a set of units.

In the graph below, we illustrate the risk-reward ratio changes as a set of rooms begins to book. In this scenario, let us analyze a boutique hotel that has 10 units in a particular unit type.

Before the first booking occurs, the risk of a low daily revenue figure is high. Consequently, increasing prices prior to a first booking also increases the risk of the ‘worst case scenario’ — $0 in daily revenue. Alternatively, if 9 of the 10 rooms for a stay date are already booked, the marginal risk of increasing the price for the last unit is much smaller. Therefore, as more of a building or inventory type books, the more aggressively we can potentially price the remaining available units.