Well, welcome back to the Short-Term Rental Riches podcast. I’m happy you’re here again. If you’ve been following along the show for a while, or if you’ve had Airbnbs for a while, well then undoubtedly you’ve had a guest ask you for a discount.

And even though our prices might be optimized at all points of the year, it still leaves you a little bit confused. So today we’re gonna jump into everything that has to do with when a guest asks you for a discount.

So the reality, yes, you’re going to have guests asking you for discounts even though your price should be optimized. At every given point in the year. The reality though, is that sometimes this is just cultural. Sometimes people will not purchase something unless they think they’re getting a good deal.

Negotiating is just a big part of a lot of different cultures. I remember my days way back selling software to automotive shops. Uh, in Sacramento, which has to be one of the most diverse places in the us. I mean, there are all different types of backgrounds and so of course there were lots of different owners, uh, in this industry that I was working with.

And there were some that hands down, they just always wanted to negotiate. So just expect that this is gonna happen a little bit. There’s also a lot of people out there that know that this works, right? If they message. 10 Airbnbs and they ask for a discount on every single one. Well, there’s probably one or two that are gonna budge a little bit on their price.

Now, of course, someone should be reserving a property based on the value that they perceive, right? And not just on whether or not that host is gonna give them a discount.

So that’s the first thing. It’s just going to happen. The next question is, when should you give a discount? And the answer is. You shouldn’t, but I’ll have a little bit of a, depends here. The reason I say that you shouldn’t give a discount is because we’re using dynamic pricing tools, or at least you should be.

If you’re new to the channel. Head to sdr riches.com. Check out all of our prior episodes. The goal with your dynamic pricing is that you always have the right price. On the right channels for the right guests at the right time. And so your pricing should be changing each and every day based on day of the week, based on seasonality, based on whether or not there’s an event in town or a whole bunch of other factors.

So that is my opinion. You should not be giving a discount. In general, we know that this person reached out to you inquiring about your property because it showed up in their search results. That means it was in the right location. It’s available for the nights that this guests need.

It at least has some of the amenities that they’re looking for, right? Or wouldn’t have showed up. It means that you very likely have done a good job with your reviews and you’re beating out a lot of competition, so that shouldn’t be an issue.

And then you also know that they’re already interested, right? Because they reached out to you.

So that is my short answer, but I do actually have one exception and so I’ll break that down here. But I also know that a lot of you’re gonna offer discounts regardless, so I have quite a few considerations for you. My exception would be if this is a midterm rental. So if you’re renting for 30 days or more, well then just naturally the dynamic pricing.

Isn’t having as big of an impact on this rental, right? Because it’s not just considering single individual days, it’s really looking at a longer period, much like a long-term rental.

You typically have a lower potential guess looking to book midterm rentals and it’s typically for a higher price point, right? And so that would be my one exception. And of course that comes down to your judgment.

So I’ve got some tips for all of you out there that are still giving discounts or that enjoy giving discounts. Just some considerations in general. The first one is that if you give a discount to someone, it doesn’t actually mean that they’re going to book your property, right?

So if someone’s out there and they’re shopping around and they send you a message as well as 10 other people, well, you might go through. All the thinking process and consider, you know, your occupancy the year before and ultimately decide, okay, uh, Tim, I’ll give you a 20% discount only to find that they never actually respond to you, or that they went ahead and booked another property.

So that’s the first thing. The second thing is if you actually give them a discount and you’re waiting for them to book during this inquiry stage, well that means that someone else can’t book, right? Because you’ve allowed them 24 hours to book your property, and so it’s very likely that had you not given them the discount, someone else could come along and book your property that didn’t ask for a discount.

The third consideration is that if you do offer them a discount, well you’ve gotta actually handle that, right? So you’ve gotta make the calculation, you know, if it’s through Airbnb, then you need to make an adjustment.

If you took a reservation from VRBO or booking.com, well then you either need to go through your property management software or maybe you’re using Stripe. Adjust the amount of that reservation, send it to ’em, and again, you can go through all of that and then maybe don’t book your property.

Another consideration is that a lot of people that are asking for discounts. Tend to be a little more challenging guests. Now I don’t want to generalize people, but my team and I have managed 50,000 guests or probably much more than that at this point, and lots of different cities.

Uh, and there is a bit of a correlation you could say, between the people that ask for discounts, even if we don’t give it to them, and sort of the quality of the guest.

My last consideration for you is that if you are out there and you’re giving discounts on a normal basis, that you at least hold back on the high seasons or the peak seasons or the periods where there are events those days that are very likely to get booked without you giving a discount. Remember, this guest reached out to you 

 because you showed up in their search results, and that means that they are already interested.

Okay? So coming up a couple rules you might want to place around discounts if you are giving them.

A couple alternatives that you might give instead of giving a discount. And then also how to just respond professionally no matter whether you’re giving the discount or you are denying it.

One of the challenges with giving discounts, especially when you’re working with a team, if you have a receptionist helping you, or if your brother or your sister or your mom or whoever’s helping you with your property and you’ve said, yeah, we’ll take discounts sometimes. Um, but not all the time. Then that means every time you get a reservation, you’ve really gotta walk through that process.

You gotta figure it out. And so it’s best to set up some rules around when you’ll be taking a discount.

You need to know your break even point on your property. So this is the point where you can’t discount your property anymore because you’re just not making money on it right now. We know a lot of the costs that go into our short term rentals are fixed, like our mortgage payment. If we have a mortgage, our property taxes, our insurance, these are costs that we’re gonna have regardless.

There are some variable costs there, right? So we have. Utilities, we have housekeeping. You just gotta make sure that you’ve calculated all those things accurately and you’re not actually losing money on a reservation. But assuming you’re not losing money, then you really do want to keep your property as fully occupied as possible.

Just make sure you set some guidelines around that so that you don’t have to go through the whole thinking process every time. You can even set up default responses to your guests, handling that communication in a really professional way each and every time without having to recreate it.

A couple alternatives that you might consider instead of a discount, maybe your property is not booked the day before and you have a minimum two nights stay, so you know it won’t be booked. We’ll consider offering them an early check-in or consider offering them a late checkout. If that doesn’t mess up your housekeeping schedule or prevent you from getting another day booked,

you may consider to throw in a welcome basket or something like that, or if you have kayaks in the lake, we’ll maybe consider offering those up for free or something like that.

And then lastly, you just, you really wanna sell your property, right? If you have great reviews and you’ve done a great job with your property, then again, they reached out because they’re interested in it, and you just wanna remind them of why all the people in the past have had such a great experience at your property.

Lastly, how do we handle the communication with guests that are asking for a discount? Well, we’ve got lots of great AI tools these days, right? You can use cloud or cloud. I don’t know how it’s pronounced. Chat, GPT. They do a really good job. You could literally just paste your communication right in there and say.

This is my discount rule. I only discount when this happens, and it can craft up a really nice message for you.

But I think ultimately you want to just remind them that your price is always optimized. It changes on a daily basis, so it’s priced perfectly. For that day or for those days in that reservation, of course, you always wanna be responding with a, a warm, uh, empathetic tone. But you also want to be confident, right?

And you may even consider putting a little bit of scarcity in there. Again, the guests reached out because they liked your property, and if you know that, it usually always gets booked. Then you’re much less likely to need to offer some sort of discount, right? And you can also reassure them of that, like, Hey, you know, uh, we know you’ll love our stay.

You can see from all of our prior reviews, our property’s pretty much always booked. So we hope we get the, opportunity to host you.

And lastly, you may consider just giving them some other dates if they’re coming to town for vacation, to stay at your property in its peak season where prices are three times as much as they normally are, say, you know what? We would love to host you, but this is a really peak season, and so for those reasons, our prices are higher because we know that we will get booked.

But if you would like to come back next week, during the week or next month or whenever it happens to be, our prices will be lower and we’d be happy to accommodate you at that time as well.

Okay, so that’s a wrap. People won undoubtedly. Ask for discounts with your property, but don’t let their discount requests undermine the quality of your property, right? Remember, they reached out because they liked your property. Your property was showing in those search results because you’ve been doing a good job because you have good reviews.

Hold firm is my recommendation. If you happen to have a midterm rental, well then you could, you know, take that with a grain of salt. It’s up to you. Really. You need to know your calculations and if you are offering discounts, just consider having some SOPs, some rules around it so you don’t have to go through the whole thinking process again.

I hope that gave you a little bit more insight, and until next time, I hope you have a fab this week.