As you’ve already seen, the pricing models and price tags of vacation rental property management software can vary—a lot. This is a good thing because it provides property owners with a lot of financial flexibility.
In this chapter, we’ll explain how the different pricing structures work, their pros and cons, and how to calculate total cost of ownership so you can better evaluate which software platform is best suited for your budget and goals.
Everyone is familiar with subscription fees by now: you pay a certain amount on a regular basis until you stop using the software.
Some companies like Uplisting prefer to keep prices simple and have one rate for all customers (e.g. $20 per month per property) to make it easy and predictable to calculate costs. However, most vacation rental software vendors split their pricing into different tiers. Each tier offers a different combination of features and capabilities. The higher the tier you purchase, the more you can do.
Tiers can also be locked behind the number of properties in an account. For example, a basic tier could be available for anyone, but a property manager would have to have at least 50 properties for the “standard” tier and over 200 for the “premium” tier.
In our experience, lower tier offerings tend to get the most basic features and limited capabilities. This is fine if your needs aren’t complicated or you’d just like to try a service out before committing to an annual subscription. But the good features, the ones that drive the most value, are likely locked to higher tiers.
Also check to see what sort of customer service you get at your chosen tier. Lower tiers can be limited to slower customer support channels like email or ticket-based support, while higher-paying tiers get access to priority channels like phone and chat support. If you expect to need a lot of help and response time is important to you, lower tiers might not be a fit.
You should be wary of “filler” features as you approach the higher tiers. Some vendors add half-baked features to pricing pages as a way of justifying the price increase. They might work, but not in a way that helps you run your business. Free trials and demo environments will help you avoid these.
Ideally additional features are treated as “add-ons” that you can add to a plan and only pay for what you most need in your personalized, custom package.
Another consideration is how often you pay. Most vendors will grant discounts if you pay for an entire year up front (in some cases, two years). While that will indeed save you some money, it locks you into using that tool for an extended period of time, so only do it if you’re sure the tool will work well for you.
Our advice: look for a platform that offers a free trial so you can decide if you really like it and then save some cash by upgrading to an annual plan for a discount after you’re feeling confident in cash flows and occupancy rates.
A commission-based pricing structure is when you pay based on the number of bookings you make. A commission-based fee structure helps keep costs manageable during the slow season, but also makes your costs hard to predict. Some vendors charge up to 10% of the booked rate, but this isn’t universal across companies.
Note that there are software vendors like Lodgify that are seemingly subscription-based, but also charge a percentage-based booking fee and a transaction fee on top of it.
Vacation rental software vendors will often charge an extra fee to unlock specific features. These add-ons could be a one-time payment to permanently unlock the feature, or an additional subscription on top of what is already being paid.
Add-ons like these allow you to customize what your vacation rental software platform can do instead of buying the entire thing and using only a half of its capabilities.
Total cost of ownership, or TCO, is a way to determine both the direct and indirect costs of using a given product or service over its entire lifespan.
This helps you more accurately budget for subscription-based softwares where costs accumulate over time. When you consider everything that can happen over the course of a few years, it’s wise to plan ahead.
Calculating TCO can be difficult when each vendor has different pricing structures, but we can provide some general guidelines.
First, take stock of which fees you are paying:
Add all those costs together, and then divide the total by the number of years you plan to use this software. This will give you a yearly cost estimate for using this software platform.
For example, let’s say you own 100 properties and have a platform that you plan to use for 5 years. The standard tier costs $25 per month per property, and you have purchased an add-on for $6 per month per property each.
This is how the calculation would look:
((Monthly rate x number of properties x number of months) + (Add-on rate x number of properties x number of months)) ÷ Number of years
(($25 x 100 properties x 60 months) + ($6 x 100 x 60 months) ÷ 5 years
($150,000) + ($36,000) ÷ 5 years
$186,000 ÷ 5 years
TCO = $37,200 annually
This simple formula doesn’t take into account other factors like set-up costs, annual or volume-based discounts, and commission-based fees.
If your chosen platform has a booking fee (1-3% is common), here’s what that cost would look like assuming you make an average of $70,000 a year in bookings at a 1% booking fee.
$70,000 in annual bookings x 1% booking fee = $700
Fee = $700 annually
Keep in mind, this payment processing fee is on top of your other TCO calculations. We recommend taking your growth expectations into account into this and other cost projections.
Of course, looking at just dollar amounts is an easy way to get sticker shock. You should never evaluate software based solely on predicted TCO. You should also conduct a value-based analysis.
A value-based analysis is a lot more subjective than a TCO calculation, but will more accurately measure how useful a platform is to your operations.
To conduct a value-based analysis, assess a software and its features based on how much benefit it can potentially bring to you and your team.What kind of support can the software provide to you and your guests? What effect would it have on your team’s workflow?
Try to estimate hard numbers such as:
The actual calculation will depend on how well you know your business and whether you’re able to measure the hours spent doing specific tasks. Remember that one hour of your time may not be worth the same as someone else on your team.
You should also take scale into consideration. Using a vacation rental software for ten properties would save you a few hours each week, but what would happen if you expanded to fifty properties? Would it save you even more time, or would the software collapse under the load?
The ideal vacation rental property management software would be effective both now and in the future—something that can grow with you as your business expands.
Read more about what you need to look out for when assessing what vacation rental software to buy.
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