How to Build the Right Comp Set
Being aware of your local competition is extremely important when deciding to purchase a rental property, adding amenities to your current rental, or when pricing your vacation rental. But not all homes listed on Airbnb or VRBO in your area are good comps, so which ones should you be looking at and what factors should be considered or valued most? Here are our top 4 factors in order of importance that we consider when building our comp sets, followed by some general best practices that we use when constructing them.
. Location Location Location. This is the most important factor when determining pricing. The closer another vacation rental is, the more relevant it is going to be to both a prospective guest and their search results on the platforms. This goes beyond comparing homes on the same street, neighborhood or even city. While other rentals within a close proximity are most relevant, it is important to expand to neighboring cities that share a common destination point. For example, if a prospect is looking to rent for the Coachella music festival, they could have an expanded search to include Indio, Palm Springs, Palm Desert, Rancho Mirage, etc. All of these homes become competition so it is important to include some of these homes in your comp set.
The second most important factor is the number of guests that the home can accommodate. Just because a home can accommodate more guests, that does not necessarily discourage guests from booking that home if they have less than the maximum number guests. For example, if your home can accommodate 6 guests, you will want to include homes in your comp set that can accommodate 8 guests because groups of 6 will still be considering homes that can accommodate slightly more guests than their group requires.
Minimum and maximum length of stay is the third most important factor. Many cities have only certain zones where they allow Short Term Rental Permits or some no longer allow them at all which requires hosts to rent for a minimum of 30 days. If a guest is looking for a weekend getaway, many of the homes listed on the platforms may not be an option because of the length of stay requirement. Whether the vacation home or city has a minimum length of stay requirement or not, there should be a couple homes included in the comp set that allow weekend stays and 30 day minimum stays because in scenarios where prospective guests are looking for a longer stay of a month or more, they will be looking at all of the homes that match their criteria.
Amenities and house rules are the fourth most important factor when building a comp set. Some of the most common differentiators here are if the home allows pets, small gatherings/events, or access to a neighborhood perk (Ex: fitness center). In some markets these amenities rank slightly higher as they can be a deal breaker for guests. Examples would be pool access in Palm Springs or beach access in San Clemente. If your home is in an area where some of these amenities are must haves, be sure the comp set reflects that.
When we build our comp sets, we are looking for ~20-30 homes that fit the general criteria, while focusing on 5-10 key comps that check all the boxes. Remember that even if the home is extremely unique or has much more to offer than any other home in the area, put yourself in the position of a prospective guest and what other homes they would consider. The more accurate and refined the comp set becomes, the better understanding you will have of the market and the more aware youll be of the opportunities.