Pricing your property has never been an easy task. There are thousands of articles and strategies available, yet most Airbnb hosts don’t seem to know a flat rate costs them money. If you don’t change prices, don’t worry – it’s completely understandable: Only 15% of Airbnb hosts have an active pricing strategy!
On the one hand, there is the fear of not renting your property and losing your occupancy rates.
On the other, if you price too low, you might be leaving money on the table, thus reducing profitability.
So which strategies should you follow to make as much money as possible? Well, let us give you what we believe are the best pricing strategies and tips!
1. Complete a market analysis of your area to identify the real value of your home
You can do this manually by looking at similar properties in your area.
- Go to Airbnb and do a search in your area
- Select 5 to 10 properties similar to yours in terms of rooms, size, and quality. Don’t compare an old house with no amenities to a brand new apartment with a sauna and jacuzzi. They won’t have the same value—even if they have the same number of rooms. Use listings with at least 10 reviews as they will be charging full market price. New hosts tend to undervalue their listings to get the first bookings and reviews quickly.
- Analyze the calendar for each property trying to identify their occupancy rate and price strategy. If you see that, for the next few months, there are few days available, that means either they are booked or have blocked their calendars. Keep in mind, some hosts rent their properties on a part-time basis. In any case, if you pick-up more than 5 listings with as many reviews as possible, you will have an accurate picture of your market.
- Make a comparison price table so you can easily see who is charging what. With those numbers in hand, you can estimate the monthly and annual revenue of each unit and then determine what your income could be.
- Finally, set your price according to the findings.
2. Start with a low price until you catch the first reviews
To stand out from your competitors before you get the first positive review, under-price your home around 25% of your estimated market value. Once you get those reviews, start moving your price up until you reach your market average. It is also a good idea to start with lower prices because guests tend to write a better review when they feel they have paid less than the value they found.
3. Never be entirely booked too early
Being fully booked too soon can only mean one thing: you are pricing your listing too low. To maximize your revenue, you don’t need to be fully booked; you need to get as many bookings as possible at the maximum price possible. Airbnb hosts that earn the most are not always fully booked.
But, how can that be?
Accepting reservations too far away in your calendar costs you money unless you do it for a much higher price than your regular rate. Think about it this way: people who don’t want to spend too much money on their holidays book as early as possible as they know this is the way to find the best deals.
The ones who don’t care so much about the budget book almost on the same day, and as they know they are booking late, they are ready to pay more.
An excellent example of this is Booking.com. If you look at this platform, sometimes you find the same homes as Airbnb, but at a much higher price. This is because Booking.com is a platform where people often look for accommodation only a few days in advance.
Another reason why renting your property too early might cost you money is because the dates of some events might not be revealed at the time of the booking. In that case, you would be losing the opportunity to raise the price for that particular event.
4. Set higher prices for the weekends and high season
This is a fundamental rule, yet many hosts still don’t follow it. Week-ends are higher in demand and therefore, people are willing to pay more. If you combine this tip with the last one, you will have the perfect combination. How many times have you booked a weekend escape the Wednesday before? If you have done it, you were ready to pay a bit more, right?
The same is true for your high season. If your home is near the beach, your peak season is summer. You need to raise the price for the summer months, not because you want to be greedy but because you need to compensate for your low season.
5. Be aware of your low season
Some fortunate hosts have their homes in places where they can get a steady number of guests throughout the year. Others, in exchange, have 1 or 2 periods where the occupancy rate decreases or even reaches 0. Imagine, for example, a sky resort during summer. If that’s your case, don’t worry. You just need to be aware of it and counter back with exclusive deals and arrangements. See our articles about how to arrange your property for the summer and winter season.
6. Raise prices when there are major events in your city
Some significant events like concerts, festivals, football matches, and such bring thousands of people into your city. They represent an opportunity to make extra money as you can charge up to 10 times your average daily price.
As these dates are in high demand, travelers search for bargains early, so make sure you either have your calendar blocked on 90 days, or you have a high price for those days.
Airbnb hosts that accept bookings too far in the future and always use the same rate sometimes get bookings for a specific weekend 6 months in advance without knowing there will be a big event that day. This is the worst thing that can happen to you as a host, as you will be leaving money on the table without acknowledging events.
7. Don’t use Airbnb's smart pricing, as it's known to be too low
This is not us trying to tarnish Airbnb’s service, but that’s what many hosts have said in different blogs and forums. Some theories say that, behind the Airbnb smart pricing tool, a strategy from Airbnb tries to close as many bookings as possible at a lower average price than hotels in the area. Under this approach, Airbnb would be killing two birds with one stone. It will make new, inexperienced hosts happy as they get many bookings, and they will keep guests happy as they will be renting their accommodations much cheaper than hotels.
8. Last-minute discounts
As the date gets closer without closing any bookings, reduce your price until you reach your minimum acceptable price. You can have different approaches to this strategy depending on how aggressive you want to be. You can start reducing your price one month or just a few days before the day arrives. You can cut your price by 10, 15, or 20% depending, again, on how aggressive you want this strategy to be.
Last tip:
As you have seen, when pricing your Airbnb most efficiently, you should take into account as many factors as possible. And let’s be honest, you are already busy acquiring more properties, answering your guests, organizing check-ins, cleaning your property, etc. So once you have decided a pricing strategy, it is a good idea to consider a professional pricing service like ListingOK that will increase your easily revenue easily.
We hope we have been of some help!