Have you ever considered using Airbnb Smart Pricing for your listing? Adjusting your pricing on Airbnb is a beneficial strategy that can help keep your rate competitive and optimize your listing towards maximum revenue. In fact, according to Hospitalitynet, dynamic pricing can significantly improve a listing’s revenue performance.
However, not all the hosts seem to be satisfied by the Airbnb Smart Pricing feature. Let’s find out how Airbnb Smart Pricing works and explore alternative dynamic pricing apps that can help you set the best pricing for your listing.
Airbnb Smart Pricing is a built-in tool that analyzes relevant data and factors for a property listing. It automatically updates a listing’s price to match the demand of the market, but only within a minimum price to a maximum price range of your setting. The factors that it examines include the rental’s location, size, amenities, and the quality of your listing.
The Smart Pricing tool on Airbnb works on an algorithm that generates price tips from metrics related to the property. After cross-examining the information, it will recommend an “ideal” price based on its calculations.
If properties are regularly booked in your area, Airbnb will assume it’s a more popular and in-demand location and increase your price. If it’s low season or you live in an area that doesn’t get much foot traffic, Airbnb will take note and lower your rates to make your rental more appealing.
What your space offers in terms of amenities and features can affect your price tips. The more you offer, the higher your rates will be calculated by Airbnb.
Don’t fret if you have a limited property, though! You can also positively influence the algorithm by creating a comprehensive listing of your property. It also examines the quality and detail of a listing when doing calculations.
How many people click on and view your listings can make an impact too. The greater your listing’s click rate, the better your calculated price tips will be.
To help boost your listing visibility, you should try to reach as wide an audience as possible. Marketing your listings on platforms like Instagram and Pinterest can draw additional views.
If you want to positively affect your suggested rates, aim to collect as many 5-star reviews as possible. Airbnb Smart Pricing takes into account the number and quality of your reviews from guests.
You can do this by striving to provide the best possible guest experience from the start. After your guests have checked out, you can encourage them to leave a review by writing a guest review for them first.
Your room type and what it offers also play a role. If your room offers an ensuite bathroom or a balcony opening up to a garden view, the Smart Pricing tool will factor that into its algorithm.
If your room doesn’t offer anything that helps it to stand out, don’t worry. You can give your room a more luxurious touch by adding simple furnishings like air conditioning, a bigger bed (if space allows), and a smart tv.
The more you make your listing available to book on your calendar, the better your rate will be. This is because Airbnb would ideally like hosts to accept as many guests as possible, as they earn a percentage of the booking fees as commission. So, they reward more frequent hosting with higher price tips.
Airbnb will also factor in how frequently searches for listings similar to yours are conducted by guests. This indicates the popularity and demand of your type of property, which helps to determine the price it will recommend.
Using Airbnb Smart Pricing sounds beneficial. So, why don’t more hosts use it? Some hosts have reported that it did help them increase their net revenue. Other hosts have complained that it has limited the amount of revenue they could have made. So should you turn an Airbnb Smart Pricing feature for your listing? Let’s take a closer look at its pros and cons.
Regardless of whether you decide to go with Airbnb Smart Pricing or not, you need to spend some time to figure out the best pricing strategy for your vacation rental business. Some of the most effective approaches include:
This method aims to maximize the income you can earn by charging a higher-than-average Airbnb nightly rate for your property. The plus side of this method is that you have the potential to earn more than you otherwise would with Smart Pricing on Airbnb.
The downside is that it may be more difficult to book your calendar to capacity because of the higher fees. For this pricing strategy to yield results, you would need to offer a premium property or a property that offers a unique experience.
This strategy aims to maximize your occupancy rate. You can do this by setting your rate lower than that of similar, nearby rentals.
A benefit of doing this is you are likely to have a higher booking rate thanks to your attractive pricing. On the other hand, when you are more fully booked, it translates to more work, and you won’t be making as much income as you could.
If you find yourself during your low season or are struggling to secure reservations, the Maximum-Fill Strategy is ideal. Just ensure that the rate you charge is still enough to earn a profit.
Long-term renting is essentially leasing, in that you rent out your property for a longer stay to the same guest, usually a minimum of 30 days. If you go for this option, some pluses are fewer management requirements and not much need to actively market your property.
As a downside, you would be earning less revenue than you would from short-term renting. You would also need to sign a rental agreement for legal protection in case anything goes wrong.
The Balanced Airbnb Management Strategy is a combination of the above pricing methods to earn the most revenue possible. It’s based on a flexible approach, meaning that during your low season you can use the Long-term Renting strategy to keep your property filled.
Then, during your high season and any special events, you can employ the Maximum Rate Per Night or the Maximum Fill-Rate approaches to optimize your earnings.
The benefits of this approach are a consistently high occupancy rate and greater income than you would otherwise earn with only one approach. However, the downsides are a higher guest turnover rate, more work, and more time spent on hosting tasks.
In the end, the method that you choose should suit your unique circumstances. There’s no “one size fits all” policy when it comes to effective Airbnb pricing strategies. If you find your bookings are increasing using one rate, you can update and adjust your pricing and set a new one to see if it gets similar results. Just always do some research before you start to charge a lower or higher price, otherwise you may not generate a profit.
Adjusting your pricing based on seasonality, events, and spikes in demand is certainly a good idea for maximizing revenue. As Airbnb Smart Pricing has received fairly mixed reviews from hosts, there are many software alternatives that are specifically designed for pricing management:
BeyondPricing is a well-established revenue management software that’s been operating since 2013. BeyondPricing offers dynamic pricing management that’s data-driven. It also offers smart industry insights and personalized revenue management guidance for hosts.
PriceLabs allows you to easily manage your listing’s pricing and availability with their user-friendly software. PriceLabs also offers handy integrations with over 50 PMS’ and channel managers for fast, convenient access. iGMS is integrated with Pricelabs, allowing hosts to take advantage of streamlined vacation rental management and rest assured that their rates are optimized across all their channels.
Wheelhouse is a revenue management and market-insight software designed for effective business management. It also offers important comp set intel to help you understand how your rental is performing against the market.
DPGO is a dynamic pricing software that can help to increase your revenue and occupancy rate. Some of the features it offers include AI-driven dynamic pricing, real-time industry information, and growth performance.
Using pricing tools is a good idea in general because it can help to maximize your revenue. Another way to jumpstart your business growth and success is by using vacation rental software. Vacation rental software, like iGMS, streamlines routine operations and puts your business on autopilot. With iGMS at the helm you can:
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