Price Hack for Airbnb Hosts
Airbnb hosting is the perfect hybrid of entrepreneur and passive investment. You control most aspects of your product, but can still rely on the safety net of a large company.
You can control the quality, and more importantly — the price. This gives you the freedom to study the rules of supply and demand in your specific area, and apply various pricing strategies depending on your situation and end goal.
Are you looking to put in less work and only host occasionally? Charge a higher nightly fee. Enjoy the stability of knowing exactly how much you will make next month? Set a lower rate and watch your calendar book up.
Those of us using Airbnb to reach financial independence need to find the sweet spot between those two — you want to minimize vacancies, without undervaluing your home and leaving money on the table. It’s a fine art, and may take a few months to perfect.
Lucky for you, I am going to teach you a little-known pricing hack utilized by the highest earning hosts.
By manually pricing your calendars on a weekly basis, guests will see a lower rate than what they can actually book.
We will get into the specifics in a minute, but essentially it works like this: guests searching for Airbnbs in your area (before inputting the exact dates of their travel) will see all of listings in your city advertised at their base price. The advertised price can be lower than the actual rate per night. Guests can use a price filter in this initial search, which shows them all of the Airbnbs in town with a base price in their desired range (under $100, for example). Once the guest selects an Airbnb, they will input their travel dates and receive the actual nightly rate (which may be higher or lower than the original $100/night quote).
*disclaimer: Some hosts are not comfortable using this technique because they feel it is “misleading”. I disagree. I keep my base price lower, but still realistic, and last minute vacancies are often booked at that rate, or even lower. The base is just that — the very bottom. I consider this an advertising technique to expose your listing to more audiences.
So, how can you tap into this powerful pricing hack? It can be done in 5 easy steps.
Step 1: Determine your target price
Coming up with a target price requires going back to your market research. How much are other Airbnb’s with similar amenities and furnishings charging? How full are their calendars? Do they have at least 10 reviews?
Make sure you are searching for specific dates, otherwise it will just show you the base price. Search for a variety of dates — weekdays, weekends, within the next 5 days and 3 months out. Spend more of your time focusing on your own neighborhood, but also take a look at more desirable areas of town as well as those that are less popular. Check the price of hotels and bed and breakfasts in the area.
Step 2: Create your target price range.
Once you have the average nightly price in your area for weekday stays, add $15 above and below to create your target price range.
Step 3: Set your base price
Set your base price $10–20 lower than your target price range. If you have done your research properly, this should end up being in the lower 25–35% of your market.
Step 4: Change your calendar availability
Once you have determined your market pricing, you need to go to reservation preferences under the availability tab. Select dates unavailable by default (next to booking window). All of your future dates are now blocked, and you can go back to the calendar to manually adjust your prices according to your target price range.
Step 5: Input prices for the next 3 months
Here as an example: your research shows the average experienced host with similar amenities to yours charges $100/weeknight. This makes your target price range $85–115. Set your base price for $75.
Your weekday pricing for this property will look like this: (assuming there are no holidays or events in town)
Week 1: $65 *
Week 2: $75
Week 3: $75
Week 4: $85
Week 5: $95
Week 6: $105
Week 7–12: $115
Add $20 to these prices for Friday and Saturday nights.
*Week 1’s price is for the first time host with no reviews. Once your listing has been on the market for 3 months, you should only have 1 or 2 vacancies in the upcoming week. Price these occasional vacancies at lower rate to encourage last minute bookings (if you are constantly experiencing more than 2 vacancies for your upcoming week, you need to check your market and reevaluate your base rate)
And that’s it! Although this initial set up is fairly easy, you will need to you need to be evaluating your calendar every few weeks to make sure you are still hitting that sweet pricing spot. The market is always changing — there are going to be new competitors on the market, events coming into town, high seasons, low seasons, and everything in between.
When you update your calendar, make sure to evaluate your occupancy rates. Your occupancy for the next two weeks should be 90–100% (only 1 or 2 nights open). That occupancy rate should gradually fall, hovering around 40% for dates 6 weeks out.
To see how this will directly affect your bookings, let’s go through one more example with concrete numbers from the property above: a potential guest is searching for Airbnb’s under $80 in your town, without a specific date. Your property shows up on the map at $75/night. After clicking through your listing, the guest falls in love with your expertly written description and goes to book it. When they put in their dates, they see that the price is actually $95/night. However, they like your property so much that they don’t mind paying the extra $20. Since they were using the price filter to search, these people wouldn’t have even known your property existed. By setting the base price slightly lower, more people will see and book your listing.
Once you get someone to click on your listing, you still have to finish the sale. Want to ensure your listing description is on point? Check out How to Write the Perfect Airbnb Description.
Additional pricing tips:
*It may be tempting to lower your prices dramatically, especially if you are a new host or you are experiencing more vacancies than usual. Never be the cheapest Airbnb on the market. Being too cheap will attract the wrong kinds of guests.
*Airbnb’s automated pricing tool can be a helpful guideline, but is often way too low. There are other companies that provide pricing software for a fee, but having used these I can say that they were largely inaccurate as well. Our market is fairly small, so these tools might work better in more populated cities. However, there is no substitute for old fashioned boots on the ground research.