How Airbnb Evaluates the Listings?

Zacks Shen
4 min readOct 14, 2021

A triple-win strategy for users, hosts, and Airbnb.

Airbnb Rental Price vs. Neighborhood in Seattle

Introduction

Are you an Airbnb host? Or are you a data science enthusiast? This article will walk you through the following interesting questions:

  • Why Airbnb needs Machine Learning models for price prediction?
  • How Airbnb determines the price of a listing?
  • How to run a successful Airbnb?

Hello, I’m Zacks, a data scientist and a long-term Airbnb user. I also registered as an Airbnb host to explore how Airbnb works. Additionally, I interviewed an Airbnb Superhost who can rent his house more than 300 nights per year for more insightful ideas. For more scientific and tech details, visit Kaggle Seattle Airbnb to see how I implemented data analysis, ETL pipelines, ML pipelines, gradient boosting, and advanced ML methods.

Why Price Prediction?

Price prediction is beneficial for Perfect Competition, a triple-win market.

  • Hosts have an intuitive opportunity to compare their services and amenities with competitors. As competition intensifies, the overall service quality and market size of the rental housing market will be improved.
  • Price prediction models are reliable references for data-driven decision-making. With price suggestions from Airbnb, hosts can make different business strategies.
  • Airbnb users have more choices at lower prices or higher quality.
  • Airbnb can grow faster including attracting more users and hosts, leading to operational and data center cost reduction and profit growth.

How Airbnb determines the price of a listing?

Currently, Airbnb has at least two Machine Learning models for price prediction. They are both for hosts:

Price Tips: Price tips are automated nightly price recommendations that you can choose to save. They are based on the type and location of your listing, the season, demand, and other factors. Even if you use price tips, you always control your price and can override the tips at any time. — Refered from Airbnb.

Smart Pricing: Smart Pricing lets you set your prices to automatically go up or down based on changes in demand for listings like yours. You are always responsible for your price, so Smart Pricing is controlled by other pricing settings you choose, and you can adjust nightly prices any time. Smart Pricing is based on the type and location of your listing, the season, demand, and other factors. — Refered from Airbnb.

Price Tips
Smart Pricing with Price Tips

How to run a successful Airbnb?

I believe you have read the articles like “10 Tips for Running a Successful Airbnb Property” or Quora questions like “How can I become the greatest Airbnb host”. Let’s think of the same question as a data scientist.

Yes, you can compare your listing with the competitors since you know your neighborhood, amenities, and a price suggested by Airbnb. However, it’s hard to determine which features are more important than others. And Airbnb doesn’t provide the full details of its Machine Learning models. The followings are my strategies based on data analysis, machine learning, and researches:

If you’re not a Superhost, you need more reservations:

  1. To beat Airbnb’s search engine, you must be a Superhost for a higher ranking, leading to more exposure. A Superhost’s listing always appears in the first search results.
  2. Follow the Price Tips and lower the price (base price, cleaning fee, or security deposit) to be more competitive.
  3. Add amenities such as Indoor Fireplace, Cable TV, TV, Doorman, Dryer, Washer, Air Conditioning, Gym, Kitchen.
  4. Provide additional services that are not included in amenities. You can prepare free snacks, fruits, and water as surprise.
  5. Set shorter minimum nights for more reviews.

The Pearson correlation coefficient (r) discloses the linear correlation between each feature and price (the bottom line), the higher the better. For example, you can consider adding amenities such as Washer and TV to make Airbnb models think “your listing’s price should be higher”. In other words, maintaining a higher quality but a lower price can help you attract more users leading to more reviews and higher stars.

Heatmap of Pearson Correlation Coefficient

If you’re already a Superhost or you have enough bookings:

  • You can consider increasing the price, setting special prices based on events, or enabling Smart Pricing to maximize the profit.
Supple and demand
By Paweł Zdziarski (faxe), Astarot

The price P of a product is determined by a balance between production at each price (supply S) and the desires of those with purchasing power at each price (demand D). Refered from Supply and demand.

Your maximum supply per year is 365 days. If you have reached the needed demand, you can increase your price for more income; If you don’t have enough reservations, set a lower price and improve your service to become a Superhost.

Conclusion

Airbnb uses machine learning models to intensify the competition. They can provide Price Tips, Smart Pricing, and improvement suggestions to the host. As a host, you can combine the models and good strategies to maximize your competitiveness and profit. Airbnb users are also benefited from the perfect competition.

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