3 Pricing Strategies Every Airbnb Host Should Know
Background
When I look back at when I first began working on pricing algorithms for Hyatus, I can now see how clueless I was about the unique characteristics of the Airbnb rental market. Looking back, I can easily point to numerous mistakes that were made as a result. By outlining these key strategies that I’ve learned from personal experience and market research, I’m hoping I can help other hosts or other data scientists avoid these mistakes.
Don’t Panic Over Potential Vacancy
When it comes to pricing your home or apartment, this is the most important piece of advice I can give. Do not panic over vacancy, or do not panic over the risk of vacancy.
As a vacant day approaches, inexperienced hosts tend to overreact and lower their prices far too much. There are numerous reasons why this tends to backfire but some are:
- Lowering your price past a certain point may only marginally increase the probability of a booking while still linearly decreasing your price.
- Most bookings are made with <14 day lead time.
- Guests who book last minute are often willing to pay more.
The above largely varies depending on your market. Hyatus New Haven, for example, does not decrease prices at all, even if the vacancy is less than 12 hours away.
Hyatus New York actually increases prices as the check-in approaches.
In general, hold firm on your price. When your risk of vacancy is very high, maybe lower it by 10–15%. Don’t overreact.
Work On Increasing Your Length of Stay (LOS)
Many hosts don’t realize the extent to which a small increase in LOS can radically decrease the amount of time, work, and money, they put into each of their homes.
Because most of the complexities and work that go into a stay revolve around check-ins and check-outs, increasing LOS is all about the % increase. Moving LOS up from 2 days to 4 days is a 100% increase. This will have the same marginal effect on your operations as an increase in LOS from 1 day to 2 days.
As a result, if your LOS is very low, it is exponentially easier to halve your overhead and time constraints by increasing your LOS by only 1 or 2 days.
Keep an eye on the competition
Nothing can increase your average price per night like deep knowledge of the occupancy and calendars of your competitive set.
For example, if your market has 25 other properties that directly compete with your offering, and you have relatively few open competitors on some subset of nights, you can increase the price of those nights. By taking advantage of days where the supply is lower, you can increase your overall nightly price by 15–20%.
Best of luck with your pricing strategy! And please comment with any questions or feedback.
