Pricing your property on Airbnb is never an easy task, but a very major part of managing a successful Airbnb. There are thousands of articles and strategies available, yet most Airbnb hosts don’t seem to know a flat rate costs them money. Only 15% of Airbnb hosts have an active pricing strategy. For the rest, they are leaving money on the table.
There are two sides of the coin. On one face, there is the fear of not renting your place. On the other, if you price too low, you are leaving money on the table, and reducing your profitability. So which strategies make you the most money?
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. For Chicago, take note that each neighborhood can vary greatly. For instance, comparing Logan Square units to ones in Lincoln Park may be skewed.
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. Try 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.
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.
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. Usually, Airbnb hosts that earn the most are not always fully booked.
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.
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 don’t follow it. Weekends 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?
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 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. In Chicago, low season is from January - early March. Our management company advises that clients save the surplus income they get during the rest of the year to account for the low season.
6. Raise your 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. Think about Chicago's biggest events: Lollapalooza, Riot Fest, the Auto Show, etc.
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.
7. Don’t use Airbnb smart pricing, their goal is occupancy. Yours is profit
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.
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 answering your guests, organizing check-ins, cleaning your property, etc.
These will get you started on the right foot for your pricing. Keep in mind: Continually update your pricing, daily if you can.