How much should I charge for my AirBnB? How should I set my AirBnB prices? These are common questions that hosts ask themselves all the time.
Pricing any product or service ultimately comes down to two things: supply and demand. Not to bring back visions of your high school economics class, but it’s really that simple. In the case of AirBnB hosting, our inputs are as follows…
Supply - How many AirBnB’s are available in a given location on any given date?
Demand - How many guests are looking for an AirBnB in that location on that date?
In order to begin setting your nightly rates to maximize revenue and occupancy, you must first start with this fundamental understanding.
Consider how guests search for properties
The second step in setting your AirBnB rates is considering how potential guests make decisions about renting a property on AirBnB. Think about your own experience when researching potential properties. Almost all of us follow a similar process.
We type our desired location into the search bar.
We select the dates of our stay.
We select a price range that we’re comfortable with.
We look at at the properties within that price range that show up in search results first and have the best reviews.
Sound about right?
With this behavior in mind, an obvious truth surfaces - your nightly rate is the single most important criteria when it comes to your AirBnB business. Why? Your property is located wherever it’s located… it’s not going anywhere. And your property is either available on the dates being searched, or it’s not - again these factors are beyond your control.
But set your price too high, and your property won’t show up in the search results even when it is available. Set your price too low, and you’re inviting more competition into the search results from higher priced properties that will likely be perceived as “better” whether they really are or not.
You can’t set prices without considering the competition
Whether AirBnB hosting is a full-time job for you or you’re just an occasional host, your AirBnB rentals represent a business; you should treat them like one! Any business today, whether its selling hamburgers or Ferraris, considers its competitors when setting their prices. You should too.
First, you need to do some research on AirBnB to identify competitive properties to your own. These are likely properties in the same geographic area, with similar amenities, reviews, and nightly rates. Start by finding the 5 properties most similar to your own.
Now imagine if you find out all of your competitors’ properties were booked for a given date, but yours was not. Chances are, your nightly rate is set too high.
What if all 5 properties are booked, but your competitors are all charging a higher nightly rate than you are? You’re losing out on revenue.
Optimizing your pricing pays
Insights into your what you’re charging versus your competitors and your relative occupancy rates are critical to your success. The good news is a little effort goes a long way.
Say you’re able to charge an additional $10 per night. Over the course of a month that’s $300, or an additional $3600 per year. If you have 10 listings, these insights could make you an extra $36,000 per year!
Or say your average nightly rate is $150, and insights on competitive properties help you keep your listing rented for 3 additional nights per month. That’s $450 per month or $5,400 annually. If you have 10 listing, that’s an additional $54,000 per year!
If you’re a professional, that’s some serious coin that could benefit your business. If you’re a part-timer, that could very well pay for your next vacation.
Should I use AirBnB’s smart pricing tools?
AirBnB offers a tool called AirBnB Smart Pricing and there are several other algorithmic based tools that claim to automate the process of optimizing your AirBnB pricing. There’s been a lot of discussion about Smart Pricing underestimating demand for properties, and there are other automated tools out there that are worth considering if you are a “set-it-and-forget it” type of host. If convenience is your first priority, these might be worth a look.
At Compare Rental Bookings, we’ve experimented with many of the automated pricing tools on the market and simply found that with our own listings a more hands on approach to setting prices yielded significantly more rental revenue. Our product is instead designed for the more hands-on host, who is willing to spend a few minutes analyzing the pricing and occupancy level data that we readily surface for hosts.
Our belief is that humans, armed with the best data available, make the best pricing decisions. We invite you to try our pricing comparisons free for 14 days - we’ll happily work with you to set your prices and let the rental revenue gains you realize speak for themselves.