How Smart Pricing Works

[Lizzie]

Hello everyone,

Smart Pricing is a commonly discussed topic in the Community Center and we have heard from many of you that you would like to know more about how it works. So, similarly with our previous topics on Instant Book and How Search Works, the Smart Pricing team have helped answered some of your top questions. Here is what they have to say!

Deciding on the right price to charge for your listing can be a challenging task for anyone. You search your area to see what other hosts are charging, compare your listing to theirs, and wonder how you measure up. But what you don’t know is the price those listings actually get booked for (and how often they, in fact, get booked). You can’t tell how much interest your own listing is generating, or if travelers are willing to pay the price you’re asking. This is where Smart Pricing comes in, by keeping your nightly prices competitive as demand in your area changes. The goal of Smart Pricing is to increase your chance of getting booked.

How does Smart pricing determine its suggestions?

When you have Smart Pricing turned on, your pricing suggestions reflect the controls you’ve set, combined with a lot of data. In fact, Smart Pricing takes into account over 70 different factors that could change your price. These factors, plus your controls, determine the best price for each available night on your calendar, and your price updates to reflect changes in factors like:

• Lead-time: as a check-in date approaches, your price will update
• Market popularity: if more people are searching for homes in your area, your price will update
• Seasonality: as you move into, or out of high season, your price will update
• Listing popularity: if you get a lot of views and bookings, your price will update
• Listing details: if you add amenities, such as WiFi, your price will update
• Bookings history: as you get bookings, your future prices will be partly based on the prices you got for successful bookings. So, for instance, if you set your price higher than Smart Pricing suggests, and you get a successful booking at that price, the algorithm will update to reflect that.
• Review history: Your prices update as you get more positive reviews from successful stays.

There are lots of factors at play—Smart Pricing even evaluates how many travelers look at your listing every day and how long they view it for! We really have built this tool to reflect factors you can’t discover just by simply comparing your listing page to others in the area.

What control do hosts have over setting their prices while using Smart Pricing?

Smart Pricing lets you set your prices to automatically match demand, with the goal of attracting bookings. To make sure you’re always comfortable with your listing’s daily prices, we give you a couple of simple settings to establish the boundaries you’re comfortable with:

• The minimum price you set is the lowest your price will go when demand for your space is low. This means nightly prices may drop to attract more guests to book, but never below the threshold you set.
• The maximum price you set is the highest price your listing can be booked for, even on high demand nights. You can set this as high as $10,000 per night, and it is not publicly displayed. Currently, every listing that uses Smart Pricing must include a maximum price setting.

At any time, if you see prices you disagree with for a date, you can just type a new price in your calendar or adjust your minimum or maximum price in your Smart Pricing settings.

How does Smart Pricing interact with other pricing settings?

Prices guests see can be adjusted based on some other settings you have in place, but not all.  For example:

• If Smart Pricing is turned on, your weekend price setting will not be used. However, we will make sure the recommended price stays above your minimum price setting, including on weekends.
• Extra guest fees and cleaning fees are applied to stays in the same way whether Smart Pricing is on or off.
• Weekly and monthly discounts get applied to the prices on your calendar for longer stays whether Smart Pricing is on or off.

We’re always adding flexibility to Smart Pricing, such as the ability to turn it off for certain days only. And we appreciate hearing your ideas on how to improve this feature. We do this by surveying and interviewing hosts all over the globe, staying current on topics and comments here in the community center, and testing new features with small groups of hosts.

That’s a long way to say, we appreciate all of your feedback and how much you care about helping improve the Airbnb products hosts use every day. Stay tuned for updates.

Feel free to share any comments you have, here in this discussion.

Thanks,
Lizzie

[Robin275]

I like Airbnb in general, but smart pricing is an insult to hosts.  I am quite certain that when we don't use this system, we are placed lower on the page.  I think that Airbnb foists what they think are good booking ideas on hosts that do not make good business sense for all of us.  I have had negative issues with instant booking that I never had when booking myself, but was told that if I did not turn it on my cabin would be shown much further down on the available pages.  The 48 hour cancellation policy does us NO good as we are in a very rural area and don't have the volume of guests that one might have in San Francisco for example.  

Discounting last minute bookings is stupid in our part of the country.  

[Situ0]

Smart pricing is certainly not workable as my apt gets booked for better pricing. 

[Jennifer464]

I get emails that I should lower my price because people booked other places that were cheaper but the dates Airbnb emails almost always are dates that I already have book or the dates are partially booked. 

[Charley4]

It understandable that AirBnB’s definition of proximity does not consider mountain ranges that turn 20 crow flying miles into a 90 minute drive. 

[David126]

@Charley4

Not sure Crows can fly that high, in a straight line. Would have to fly over 13,000ft.

[Lawrene0]

Ah! Good to know that amenities affect the pricing, @Lizzie. I wondered why the price tips for my treehouse keep implying I should chop that wood, scour those floors, cook those breakfasts for next to nothing, and in my case the comparisons are to cramped bedrooms in Petrolia. (Almost as uninspiring a name as Leadville, I would say, @David126.) It is probably because I have few amenities. But that's one of the reasons I get booked. It is an off-grid, in-the-woods place. Amenities would spoil it. I always ignore the tips, and it is not as if I am asking a fortune. 

I did just today set up a new cramped-bedroom listing of my own to accommodate "overflow". Fellow couldn't reserve the treehouse because it was already booked, but needed a place in this area, and, I assume, didn't want to go to Petrolia. I'm not keen to wash sheets for next to nothing either, so I think I will pick my own prices here too.

Thanks for setting this all out, Lizzie. I won't use Smart Pricing, but it is clearer now why it is the way it is. Happy to hear that it's not merely out to get me 🙂

[Barry27]

I agree with the tone of these threads. I have an ‘eco studio’, all non toxic and recycled detailing and warm soft lighting, and a treehouse in a 150 year old totara tree made on similar principles. I too am pestered by airbnb that ‘possible guests’ are booking somewhere else for $24 less a night. That’s absolute rubbish. There isn’t even a ‘private’ room close by for NZ$50 and many close by are furnished with synthetics and with ugly cold lighting.

I’m pretty happy with the guests I have who come here because of the warmth and non-toxic nature of the spaces. And they are pretty happy too it seems. So yes - please airbnb - lay off the pestering emails.

Baz - (eco-friendly private country space. Treehouse in totara heaven. Aotearoa/New Zealand.)

[Kelly149]

@Lizzie Thanks for the info. Unfortunately, I’ve never seen anything happen in SP that seemed smart. As @Lawrene0 mentioned I’m quite certain that it compares me to spaces that aren’t actually comparable. Also, my weekend rates & weekday rates are HUGELY different. Smart Pricing will never be smart for me until it recognizes the difference btwn weekday & weekend. 

[Andrea9]

I've never been able to make heads or tails of SP's non-logic.

I personally would never use it to determine my prices. 

Even the price suggestions are usually way out of the ball park.

The suggested prices don't reflect any local events here in Amsterdam. For ex. dates that would be interesting at a later point in time - let's say German bank holidays falling on a Thursday, which has many Germans taking a 4-day weekend trip, many of which to Amsterdam, do not seem to register properly in price suggestions that far ahead. Means if using SP and opening the calendar so far ahead, it would mean loss in revenue for such popular dates.

Nor do the suggested prices take into effect the idea that a host may not be interested in hosting at so low a price that wouldn't even be able to recoupe cleaning costs. Which hosts wouldn't rather enjoy the peace in the house than practically 'pay' guests to stay! That's also why the emails telling me about guests who viewed my listing and booked at X lower than my price come across as super condescending.

Just because somebody decides to book a cheaper place that offers less than I do (details of which aren't even included in amenities list I can check off) and which also has a shared bathroom instead of having a private guest bathroom like my listing, has no value or interest for me. I means I wouldn't even want that booking. It's a guest's budget decision and not a valid reason for me to lower my price by 15,- or 25,- or whatever other amount Airbnb thinks might 'help' me get a booking. Why would I even want to bust a seam to work for nothing just to have somebody stay? 

I'd rather have guests who truly value what I have to offer at a price good for both sides and not get cheapies who may not even value what I have to offer. 

Bottom line here in Amsterdam is - SP isn't taken seriously by most hosts, or at least those hosts who've been with Airbnb long enough to know that not everything that's touted to 'help' does in reality mean it is a help to hosts.

[Terry21]

That was a perfevt answer and one that i agree with too

Terry Bangkok

[Amanda270]

Absolutely agree with everything written in this post.  British Bank Holidays also can attract higher prices and the cost of heating during the cold months needs to be factored in.  Guestimate pricing from Airbnb does not suit all premises in the many varying geographical climates we all host in.

[Linda37]

I totally agree. Smart pricing doesn't factor in that I offer a much more flexible twin bedded room rather than a double when it compares listings in my area either. 

[Cynthia215]

Agree totally, letting your place for a pittance just to get bookings is a crazy idea, it is slave labour, no respect for the hard work that is involved, and inded for your property.

[Rose164]

I agree 100% with this host...I'd rather have guests who truly value what I have to offer at a price good for both sides and not get cheapies who may not even value what I have to offer. 

[Dustin25]

I will keep this short and sweet. Everything you said is exactly how I feel about my listing! SP doesn't take in to consider that the people that book places that are cheaper is because they are cheaper. I want as many bookings as I can but I can't give it away that just seems to be a win for the guest and operating at lose for the host. I also had one more thing to say and that's if I lower my price that might cause others to do the same and then in is a race to the bottom like another guest has said. I love your house you have up here and wish I could stay there when I am in town but I will be with 2 friends and we need to find a place for us all. If your ever in Pittsburgh look me up I will offer you a stay at the SP rate! Just to guarantee I will get that booking like they say and it can be right at lest once. 

Dustin