How Smart Pricing Works

Lizzie
Former Community Manager
Former Community Manager
London, United Kingdom

How Smart Pricing Works

Smart Pricing

 

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


--------------------


Thank you for the last 7 years, find out more in my Personal Update.


Looking to contact our Support Team, for details...take a look at the Community Help Guides.

287 Replies 287
Lizzie
Former Community Manager
Former Community Manager
London, United Kingdom

Hello @Sheila146,

 

Thanks so much for your comments here, it is great to hear about how you use the tool and your feedback. 

 

I have spoken with the Smart Pricing Team and wanted to come back to you on your question here.

 

Currently the information we provide on a missed bookings doesn't show this detail your refer to, but we're actively exploring how to show this in a way that's consistent with our terms and conditions. Today we tell you that guests viewed your listing, but booked another (along with their eventual booked price and date range). We do though believe that showing additional detail about the listings that were successfully booked over yours, is a useful reference point for our hosts, so stay tuned in 2018.

 

Thank you again for your asking about this, I hope this is helpful.

 

Lizzie


--------------------


Thank you for the last 7 years, find out more in my Personal Update.


Looking to contact our Support Team, for details...take a look at the Community Help Guides.

Currently it does not compensate us to activate them. It would be a much more interesting tool if smart prices could be activated by keeping prices fixed for the weekend or even better if different minimum prices could be established according to the day of the week.
In our experience, the difference in demand during the weekdays and weekends makes it impossible to establish a minimum that makes the smart price option effective ... greetings!

I agree with the comments of the other hosts. I spend a great deal of time and energy having my apartment clean, well equipped, beautiful. Not to mention the investment of renovation, permits, overhead, 37% taxes. I've maintained superhost stautus since I started over 2 years ago - then I get suggestions from Airbnb that I charge 11 USD per night, and offer a discount. I can only imagine what kind of guest I might attract to my beautiful brand newly renovated 150 year old 5 star reviewed apartment. No thank you. I would clear a whopping 4 USD per night.

I am currently traveling in India and paying 20 USD per night for much less clean and luxurious accomodations.

I suspect that part of the algorithm is keeping the prices suppressed so that Airbnb continues to corner the market on accomodations, build their empire on the backs of hosts.

I will keep my rooms empty before I rent them for 11 USD a night. Why on earth would I work this hard and have the wear and tear on my apartment for nothing? For the pleasure of washing endless laundry and scrubbing a toilet after a stranger?

Wow.   So much good information here on SP.   We're pretty new to this and it just dosen't seem like a good idea to me.   How could Airbnb know that we have a motorcycle weekend in September and could charge a gazillion of dollars a night for that one night?    I know my town, my local competition, the ins and outs of the ferry system in Washington state, our events calendar, and what the market will bear.   I'll do my own pricing.  And comparing me to others with less than I have isn't fair.   

J-Renato0
Level 10
Rio de Janeiro, Brazil

@Lizzie

It is my second feedback in this topic, and I have some more things to say.

 

Actually, I have tried the smart pricing more than once and I know on how to use it. I know I can set manually prices for some periods of time. However, I a prefer to adjust manually all the prices in the calendar.
I think the biggest problem is not the Smart pricing tool. The biggest problem is the Price Suggestion Tool and Messages that induces the hosts to lower its prices towards the rock bottom, engaging on a destructive and endless competition.

Meaning, whether or not the host use the Smart Pricing, it will induce the host to lower its prices, manually or by lowering the minimum price set in the smart pricing tool.

IMHO, I think that, not only the smart pricing, but mainly the price suggestions tool interfere with the spontaneous market values and it is not good. In my view each host should adjust their prices according to their own perception and needs. According to the concepts of the free market economy, freedom to choose is an essential condition. Prices should be adjusted depending on demand and supply, and customers should be free to choose what suit them better. I am not saying that somebody are obliged to follow the price suggestions, neither the host nor the guest. But suggesting prices to the hosts, including informing the prices given by other hosts, IMHO is not a good practice. From my point of view, and figurativelly speaking, It should be the so-called "invisible hand of the market" that should press the adjustment buttons. The pricing tool can force the price to fall artifically, and may make the hosting activity unsustainable in the long run.

I have read a post on another site, written by a host who has been an Airbnb host since the beginning, and he says:
"The exact moment these tools were launched, the values fell in the region by more than 50%. My friends in Italy, Spain, France and the United States have the same perception."

 

Please, let Airbnb know that, it is a constructive feedback and criticism.

I look up to Airbnb and I am happy with Airbnb! 🙂 

What I would like to say is that, I would be happier and delighted if the Pricing Suggestion tool would not existed and we could shake hands with the "invisibel hand" of the free market economy! 🙂

@Lizzie I would love to rely on SP for pricing, instead of having to do my own research all the time. I found that the problem comes in when you thought a certain day had a price and SP changes it. I had this happen a couple of times last year and now I am very anxious using it again. For example, the pricing is working great from now to the next year, including our very busy Stampede week in July, but last year I had it all of the sudden drop my price to half. I am not interested in giving someone a 50% discount just because the book at the last minute. Last minute booking is not very good for a host, I'm pretty sure we would all like to plan our bookings in advance.

It seems that everyone is lowering their rates, but they really shouldn't! I believe, just like many other hosts by the comments I see, that AirBnB is purposely, or not, lowering and ruining the market price, at least here in Calgary. That might be the reason why the hotel association in Alberta has waged war against AirBnB. When someone is able to get a whole suite for 40$ a night in a city of this size, it causes the hotel industry to get mad and want to see us all gone. Let's get truly smart and play nice!!!!

Hi Lizzie,

I'm afraid that despite all your efforts with the smart pricing you are not getting it right.

FIrst of all, there must be something wrong with the algorythms as SP suggests me almost the same price (if not lower) for a 4-room flat that takes 6-7 people as for a studio for 2-3 in the same house. Obviously, it is easier for two to under-take more spontaneous trips than a group/family of 6. That the price for the big flat should be almost the same as for the much smaller studio just shows that this system is not working.

The bigger issue however, is what others have already brought up. You are creating a downward spiral for the price-setting. This is absolutely not good, and I hope you are realizing that this is what so many are trying to tell you.  I'm sure that the intentions are good, but you are creating a monster of competitive price-setting that hits those that your system depends on.

Agneta

Verbier

Marzena4
Level 10
Kraków, Poland

I already wrote some suggestions for improvements in the previous post.

 

And, apart from the above, how might Airbnb coders implement local holiday trends? The current algorithm is based on the bookings already made, and it is good, but what about events that will pop up? Hosts who will be the first to be booked will be at a loss.

// "The only person you can trust is yourself"
David126
Level 10
Como, CO

@Lizzie

 

I would like to be able to opt out of all the notifcations comparing me with places nowhere near me. I used to live near Swindon and also in Central London, about  the same mileage apart as is being used by ABB for comparison. As I am sure you are well aware very different markets.

 

Now I do have a slightly unique listing, but then I know I am not alone. I have seen many other people post on here who are not the norm.

 

My County is a little bit bigger than Norfolk but has a population of 17,000. So I know the other listings up here.

 

There are ski resorts not that far from me, well in US terms, they have mutiple properties very similar so comparisons may be helpful to them. Obviously their peak prices conicide with peak ski time, I get a little of the business but can not follow their pricing, wish I could!

 

I have had a booking for Christmas New Year, if my property was located 20 miles due West I would be charging at least 5 times as much and be booked out months ago.

David
Lizzie
Former Community Manager
Former Community Manager
London, United Kingdom

Thanks so much @David126@Lawrene0@Marzena4 and @Andrea9, for sharing your thoughts around improvements here. 

 

I think you raise some great suggestions here and valuable points. Correct me if I am wrong, but it sounds like you would like more ability to add in key things to your listing that helps to impact Smart Pricing (perhaps distance/key events in your area/ highlights on your listing etc.). If so, how do you think the best way to do this would be for hosts?

 

Thanks again,

Lizzie

 


--------------------


Thank you for the last 7 years, find out more in my Personal Update.


Looking to contact our Support Team, for details...take a look at the Community Help Guides.

None of those things would make me use Smart Pricing and my recommendation to the vast majority of Hosts would be to avoid.

 

I know I am relatively cheap, so you would expect over 2 ish years at some point I would have recommendations to increase my price, never happened. Slightly odd.

 

Hotels/Airlines/Concerts etc price according to the estimation of future demand, so I would expect to see recommendations coming through to significantly increase my price for Thanksgiving, Christmas, New Year,  Sprink Break (American Easter sort of) etc, never happened.

 

I do not  know the big picture, I know my listing and it seems that my experiance is similar to others, seems designed to depress pricing, maximum bookings numbers.

David
Helga0
Level 10
Quimper, France

Thinking about it, I do not believe, that I would ever adopt the feature, no matter how reasonable the suggestions become. 

For a simple reason: I wish to offer the service at its just price.  Not 1€ less, not 1€ more.  I manually increase the price, when I upgraded the place or for holidays, when my time is worth more 😉

I may reduce the price a little bit to fill a few close nights left between bookings. On other days, I may increase next nights to have a free evening- with the option, that someone books and pays enough to enjoy a drink (without guest) in the next bistro. 

I would not feel at ease with guests, who booked at very different prices, than what I define as the just price. If they paid half price, I would expect them to be grateful and it may turn out, they are not, as they have no idea of general prices in the area, my basic price and furthermore, general prices do not even exist any more. 

If they paid way too much, I would feel bad about it, and in the end, it creates problems with towns, where you may be limited to a maximum income from the activity. Like in Paris, if you host in a rented apartment, or more generally, if you earn more than a lmit for non commercial activity or VAT obligations. 

I think it’s a dangerous feature, as it makes price comparison impossible. You can’t say any more, how much a certain type of service is worth in a specific area. 

It gives too much power to secret algorithms. If a large number of hosts accept and if airbnb holds or increases their market share, the smart pricing settings could define the global prices. Ai4bnb could increase all prices to the joy of hosts and detriment of consumers or else, they could bring all prices down, to fight other players on the market. 

 

 

That's true, @Helga0. Nothing good with either the too-low scenario or the too-high.

@Lizzie, I think I would not use it either, and I wonder whether my suggestion for customizing is way off, and anyway would be reinventing the wheel. I understand there are customizable price calculators outside the system that people who like that sort of thing are using. What if Airbnb went out of it entirely? Just left it up to hosts? No smart pricing, no condescending emails about guests booking elsewhere for rock-bottom prices. I would be very happy with that.

Put the smart-pricing/nagging-email developers to work on the system glitches?

Yes, the weekly barrage of emails is incredibly annoying - especially when they compare our superior apartment with extraordinary views and amenities to little boxes made of ticky tacky. Seriously ridiculous. If a potential guest chooses to stay in a Motel 6 type situation, then that's perfectly excellent - but that doesnt mean we should lower our prices to match it.  We definitely prefer not to have guests in those situations and are more than happy for the occasional guest who is wowed by what we have to offer.

Marzena4
Level 10
Kraków, Poland

As I've been using SP for a while, @Lizzie, I'll suggest the missing option I mentioned, and I think other hosts might use. For better clarification, I'll try with CTRL+C/CTRL+V. Sorry for crude pics, I am not a professional in this field.

 

SM_Prop1.jpg

 

 

And the "Add another requirement" would produce a pop-up option like the one below:

SM_Prop2.jpg

 

I think it should not be difficult to implement, especially that, as you can see, it is copied from another setting.

// "The only person you can trust is yourself"