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

[David126]

2 1/2 years of airBnb suggestions on my listings, for example comparing me with places 80 miles away

2 years of people making similar observations about their listings on this forum.

[Cathy65]

Use your brain.  Airbnb is trying to drive prices to rock bottom, and succeeding.  When I started, in my town it was $60-100 for a nice room.  Now the market is flooded with rooms for $30/night!  not worth it, and ruining my ability to survive doing this.  Thanks for the memories, Airbnb!

[Lisa723]

You can't really blame Airbnb for the laws of supply and demand... https://en.wikipedia.org/wiki/Who_Moved_My_Cheese%3F

[Cathy65]

It's not "supply and demand" when Airbnb 1) aggressively recruits hosts, then 2) intimidates the ignorant newbies into setting rock-bottom rates.  That puts enormous pressure on everyone else to lower their rates, lest your place seem over-priced and guests ding you for it.

I have also read that Airbnb is 3) putting the dirt-cheap places higher in the search, and burying the people who refuse to use so-called Smart Pricing.

That's three ways Airbnb is harming long-time hosts like me, who built up this company in the first place.

It's not "supply and demand" when Airbnb is manipulating supply (to create a glut on the market, as is evident in most markets by now), manipulating price, and effectively price-setting by promoting under-priced places and hiding the listing that are at true market rate. 

Like I said, use your brain.  

[Diana-Cecilia0]

That option for the HOSTS to agree to an automatic approval of a Guest is insane.

What responsible Host or Owner will agree with it? Only if they are desperate, In a 3rd world country where you hardly can track the tenants or Guests it is dangerous to have that automatic approval. 

The most detrimental thing, which I consider a bully action, is that if you do not agree to it your unit is not shown in the Guest Search.... Unless the Guest finds the place where to click to unvail all the responsible owners Units, that request a 24 hours of pre approval.

AIRBNB should show all units at the same time regardless of if it has or not an automatic approval. Once the Guest selects the unit, then a new window should open and show the OWNERS HOUSE RULES that have highlighted "24 Preaproval Period". 

If the unit does not have this "Pre Approval 24 Hours Time ...to make it fair for all the other units in the same DISTRICT or AREA, 

After all the Guest is the one that Chooses the Unit and MUST read the HOUSE RULES and agree to it.

Why force the Owners/Hosts to HAVE TO AGREE to automatically accept the Guest in order to have their Rental Unit been shown to the Guest in the Automatically first Query? 

That is unfair to responsable quality owners.

To AIRBNB, have you ever thought that caring HOSTS usually contact the Guests when they have New Guest Request for the same unit? The reason, simple, leisure traveling sometimes is extended, specially in the Beach areas. If your Guest love your place, it is a courtesy to ask if they want to extend their stay. Several do extend it. And because you are providing QUALITY to your service you get penalized and your unit is not shown because the Host/Owner does not accept to have the automatic approval feature?

Please AIRBNB reconsider that policy to help increase the Rental Activity. It is good business for your company, the Owners & it is fair to the Guests. 

[Diana-Cecilia0]

Whole sale pricing that only benefits the marketing platform? Thanks for your experienced comment Patrick!

[David126]

Not me, but probably proves the point.

[Diana-Cecilia0]

I completely agree that the algorithyms randomly suggest, quite often to lower your prices to get your unit competitively priced to be Rented.

What is a Rental Income Producing Unit if it does not produce Income? It is an Expense!

With my 8 years of experience as am International Property Manager of 84 units, the CASH FLOW is what defines that your investment is THAT an INCOME PRODUCING INVESTMENT.

Here AIRBNB is a great asset, the outreach opens new markets. The technology is great from the consumer point of view GUEST...but what about the HOST??

You can not compare apples with bannanas.

In order to even consider the "Price Adjustment to INCREASE the Booking of a Unit", the prices suggested by AIRBNB must take in consideration to ONLY compare units in the same Zipcode (in the US) or Distric (in other countries) otherwise that Algorithm is completely OFF.

For example: I have listed a condo in the Beach district of Santa Maria Del Mar, Lima Peru. AIRBNB keeps putting in the same Offered Basket of Units, to the potential guests, units from neighbor Beach Districts like San Bartolo, Punta Negra or Punta Hermosa. The prices in those last 3 Beach Districts arse about 40% lower average than the ones in Santa Maria del Mar. A radical difference in Taxes and specially, something that affects the GUESTS... specially about the infraestructure of the District where the Units are located. Just to mention one very radical, All the roads in Santa Maria del Mar are FULLY PAVED, the others districts have dirt roads and some paved roads. The potable water in Santa Maria makes it to the unit like in any other develop first world country, it comes from the DIstrict Water Supply via underground pipes to the units. Several of the properties on the other districts have tanks in each property that is filled by water trucks in a weekly basis. 

I could go on and on about the differences. The point is that WE MUST DEMAND TO AIRBNB TO BE ACCURATE ABOUT USING UNITS IN THE SAME DISTRICT (ZIPCODE) AT LEAST !!

It is IMPERATIVE that AIRBNB corrrect this ASAP.  Because this affects directly the HOST/UNITS while the Potential Guests Browse for Rental Units. They request for a Unit in an District and AIRBNB puts it in a basket with a bunch of other units that are not in the same area. 

I am all over to have them offered as "You might consider this other areas....and disclose where are those located".

Like in this scenario: Guest input Santa Maria Del Mar units... Then AIRBNB shows 3 units available, then a flag that says, LOOKING FOR MORE? Maybe you can consider other Districts like San Bartolo (3Kilometers away), Punta Hermosa (x kilometers away), Punta Negra (x klms.) etc.

To our AIRBNB company and tech support, please act ASAP as this affects tremendoulsy the Hosts Business, the service of the Guests and the potential commission earnings for AIRBNB Company. Remember that the Summer season in the South part of Planet Earth is over at the end of March!!!

Thank you for your time to update your systems! And let me know if you need local information,

Respectfully, Diana Cecilia Hayes

[David126]

I would not mind if it was adjacent ZIp codes, had another one and the Town is 80 miles away, 90 minutes drive as the road is pretty clear in that direction.

I have had them in the past where they are not even adjacent County, and the Counties in Colorado are big.

[Patrick80]

Totally agree with you Diana. Airbnb’s price point system is flawed to the core. This thread has been going for months and there are countless testimonies from hosts but Airbnb just won’t listen. 

Stubborn like a mule! 

[Diana-Cecilia0]

Patrick have you also try VRBO? They own more than 25 websites that are interlinked.

[Diana-Cecilia0]

We are talking about a luxury unit in an upscale Beach Resort compared to one that looks pretty in pictures but has not even paved roads or city potable water!

David have you contacted AIRBNB to correct this OFF Comparative Unit ?

[Eugenia77]

Hi!

I came up to this conversations as I have two listings:

They are in the same building, though, same address. 

They have the same capacity and the same utilities and extras.

We have listed with two months of difference, but the pricing machine suggests higher prices for the new one than the older that has more and better evaluations.

For me it is a little confusing...

[Bruna-and-Nathan0]

Hi, I’m having trouble with taking the 20% discount of my hosting for anyone who wants to book my place for stay.

I thought it was just for the first booking but it’s taking till month June. How can I cancel this promotion?

Thank you for the support!

Bruna Gomes

[Ann10]

In my opinion and experience, SP doesn't work in my favor. Now, I can't even go and look to see how much I got last year, which was much higher than SP is suggesting. I usually screen shot everything. I never thought they would make the calendar disappear too. What happened to SH making 22% more? Oh! When I put my minimum in, then the whole year is at the minimum. I know I didn't make the same amount the whole year. Now, I've got to go and look at the past reservations and calculate it out. Thank goodness I screenshot those.

“Who controls the past controls the future.
― George Orwell, 1984