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

[Cathy65]

Harriet, I have been a host for 7 years, and I agree 100%. Hosts who fall for “Smart Pricing” are either naive newbies or gullible idiots. It is a fast-track race to the bottom. And taking the bait to recruit new hosts, when Airbnb is well aware there is already a glut, is suicide. I too have zero reservations for Nov/Dec. And I am not going to be Airbnb’s chambermaid for minimum wage.

[Harriet5]

Hi Cathy,

I just figured out at least some of the "no bookings" issue.  Airbnb did a big rework of the web site.  I don't remember being told anything a out it, and it does look nice.  However, if checking on things once again to try to know what had happend to my guests, I saw that right under the large title for my listing (the name I chose for it) there was a line saying "private room".  Then some other information.

I am not booking a private room.  I am booking a studio apartment.  Private suggests that it is in someone's living space!  My daughter and I have both spent a lot of time, which we really can't afford, so that we could correct the Airbnb mistake.  Yesterday it was corrected, and I have already received 3 bookings.  Of course my price is low, and I'm upping it back.

I hope this is helpful to others.  

Harriet

[Ann72]

Cathy, can I ask your opinion?  One property I have is priced at $425 per night.  I set Smart Pricing with a minimum of $425 and Airbnb's recommended maximum of $1,084 per night.  The calendar maintains the minimum until early May, and then raises the nightly price to between $490 and $530.  (The house is in Maine and is mostly booked in the summer.)  I already have several summer bookings at these prices.  I don't see these higher prices as a bad thing.  Why do you think so many people think Smart Pricing is so terrible?  Do they not understand they can set a minimum?  I'm worried that I'm missing something really obvious to everyone else!

[Cathy65]

Hi Ann, 

It may be that in some limited, seller's-market locales, SP gives you a higher price occasionally.  Most of us have experienced it as part of Airbnb's relentless race-to-the-bottom.  They push me constantly to adopt rock-bottom prices at which point it would not be worth the time, trouble, and expense of hosting.  We stay more or less as booked as we want, at OUR prices.  I think you are seeing a lot of resentment because for the most part, SP is manipulative and not at all in the interest of the host.  Thanks to this manipulation, my local market is now awash with $25/night rentals.  It is starting to hurt us.

[Cathy65]

I suspect this may differ depending on the market.  Your house in Maine is probably in a desirable and non-saturated location.  I my market, Airbnb has aggressively recruited a glut of hosts (many of them students violating their leases by renting out rooms in their apartments), and now Airbnb hounds me relentlessly to drop my rates from my normal $80-90 (at which rate we used to stay fully booked) to something like $30-40.  Not worth doing at that rate, for all the labor, time and stress involved.  So, we keep our rates higher and are content with the bookings we get -- fewer but at least we are not working basically for free to make Airbnb their enormous profits.  

If you stick around long enough, they will try to drive your prices down as well.  My advice is to take the time aand thought to set your own prices as you see fit.  They have an agenda, and are driven by their interests with no regard for yours.

[Randy165]

I am in the condo rental business for 2 months now, using airbnb for my rentals. I discovered smart pricing wasnt for me in the first 2 weeks...Lol...good luck all.

[Lanida-And-Larry0]

I have smart pricing with a max of $200. My  listing has a price of $205, why?

[Ben551]

After my first month using AirBnb I am going to switch off Smart Pricing now. 

It helped to get me started, but after joining an independent intelligence pricing service I have now learned that AirBnb Smart Pricing was actually applying Northern Hemisphere seasonality to my Southern Hemisphere listing in New Zealand.  It could explain why it was suggesting my lowest prices should be over December to March (our peak season and summer) and the highest prices over June to August (our low season and winter). 

Oh well, you live and learn... it could explain why I've had 86% occupancy since clicking "list" though...

[Fred244]

We just listed our place on Airbnb.

I used the smart pricing for the most part but I want selected holiday weekends to be a set price. However, when I set a price for the holiday weekends it now shows on the calendar that those days are not available. How do I overrule this? I cannot figure this out for the life of me.

Thanks.

[Gabriel2868]

I reviewed the smart pricing suggestions for my places and I was pleasantly surprised as they were pretty close to my rates and in some cases actually higher - most were lower but not significantly. So I had a home that was struggling a little bit so I turned it on. About a week later all of a sudden I get innundated with inquiries and got a New Year's rental. My homes are large homes that hold 15+ people at a ski area with ski-in/ski-out. New Years is the highest demand season with rental rates at a maximum and occupancy at almost 100%. AirBnB had dropped the price to less than 30% of my maximum rate. Almost a $7000 difference between what the rental usually rents for over the booking and what they put the price at. The home has been fully occupied at the maximum rate for the last 12 years - not a single time has it not been booked at the full rate. AirBnB must hire 3rd graders to run their algorithm. What pisses me off the most is the bait and switch where they show pricing suggestions that are reasonable and then change them after you enable it. Secondary is how absolutely off their suggestions are - how can you underprice a rental by more than 70%. Never trust AirBnB. ALL they care about is volume and occupancy.

[Cathy65]

This is what I have been saying til I am blue in the face.  YOU CANNOT TRUST AIRBNB's PRICING!  They are out to undersell you.  Don't be a fool!

[Gabriel2868]

I say all hosts refer to it as AirBnB's "dumb" pricing. If we all do that everywhere maybe it will destroy the marketing of it and they'll actually look at making it work like it should.

[Pasek0]

Geez, how frustrating... I have an idea of, maybe, why that happened: 
We have two, pretty much identical rooms at the same price and, for one of them, Airbnb state that 33% LESS guests are searching, which is driving prices down.  While for the other one, which is right next door, they state that 8% MORE guests are searching, which is driving prices up!!!   That's a 41% difference in potential guests for pretty much the same room, in exactly the same location with exactly the same facilities!
With wildly inaccurate raw basic data like that, how can they possibly offer a sensible pricing structure?
Have you, or anyone else, noticed this discrepancy?

[Larry339]

@Lizzie I appreciate this post its quite informative. It helped me make a decision on smart pricing. I recently turned it on with a minimum and max price (crucial) and just had a booking at a higher price than I would have set on my own. 

[Lizzie]

That's great to hear @Larry339. I think if you only apply parameters you are happy with, then Smart Pricing can really work well for hosts. 

I wonder have you seen this great guide by @Ann72 on Smart Pricing Journey. If not, I recommend taking a look. 

Have you been hosting long?