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

[Mario324]

Hello my name is Mario and I rent out my house that can sleep 9 and has a pool yet tips say I should rent it for 72€??? So 8€ per guests how is this possible in 2017 let alone 1950,s prices. I feel there is a raise to the bottom when it comes to price tips.

1950,s prices. I feel there is a race tp the bottem when it cones to 

[Manuela161]

Hi, I understand that Airbnb tries to help listings get more bookings with smart prices, but what Airbnb doesn't calculate is  that the money host get for their bookings has to cover up also taxes ( in Italy almost 50% of your earnings !!), bills (gas, electricity, internet, bills related to the building where the apartment is...) usage/repairing constantly, not to mention what can be left in the apartment to welcome guests (bread, jam, orange juice, water, tea, sugar, soap, toilet paper and much more).  

[Blair13]

We have ignored smart pricing when it was first introduced as we currently have more booking interest than we are legally allowed to accept in London. We have to decline guests already as it is because many request for the same days (we get threatened by Airbnb for declining as well but that’s a different story)

We started another booking and I decided to try SP. it doesn’t work for us. Immediately within a couple hours all the best dates booked up for Christmas period, New Years, Valentine’s Day. Not just those days but all the available bookings we can have for that quarter! It went straight to our ‘lowest’ setting with no regard for the season or specialty dates. Nothing fluctuated, it was all just ‘low’. We lost out on hundreds of pounds.

I’m turning it off. There is nothing smart about it. I can see settings where guest rate our value for money and we have 4.5 stars there so I’m going back to firm prices that I think I did I fine job researching in the beginning.

[Tricia12]

Yu need to set your lowest rate higher!

[Helga0]

I wondered about it too. If Paris enforces the 120 days limit law and airbnb already announced to block after 120 days in the town center, what would be the intertto give any discount at all? Next fully paying guest please, only a few days left. 

- SP would need to take numbers of days left to fill and to end of the year into consideration and raise prices. 

[Dasiri-Co---Ltd-0]

What you describe is the theory. I am using smart pricing on 15 properties and it never works like it should. Just an example: New Year, absolute Peak, your so called smart pricing set the nightly average at the absolute minimum, which generated a huge loss. In over 80 percent of the time the pricing hardly gets over the bare minimum, which prompted me to increase the minimum

[Stephanie27]

Hi @Lizzie, your article has had 3666 views and 37 well thought out comments virutally all of which are a negative take on smart pricing. 

I also feel negatively about it as the one thing it consistently does is tell me to reduce my price to a point where there is no profit. I have a business to run which was running long before airbnb came along and shifted the market. 

If I was a manufacturing company it would be like operating in a market flooded with cheap unregulated imports. Cheap isn't necessarily a good thing when people have families to feed and taxes to pay.

Recent example, according to you I should move to price tips because someone viewed my property and then booked something that was 87 euros a night cheaper - which would make it 13 euros a night which wouldn't even cover the cost of making the bed never mind turning on the heating. The only thing I can see at that price is a grotty shared room...not a 4 star cottage for 4 people.

Hosting and running a successful accomodation business isn't always about price and what smart pricing does is pushes already low prices even lower. It creates a market where those providing low quality accomodation and not complying with paying their taxes and social obligations get the bookings. Is that what airbnb wants? 

You start out talking about "community" and "hosting" well this situation has evolved because you are such a huge platform now and you need to make responsiblity for what you are doing to the market because you are destroying livelihoods. 

I know of two business here who have gone under because airbnb faciliates low quality, unregistered, non tax paying accomodation at a cheap price. I feel it is like the "sweat shop" of booking sites.....

Maybe you need to use an algorithm based on this feedback and ditch the notion of pushing prices down and cultivate a site where quality and social responsiblity are valued?

Kind regards

Steph 

[Prakash4]

Smart pricing misses out on the 'locality' premium. We need to differentiate between places in the heart of the city and those on the outskirts

[Marijke15]

We would like to have the bookings made for the price [per person rather than the unit.  Is this at all possible? Marijke for Wings

[Tricia12]

I have used smart pricing for a while now and I must say I am very pleased with the result.  I have set my minimum price as my usual price and the smart price is always higher than my minimum - sometimes quite consderably.  I don't regard it as a discounted price - quite the opposite it is a bonus!  It saves me having to research what is going on in the area etc so I don't have to think of putting the prices up when there is an event locally.  I have only been asked once why the price was higher than quoted on my home page and when I explained it was 'supply and demand' the guest understood, but wasn't that happy, but still booked!

[Ousman0]

How Thing work here

[Clarissa7]

My area of Morocco is booked solid for six weeks in the summer. 

I compare summer prices precisely with genuinly similar accomodation advertised in the precise area and make mine just below (generally at least half as much again above Ab&b 'smart pricing') - prices vary hugely on proximity to sea, area, standard of accomodation etc. This takes a bit of work, but results in a full calandar. There is no way a computer could calculate these accurately.   If I have a last minute couple of nights free between bookings in the summer, then I increase the nightly price and am pretty sure to fill it - Ab&b suggest lowering it!  

My accomodation 'smart' pricing suggestion for today literally would not cover my greeting/cleaning/electricity costs, let alone the extras we are pressurised to add...    The only gain would be to Ab&B with the booking fee!

[Suites-and-More0]

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!

[Kyle103]

I have read enough of the comments to see I am not the only one insulted by your emails.… They keep telling me people are looking at my place and choosing another place based on my prices being too high. I have researched my area, the number of bedrooms I have and the fact that I am one of the few pet friendly homes available and my prices are way too low. Either get your algorithms for the various filters on board or stop insulting us with these emails.

[Mala0]

Cant  read the other feedbacks at yet so i may be repeating here.  I always understood how the smart prices worked and guessed it was based on many varying factors.

The bottom line is the prices that generate from smart prices, do not allow for the host to make a profit worth renting their places for. As we all know it is hard work and on the times we get very demaning and sometimes not very amenable guests it makes it even more of a hassle to give so much for such little.

No matter how much we may love to host, to do for others, to share out homes at the end of the day the very large percentage of us are doing to it either make extra income or use it as a main income. 

In conclusion for many the smart prices is all about making our prices as cheap as they can to bring in commission for Airbnb but we are left with alll the very hard work plus having folk in our homes, risks they can bring, time eliminate, financial outputs etc for very little gain if we were to due smart pricing on a regular.

Everything i know tells me i have my prices so low, i get 100% rating for my value for money listing, however many areas we host in are made to push down their prices and no matter what people think room could rent for and the local cheap travel lodge being 4 times more expensive, those who want to stay in area will always look at your competitors and choose a cheaper one than yours so we are beholden prices other hosts put.  Some fall into the trap of commititive pricing and literally do thier rooms for £14-£19 pounds a day in an area the lowest level BnB are renting for winter could be £40-£50  per night...  After fuel costs, breakfast, cleaning cost, laundry,  miscellenous like toilet tissue, shampoo etc and then on top of this we have to pay tax!  is it worth doing all that hard work for such little?.  We are not hotels and we cannot compete on whole sale business and then we are pushed to put our prices down to be a cheaper option because at end of the day, like me also we all want to have good accomdation for least price. It is a balance that has to work for the host and the guest equally though.

Airbnb are constantly trying to lower our prices and if i had to do a single penny lower than i am now i would not bother!..