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

[Betina8]

Hi - I feel that the problem with smart pricing is that you don’t know the area we live in , I see the price recommended and It is so low - The week days are good for me as I am close to the university and also in winter which is off season , we have a lot of overseas quest doing courses at the university- This is not taken into account when giving me prices so I will never put smart pricing on due to this problem - I did put it on in the beginning and lost money  Regards Betina 

[Lisa-And-Rob0]

Smart pricing suggestions are always considerably lower than my own pricing that almost always gets booked. If I booked at SP’s cheaper prices I would make less in rent and have guests that don’t value the place as much. If SP worked for hosts, there should be a number of posts to that effect but I am not seeing them. Why the push Airbnb?

[Rick-and-Deana0]

I have found that Smart Pricing "always" under prices what I can get.  I have tracked this for a while and can assure you that if I had used their pricing I would have made $1000s less each year.  It is possible that with Smart Pricing you can get "more" bookings which equals more money but with very few exceptions we are booked on all our properties as often as we want.  Now I do go in an lower prices as we get closer to an unbooked date and this almost always get's it filled.  But often the week before or after has already been booked weeks in advance and for a significanly higher price.

I strongly believe that Smart Pricing has significantly lowered prices accross the board which is good for AirBnB but not for hosts.  It is clear from my experience that it is not a tool to help me make more money.  I have also tracked how much lower the prices are across the board since Smart Pricing came about.  We have been with AirBnB for 6 years and are dismayed at how much lower prices are now and they continue to be lower each year. This is part of the AirBnB business plan.

Do yourelf a favor and manage your own pricing and you will make more money.   I am hopeful that AirBnB won't punish me for this comment.  I love this company and what they have allowed us to do with our home in our pre-retirement years. They are continually updating the app and making this process easier and easier as a host and a guest.  Not to mention all the amazing people we have been able to meet over the years.  However many things in life have unintended consequences and I believe Smart Pricing is bad for hosts - though I know that was not their intent.

[Rick-and-Deana0]

Below is an email I got right after the above post.  AirBnB is recommending that we lower the price of our 3300 SF home with 5 bedrooms and 4 bath and 7 beds to well under $100 per night to match the poor fools below who rented for too little. On many occaassion in the past we got $395 a night for this house with 8 guests.  This email was intended specifically to encourage me to lower my prices to the already too low prices that Smart Pricing fooled people into thinking they needed to get bookings.

I have made $17,000 on this listing in 2017 but with Smart Pricing the same days would have been 65% less.  Maybe I would have rented more over all days but it would have required 3 times more days and we did not want to rent that many more - especially at 1/3 the rate.  (In previoius years we did even better than this but since Smart Pricing all prices have come down substantially.)

Turn lookers into bookers

4 people who looked at Gaylord Street Urban Retreat for December and January ended up at listings that are an average of $59 less per night. Here are a few examples of reservations that could be yours next time:

1 guest $85 less per night for Dec 6-10 8 guests $74 less per night for Dec 6-10 6 guests $51 less per night for Jan 25-29

Lowering your price could help you get more bookings and actually lead to more earnings over time. As your total bookings increase, your overall earnings can as well.

[Steven45]

PLEASE!  The elephant in the room is what the hotel across the street is charging for a grossly inferior accommodation, something AB&B pretends does not exist!!  The SP does not even take this number into consideration, as if ABB guests never stay in hotels.  Just this week I booked a party attending a conference across the street at 300% of the SP rate.  My guest considered it a total bargain since the hotel was charging 50% more than what I was charging; and the hotel did not have my ammenities.  Honestly, SP is a drive to the bottom of the barrell and I WILL NOT USE IT.  Of course, that probably means it will be mandatory soon.  Does ABB think it own's the Hosts?  Pathetic waste of their time.    

[Rick-and-Deana0]

Just made two posts with details that agree with your experience.

Don't Use Smart Pricing

[Brandon4]

I did not see it mentioned however it would be nice to be able to set a minimum price in Smart Pricing for separate seasonal date ranges.

[Heather86]

This is a helpful discussion that makes me want to go back to my calendar prices. I don't use SP but I do actively look at the calendar and price tips. I think those are essentially the same thing but recommendations that I can opt into rather than automatic adjustments. Right?

But, as someone else has pointed out, it has seemed like a race to the bottom. I would normally charge $110 but have gotten suggestions as low as $55! I was not sure whether this was my local market getting saturated, the low season (winter now), whether this is airbnb comparing me to rooms within homes (rather than whole home - mine is studio apt on my property), or what. 

This thread makes me want to go back and up my prices again and hold out. I have developed a slight wariness for people who book last minute and people who book at a super low price. I hate to say it, but those type of customers seem to correlate with not leaving the studio in as nice shape as higher priced bookers. 

[Rick-and-Deana0]

I have waited until less than two weeks before an unbooked week to lower prices to match Smart Pricing and have almost always filled that week.  The weeks before and after this week however were almost always booked at significanly higher rates.  I recommend you manage this own your own and be patient.

[Heather86]

Yes for sure I tend to give consideration to the price tips in two instances: 1) when it is 2-3 weeks out, and 2) for mid-week dates rather than for weekends. 

[Cathy---Tom0]

Smart pricing=discount pricing, and we never use it for either of our listings.

We've never had smart pricing suggest we jack our rates.

In fact, it almost always suggests a deep discount.

Still, we continue to book.

When we rent our entire home, the last thing we want is a deep discount.

Our rates are a natural filter for the type of guest we hope to attract.

So far, so good.

Like instant book, it's pushed hard.

When it comes to our home, we are not willing to relinquish control to a computer and its algorithms.

[Jim241]

In my opinion SMartin Pricing does work for renting an entire 4 bedroom house in San Diego for $71/ night.  I rather not rent my place out just $71 dollars.  

[Sherry72]

Airbnb kept recommending a lower price even though I had consistent bookings for my first 2 months of listing, then I was getting pop-ups threatening to suspend my listing due to "lack of commitment".  So I used Smart Pricing hoping this would alleviate the "threats".  I live in Las Vegas, Smart Pricing listed $66 for New Year's Eve; yesterday I received a 3 night booking for New Year's Eve at $35 a night.  It's 6 weeks away and New Year's Eve in Las Vegas.  WOW!  What a deal Airbnb gave these guests.  I fear if I don't adhere to Airbnb's smart pricing, my listing will not be viewed because Airbnb won't show my listing. Oh well

[Helga0]

@Sherry72, your listing looks very new ce and gets ridiculously low price suggestions for Christmas eve too. Additionally, there is a discount for 3 days stays, which brings it down to rates, where every normal person asks herself, where the hidden flaws are. 

You have interest to set a higher minimum price for smart pricing. 

I believe the commitment remark may stem from a longer response rate, maybe a request not answered in time or a future booking cancelled. 

[Susanne156]

Hi @Lizzie In my case my listing is far superior to probably 80 to 90% of the listings in my area. So smart pricing consistently suggest prices that are far too low.   Would it be possible to add a way to automatically increase our smart price suggestions by a percentage based on our own assessment of the value of our listing?