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]

@Lizzie I just posted a seperate thread as I received an email today telling why I should give long term discounts to increase my bookings.

I do not want long term bookings but aside from that the email said this:

Add a weekly or monthly discount

Hosts in Leadville who offer discounts for longer stays increase their long-term bookings by 625%. Longer stays let you save time and money that would otherwise be spent on cleaning your place and welcoming more guests for the shorter stays.

Try adding a discount for reservations of 7 nights or more.

Leadville is 81 miles from me, no Motorway, can be a challenging drive in the Winter.

I assume the system thinks this is somehow relevant to me? Never occured to me that the messages I was getting were using Leadville as a comparison.

[Iain21]

We have also found that the pricing recommendation engine is pretty vague on geography, and also on type of accommodation.  We suspect it tends to compare us with the many backpacker places catering for young travellers seeking seasonal labour in our district.  If that was the market we wanted, we would have gone after it.  Our standard price already reflects our 15+ years of experience in running this accommodation, and the work involved in organising the changeover, cleaning and laundry, checking the amenities, processing, etc.  We have a good understanding of our costs, and also of the truly comparable properties that are truly in our area.  We are not interested in discounting a high-grade product - that's just a race to the bottom.  Our standard rack rate is AUD$175 per night, for two guests.  It feels a bit of an insult when the engine tells us we could get more bookings if we charged $97.  Of course we could, but why on earth would we??

As for discounting last-minute bookings, it makes no commercial sense to us.  Our cleaning labour is casual, our laundry is charged per item, and we're better off leaving the chalet empty than booking it at a loss.

[Jean1]

My suspicion is that Smart Pricing is done by computer, or algorithm, and is incapable of taking into account the incredibly varied and unique places that we are hosting all over the world on Airbnb, and that people are looking for.  As for why Airbnb pushes it so hard, I would suggest you follow the money.  More bookings = more fees, and that model precludes a quality, well-crafted and often unique environment and experience for guests.    Don't get me wrong, I love Airbnb and its community, but I do wish they'd lay off pushing the SP.

[Rick-and-Deana0]

I agree completely.

[Margueritte-And-John0]

I agree with the several folks who stated that the suggestions from Smart Pricing are not very realistic. It doesn't seem to compare only properties that are similar.

I wish Airbnb would dovote more of their resources to advertising and attracting new travelers rather than constantly urging hosts to reduce their prices. Airbnb still is unfamiliar to most of our friends that we mention it to. A lot could and should be done to increase public awareness of this type of accommodation.

[Annette-and-Gordon0]

I don't use smart pricing. My home is listed on more than one site. 60% of my bookings come from sites other than airbnb. I am booked out 62% of the time with only 2-3 unbooked weekends in a year. Why would I discount my home when I am pretty much full up? SP would only be resonable for homes only listed on airbnb. 

[Stacey23]

What other sites do you recommend? 

[David1535]

Very much agreed with Margueritte and John

[Jan288]

I am thinking if people learn that they can get the best price on Airbnb, they will go there instead of other sites.  What I do not understand is how they can go below my minimum set price?  

I don't get insulted by a ridiculous suggestion.  I just say no thanks.  

[Jan288]

But we can always say no.  I use Smart Booking when it is getting close to the time where I can rent the time out.  In my case, there are costs that are incurred daily, whether or not I have people in my condos.  Mortgages, homeowners fees etc.  So when it looks like everything is going to come out of my pocket I then lower my prices because it is better someone pays part of these bills than I pay it all.  I generally do not go under cost unless it is very close to the time the condo is vacant.  They something is better than nothing.

I don't take it as a put down when Airbnb says my condos would sell better at 97 dollars a night. They would sell really well at 50 dollars a night!!.   But in reality, Airbnb is letting me know what level that last minute bargain shoppers are looking for.    I charge low season $185 (and that's a bargain).  I profit at this price if ever night is rented out. However, isn't it better to get $150 per night than $00.00  a night if you incur costs on your property either way?  Maybe I do not profit, but I also do not lose as much money.

Just a different perspective,

Aloha,

jan

[Laurie62]

Over time ... it's a race to the bottom.  They are pushing your competition hard to lower their prices and people with quality offerings and absurdly compared to hole in the wall places.  It's like telling freelance workers, don't demand the correct wage, you could get more business if you (and then everyone else) lowers your wages ... and then lowers and lowers and lowers. 

[Ann304]

I agree also that Smart pricing suggested by Airbnb suggests a total lack of knowledge of the local area.

[Vikki13]

I am mystified by the rates suggested by Smart Pricing. I offer just a single room in my house, which can accommodate 1 person. I initially accepted the rate recommended by the Smart Pricing algorithm even though I thought it very low, as I thought Airbnb must know their business. However, I was shocked by my first 3 consecutive guests who were all backpackers, and who behaved terribly. I almost shut down my ad at that point, but instead decided to check out the price charged by the local backpackers hostel. I found it was double my price! No wonder I was getting backpackers. I immediately dumped the so-called 'smart price' to take myself out of the backpacker market and have not had a problem since. I am booked on average 5 nights out of 7, which suits me just fine. Airbnb, please fix your smart pricing algorithm, as it does not reflect local circumstances.

[David639]

I agree with Jean in Costa Rica.

I only have 4 free nights in November with most reservations being back-to-back so what is the point in suggesting I should engage "Smart Pricing", I can adjust my daily rates myself if I see a need without being hounded by a computer driven algorithm.

David, Cremorne NSW