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

[Jacqueline125]

Pricing is too unique a situation to be given over to an algorythm. I live in Perth, Western Australia and we are just coming off a mining boom and all our costs are currently overpriced. We are a very expensive place to live.

The local government has had a run of "bad luck" and we are paying off the budget deficit with outrageous electricity prices. We are also a desert state and water is in short supply which is reflected in our water charges.

Before I joined Airbnb I was letting my rooms out to local people on a  longer term basis. I prefer Airbnb as I enjoy the times when my home is my own and I never get stuck with an annoying tennant. However, I let my rooms out to make money and if Airbnb is not able to make me a certain amount of income I would go back to local letting. There would also be less cleaning and no service charges.

Does the algorythm take the above factors into account?

I tried smart pricing when I first started but I am making more now that I set my own prices. 

Smart pricing has been telling me that I am overpriced yet I am still cheaper that the local backpackers where you share a dorm room with 6 other people. I check the listings weekly to see where I am sitting with relation to pricing and I am towards the lower end which is where I want to be. Smart pricing advises me  to charge a price lower than the cheapest listing in my area.

I also have a retail business and one of my pet hates is when a supplier tries to dictate selling price. The selling price they try to set is usually in the interests of their business, not mine.

[Liz269]

I don’t like being compared to the the price of a room in a run down mining town town 6 miles away-  our place is lakefront and next to a ski slope-  air bnb needs to take geographical factors like being on a lake or a beach...or a unique tree house

[Dave-And-Annie0]

The thing I don't like about the longer stays is I want the rooms cleaned at least once a week and there's only one fee for that so I'm cleaning for no compensation.

[Elizabeth156]

The algorithm is geographically challenged makes no sense when they lump areas together which have nothing in common

[Cathy65]

Race to the bottom, indeed! My town is now completely saturated with listings, and yet ABB is offering $300 to recruit a new host. Meanwhile putting all this obnoxious pressure on hosts to lower prices. As virtually everyone has said, it is not worth the time and trouble  

[Cathy65]

Race to the bottom indeed! Our town is totally saturated with listings, and yet ABB is offering $300 if you recruit a new host. And with all this obnoxious pressure to lower prices! Our bookings have fallen off a cliff, but as many others have 

[Cathy65]

... said, it is simply not worth the time, effort and expenses to host for rock-bottom prices! They want us to work for peanuts as they become ri her and more monopolistic! 

[Rhonda34]

No one should de value their listing. I get the prompt  all the time and I am not changing my price. Or I would be working for nothing. I enjoy the experience and I provide value for money. I live in the beach with million n dollar homes around me. If others get more listings at a cheaper price then good for them. If you consider the location and what is provided that's got to be important a five star hotel does not drop its rates to a three star and neither am I. It is a business after all. As much as we enjoy being hosts it takes time and effort and expenses. To compare apples with oranges is not a premise for a price drop. 

[Margaret132]

Lizzy

thank you for informing us of some of the factors SP takes into account. Every time Airbnb 'give out' a little of the logic behind processes like SP & SEO (search engine optimisation) it gives me the opportunity to tweak my listing for better performance.

I do use price tips when bookings have been slow - I use them to provide a 'birds eye' view of the pricing in my area.

I don't use smart pricing because I believe it does not factor in long weekends in Western Australia, am I correct?

Margaret

Perfect Central Location - Albany WA

[Ivo3]

Well, it does not work well for me... My family is in BNB business over 50 years, I do this job for over 30 years. I know the price on which I can sell in high season. I am selling full capacity year after year with no place left free already in May. Still, Smart Pricing is suggesting lower price. If I let Smart Pricing do the job, that means just one thing - lots of profit less for me and for Airbnb. Also, out of the season, Smart Pricing is suggesting prices less than zero profit for me, which is not acceptable.

[Roberto466]

Although I used smart pricing now and then in the past, I think it's a trick to bring more money into airbnb pockets more than into ours. It's a profit company, so no shame in that... For them, little money is better than no money at all. Whit hundred thousands of advertised flats, a little from each makes big money as a whole.
To me smart pricing is the thin border between having a very small profit or no profit at all. With taxation, bills, cleaning fees, management expenditures and the setbacks that may happen, the down pricing is definitively not worth.
I disabled, I'd rather keep my flat empty.
I'd really love though to have airbnb stop spamming about it. I keep on receiving daily emails and alerts about the smart pricing option. We are no stupid, we've got the news. It seems you have algorithms for everything, it'd be nice to have one to stop spamming.

[Theresa-and-Todd0]

Not a fan of smart pricing at all. The times were I am in boston a mile means the difference between a low rent and luxury neighborhood even within the same area code. 

[Theresa-and-Todd0]

I meant the "area" where I am located - pardon typo. It doesn't work because it compares low rent with high end just because they are within a short distance but the exact location makes a huge difference

[Gladys30]

I am concerned that SP pushes prices below minimum. How come. 

[Carolina-Cottage0]

It seems that Smart Pricing will constantly be skewed by not taking cleaning fees into account.  Is there any way to adjust accordingly?