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

[Liz-Ryan0]

most cabins near us do not include breakfast, but half our cabins include an excellent full breakfast - how could we use Smart Pricing Under those circumstances? 

liz 

[Penny75]

I actually have not found it useful in the central Vancouver, B.C. area.  I don't know if Smart Pricing takes into account neighborhoods in big cities. So for example my neighborhood is one of the most sought after in which to live and stay,  and the real estate prices reflect that but I am not sure Smart Pricing does.  Can it treat neighborhoods like cities and compare that way? Also when I got an email saying people had booked places similar to mine for less, I checked out what might be "similar' and I found very few rooms with private ensuite bathrooms and private entrances where people did not have to share the space/ enter the hosts' home. For some perhaps that is an advantage but many people like the privacy of having their own un-shared bathroom and entrance! (they comment on this).

Thank  you!

[Ian215]

I have a pretty disparaging view of the way Airbnb is pushing smart pricing and instant booking so hard. It is solely to increase their own revenue and is not in the interest of the host at all. They are pushing this hard now because, as Uber did before them, they've realised that they have grown their business to the point of being a monopoly and so now they can treat their users any way they like.
Nobody enters my home without being vetted by me first and my price is my price. Stop punishing me for this Airbnb because if you persist, I will rent rooms to permanent tenants and you will get ZERO fees from me. Capiche?

[Jacqui0]

I gave smart pricing a try but it’s not for me, it made no sense, it had some of my peak times at my lowest rate.

[Cory24]

I'd like to add to the negative comments here about the way Airbnb is positioning Smart Pricing in their emails and this article.   I'd suggest you eat some humble pie here, and instead of pushing into how smart it is from a technical and data point perspective, accept the reality that it just does not work well in practice from your users - across the board.  It doesn't work at all for me and doesn't take into account geography, topology, walkability, quality, events, seasonality, city-wide sold out weekends at hotels -- basically everything people are mentioning here.  

I would appreciate having a power dashboard alongside Smart Pricing that gives me the data you are mention so that I can use it.  But I also don't appreciate AirBNB's tone with emails and web site messages saying I missed out on bookings because my price was too high. If my price is too high, I'm happy to miss out on those bookings, so please allow me to turn off those messages. And please change the tone of those messages regardless.

I'd also like to hear from a few users that love and swear by Smart Pricing and why.  My guess is there won't be one and hopefully you'll take the feedback to your product managers that you have a poorly implemented feature here, AirBNB, that is of constant annoyance to me as a host.

[Lisa723]

Smart pricing works well for me. I don't understand the complaints about it pricing too low. You still set your own minimum price. I set mine to a price I am happy to get, and from time to time the algorithm bumps it up. What's the downside? Nothing's forcing you to set the minimum lower than you want to.

[John1085]

"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."

A direct quote from your article. I have highlighted the key phrase.

I love Airbnb, but like anything you love, there are always one or two things that can annoy.

Your constant messages to lower our tarifs is one of these, and your "smart pricing" is designed with the same end in mind .... more bookings, more income for hosts and, of course for you too. 

I get really annoyed with your messages about other listings in my town that are attracting more bookings than mine. On several occasions I've spoken about this with your so called "local" helpline here in New Zealand. Local is a misnomer. Normally the people dealing with me, always very polite and helpful, but with no knowledge of my small town and local situation, are from the Phillipines! My town is very small, permanent population aroud 5,000 but many more people passing through or visiting for a few days, especially in peak season. It has its own nuances which somebody from a megalopolis like Manila would be very unlikely to have any idea about whatsoever. 

But here is my main issue. In this small town, which I've lived in for many years and have known well for nearly all my life I'm very familiar with all the properties here. I worked in Real Estate here for a number of years. For me to "compare"   my listing with these others who are getting booked before me I need to know this vital information What are the addresses of these places?? Before making a decision to lower my tarif or indeed adopting smart pricing, naturally I need this information. All good decisions require good background information ..... Business Decision Making 101 !!

[Alex652]

I like to have Smart Pricing during the week.

But at the same time I like to have my Base price on weekends.

But Airbnb do not provide this option to hosts.

Hosts should have an option not only to use Smar Pricing "On - Off",

but Smar Pricing "On - Off" during the week and Base Price during weekend at the same time.

[David-And-Melody0]

Not only does "smart pricing" suggest totally unrealistic prices that vary enormously from one night to the next, but it makes a lie out of the price on the listing page.  As far as I'm concerned, "smart pricing" (sic) means no price at all.   What possible justification is there for charging Tuesday's guest $95, then Wednesday's guest only $65 for exactly the same thing?  "Smart pricing" may generate more fees for Airbnb, but is fair neither to hosts nor the guests.  Read all the comments.  Are you paying attention?

David Todnem

[William284]

It amazes me that Airbnb has thousands of hosts telling them that "Smart" pricing isn't smart; and Airbnb obstinately, illogically, and stubbornly refuses to listen to the combined wisdom of varied and diverse -- seasoned and experienced -- hosts from around the globe.  Instead, Airbnb continues to send missives trying to convince us how smart their idiotic "Smart" pricing regime really is.  Well, these continued epistles just aren't working.  We know that "Smart" pricing is dumb.  It does not take into consideration all the complex factors of the marketplace in any given geographic area.  It doesn't work.  We aren't buying it.  And these continuing messages that attempt to convince us that it is oh, so sophisticated and wise -- well, they are simply insulting.  They can continue to punish us for refusing to buy into their "Smart" pricing and Instant Booking schemes.  Eventually, one day, they will wake up to find that we have either gravitated to Booking.com -- or we have discoved that there actually is another competitor in the home sharing business that is still in the home sharing business.  I don't want to be in the corporate hospitality industry.  I want to be in the economy of the future -- resource sharing -- home shairing.  If Airbnb abandons that concept, I think that there will be many who will abandon Airbnb.

[Elise-and-Frank0]

Smart Pricing is NOT smart! Since it came into play, in my area it has driven the rental rates down (even though the stats for local tourism are thriving) by constantly encouraging all of the hosts to compete with each other. But from photos there is no comparison in quality/standard/luxury...that's not my market.

[Rebecca193]

Please add an additional time period customization for a SP minimum.  I would consider lowering my minimum if I could specify a limited period of time (think winter) but I just lowered my minimum as per AirBNB suggestion and got a booking in high season, June, with the low season price.  I quickly changed it back to my old minimum until I could fine tune it.  

[Laurie62]

Airbnb ... will you pay any attention to what we say?  I'm not optimistic that you care, as you become an increasingly profit and monopoly obsessed corporate giant. You are pushing us good hosts into a "RACE TO THE BOTTOM"  with your inaccurate & unfair comparisons - so everyone is supposed to bid lower, then lower, just to keep some business??  "Smart" pricing is bad for all of us hosts, but your system especially punishes the hosts who actually CARE!!!  Care about amenities, professional cleaning, beauty,  breakfasts,  following the law, soaps and lovely sheets ... and being a host!  A lot of places, the hosts offer little, are never there.  Yet you force comparisons that hurt good hosts.  You haven't considered safe neighborhoods, many subways by me (vs. long walk to 1 subway in dangerous neighborhood).  Not to mention my huge spectacular NYC garden that can seat 25!  It's insulting and you should STOP.

[Leslie171]

Amen, Laurie! It’s time for a whole bunch of other Airbnb like businesses to pop up and do it with fairness and a desire to help hosts, especially super hosts, thank you very much. It seems we are seeing an Uber situation where everyone woke up and realized it was no humanitarian company they were part of, but just another greedy, dishonest exploiter of decent people.

[Chris-And-Tim1]

We've found the smart pricing tool unacceptable as it seems to be based completely on either poor data or poor modeling.

It has nothing to do with what we offer vs what our Airbnb competition does.