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

[Iain21]

I concur, Mike and Nicky.  This steady downward pressure on prices is in no-one's true interest.  We need to have sustainable, profitable businesses to continue to offer accommodation to travellers.  AirBNB needs its hosts to have sustainable, profitable businesses, to maintain quality.  And, with honourable exceptions, the guests who want to beat you down on price are the ones most likely to leave the place a mess, as you have found.  Not least, the narrow focus on price completely disregards other differentiators like location, character and quality, which you obviously have.

Recently AirBNB's computers told us that three people who had "looked" at our listing had finally taken other accommodation during January, for about AUD$40 per night less.  Well, good luck to them! They were obviously not in our market segment.  I hope they found what they were looking for.

AirBNB, your hosts are your customers just as much as the guests are.  Do you really want to be in the business of driving your customers out of business by destroying their margins?

The problem is not just "smart" pricing, which dozens of posts in this thread show is actually really, really dumb pricing.  The problem is that AirBNB does not seem to have understood its customers' business model.

[David126]

@Iain21

Next time you need to block some dates, instead of doing so increase your prices for those days by adding a few 0's.

You will find Smart Pricing will now give you much more acceptable suggestions.

[Jan288]

I never have trouble with my guests except for Airbnb.  They expect my very fancy oceanfront West Maui condo for a dirt price and when I do give a last minute discount it is not appreciated.   I think they do not understand the cost of a property like that because they are used to paying a low price.  

[Oomesh-Kumarsingh0]

@Lizzie In my opinion the smart pricing only benefits people to host for pleasure rather than a business. It is very unfair if there are many other Airbnbs in your area because the system will put a price on your listing based mainly on others who are renting around you. Lets say someone rents a cheap one room studio next to your house the system will compare the studio to your house. Good luck to those to likes using it but this isnt my cup of tea!

[Jacqueline125]

There is something wrong with the price suggestions. I have just looked at one of my listing and it said low demand. Lower your price to increase your listing appeal. The room in question has been almost completely booked out for the past 6 months and does not have a single empty night until May 2018. I think the appeal and my price are working just perfectly. Where exactly are the pricing tips coming from? What metrics do they use that does not take the fact that a room is always pretty much fully booked?

[Iain21]

Yep, it's broken.  AirBNB, are you listening to your customers??

[Rae14]

Does someone know whether activating the Smart Pricing option gives my listing better display? This is a hunch several local hosts and I have had based on 5+ years of observing pattens with our collective listings. If it doesn't, I am not seeing the benefit to using it- the recommended rates continue to be extremely low, spanning multiple cities. I've recently tried it out and am not noticing much of a difference in bookings. Rates per Smart Pricing and price tips consistently lowball our spaces, or compare our listings to extremely different listings (ie very different location, very different amenities, etc.). 

I'd be thankful for any insight! ---Rae

[David126]

Smart pricing will reduce your prices and I assume cheaper prices mean you will be seen by more people looking, more people looking at the cheaper end than the higher end, so yes.

[Jan288]

David, 

Do you know this:  I set $180 for my lowest price they could sell.   That is what I understood to be correct.  Then they booked some prime time for me at $169 per night????  Why would they go below my actual set price?  It was not last minute and at even my set price of $180 it was probably $50 below the value.

Aloha,

jan

[Jan288]

Aloha Rae,

Yes, if Smart Pricing is on, you will book up very fast.  That is how Airbnb makes more of a profit.  I had the entire fall open last year, went on Airbnb, with Smart Pricing, and sold 112 days in fourteen days!  I could barely keep up with the reservation work.  

Aloha,

jan

[Steven45]

Smart pricing is for low demand areas.  High demand and seasonal areas have a better track record for booking based on pricing from other local listings on multiple sites, NOT just ABB.  If you are in a resort setting, DO NOT USE smart pricing-  you will be disappointed and lose revenue.  You are better off to use a weekly and monthly discount off a "Rack Rate", and go from their.  Can you imagine how low the rate would be if you institued smart pricing, and then they discounted for the weekly and monthly rates?   DO NOT USE SMART PRICING!

Aloha

[Patrick80]

Hello Rae

There has been a lot of comments on Smart Pricing on this thread. Just go back a bit and you will find that the majority of hosts do not support Smart Pricing. It is a race to the bottom and only profits Airbnb, not the host. If everybody took up Smart Pricing we would end up renting our places for $20 a night!

[Lisa723]

More accurately, the majority of hosts *commenting on this thread* do not support Smart Pricing. That says nothing at all about what the majority of hosts think.

[David126]

My belief

Majority of hosts do not use smart pricing.

Majority of those who do, do not realise what it does to their prices.

Majority of those that do find out, do not use it when the realise what it really is.

[Lisa723]

Anyone can have a belief, of course. Actual data on which to base said belief would be great. Personally, I find Smart Pricing an imperfect but useful tool that for the most part prices my properties appropriately according to season.