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

[Bruce53]

Hi Lizzie,

I remain unconvinced that smart pricing has any benefits for us. If we have dates coming up and we are still unbooked it usually means there is less demand.

In times of low demand our competition may drop their prices to get revenue to cover standing costs but will possibly be doing the cleaning and provisioning for little or no reward; and that is their decision to make.

The positive for us is that as the price cutters get booked there is less competition and therefore more chance we will get bookings at a fair price that returns us our desired margin.

Conversly keeping our prices consistent without gouging for advanced bookings gives us a price advantage over competition whose prices are set sky high.

There is also the question of customer loyalty and return business. Clients will be unlikely to return if they find they have paid an artificial premium and those returning will expect to pay a similar price even if they received a discount.

[Patrick80]

Smart Pricing is like a race to the bottom. If everybody on Airbnb started using it all prices would come down. As all prices come down someone would lower their price a little bit more to be more competitive and hence influence the Smart Pricing algorithm. It is a vicious circle that keeps influencing prices on a downward spiral.

Thanks Airbnb but Smart Pricing is not for me.    

[Pasek1]

Spot on Patrick. We're witnessing exactly that

[Mia66]

You are absolutely dead on with your reply, and I also refused to bow to the “update your listing to use our fantastic smart-pricing tool”...until I realized that unless I conceded to being a sheeple and enabled both smart pricing AND auto-booking, my listing showed up on page 32 regardless of my Superhost status or other glowing reviews. 

Overall 2017 earnings are down 23% even with a reduction of overall available inventory due to new city licensing rules. 

[Linda108]

This post is interesting to me because I recognize so many of the responders and understand their dedication to this shared economy platform.  @Lizzie  I think SP is more relevant to those hosts who, unlike so many of the hosts that have responded to this thread, manage a high number of listings (20+) and who operate according to more of the generic market information.

To me this discussion thread highlights that there are very different categories of Air BNB listings.  For me, the hotel or large BNBs are not what Air BNB are about.  These type of listings are legitimately part of the hospitality industry, but not part of the shared economy industry.  I do not understand why Air BNB, as a leader in the shared economy industry, is accommodating and mirroring the hotel industry rather than staying at the cutting edge of the shared economy industry.  Just my thoughts...

[Aj0]

@Lizzie

Thanks for the update I appreciate it

All that data matching sounds good to me and considers so much more than we can when comparing what others in the area charge.

I have been using the functionality for over a year now and happy with it plus now getting more money than I was charging previously.

Cheers Allan 🙂

[Lin14]

The simplest price variable is date. Where can I set price by date (not day by day in the calendar).

I want a tbree or six month lookahead, but that takes me into a new season and so different demand.

I need ro set not just one price, but price for a given period - day, week, month, quarter.

Then let smart pricing work on that.

[Eu0]

Hi Lizzie

In my experience , guests turn away from what I am about to point out to you. I feel that the 24 hours period needed for guest to respond after I have accepted the guest's request  is too short.  people need more  time to decide. 

[Lin14]

Smart pricing works fine for 70% of properyies Id guess. It doesnt work so well for outliers. If a property is exceptional for an area, smart pricing drags recommended price down to the average.

I want smart pricing to group properties in a neighbourhood into price bands (input price set by user).

[Philip--And-Jean-Christi0]

Hello

I realise your smart pricing model is more sophisticated than it appears.

However, I have the following issue with it:

I am in a small town where there are virtually no mid-priced hotels (only 2 or 3 luxury ones), and up to 300 Air bnb's.

This sghould be a very fortunate situation for Air bnb hosts!

However, it seems to me that your smart pricing model pits air bnb hosts against each other in a price war that is uneccessary given the lack of competition from hotels.

I am constantly surprised to see how low the airbnb prices are, and feel that smart pricing is probably dragging them down unecessarily.

Is this something you have already heard?

[Manuela161]

I totally agree!!!

[Pasek1]

How to trust SP when it does not even appear to have heard of Christmas and New Year?

Or, perhaps, it holds these holidays in such low esteem that it offers the same price for them as the rest of the month?

For info, Ive just turned SP on and off again for these dates, just to check my facts.  It's true, SP gives zero consideration to the fact that a host's time is more valuable during these holidays or that guests would expect to pay a little more over this period.  

Lizzie, please advise what is the point of a maxinum price limit, if it doesnt even go up by a single pound or dollar over Christmas?

If not Christmas or New Year, when?

[Lizzie]

Hello @Pasek1,

Thanks for joining the discussion here and for your feedback. 

I wanted to come back to you on your question here, as I have spoken to the Team about it.

Many hosts on Airbnb set a maximum price limit to represent the maximum amount they view as 'fair' to receive a guest in their home, others use this setting to comply with local regulations. If you feel this setting is valuable for your listing, you can consider raising it to a level where it won't interfere with your prices.

I hope this is helpful.

Thanks,

Lizzie

[Poly3]

Well when I had the smart pricing booking came for August and they booked it with the lowest price!! So that wasn’t so good!! 

[Heidi-and-Philip0]

Thank you for the post @Lizzie

For us personally,  we wouldn't use Smart Pricing at all.  Appreciate the effort but don't understand the point.

We list two properties,  both at prices that we can't and wouldn't list any cheaper - and would rather have no bookings than list at SP suggested prices.

I think for most of us we try and be reasonably priced without ripping anyone off and at the same time try to make it worth our while (as it is very hard work).

I am just wondering if it is worth Airbnb putting time and money into SP ?  But I guess you would be able to see how many people use and benefit from it ?

Thank you

Heidi