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

[Leslie171]

Yes, Lizzie, there needs to be an adjustment for clearly superior listngs. Most of us will not settle for the sometimes questionable sorts that only want to pay $35 for a place worth $75-100 U.S.

[Leslie171]

Lizzie, whoever or whatever you are, I hope you've now had enough feedback to do something about smart pricing. The way it's currently malconfigured insults most of us. Again, compare our prices to those of a hotel; suggesting we offer absolutley beautiful accomodations for $35 is simply obscene. 

[Marlene89]

I can't wait to get going again when my bathroom is finished. It's great to know you are there to help me.

T

Thank you

Marlene 

[David1061]

I have looked at smart pricing and came to the conclusion that it is not very smart, from the host's point of view. The smart price always seem to involve a substantial rate cut. We don't add a cleaning fee thus dropping our price to increase occupancy rates is a loser; more cleaning work for us, more wear and tear on linens, towels, more electricity for heating and hot water, etc. 

As hosts, our goal is not to maximize occupancy, but to enjoy a reasonable return relative to the amount of work involved. The "smart" price is often below the threshold where we prefer to be vacant, rather than occupied and paid peanuts.

[Samara7]

All SP does is make a war of prices in your area between hosts, especially with the new hosts that don’t know yet that they will work for free and just Airbnb will be making money on the hosts back. It will lower your price until is almost free, not
considering all the trash that you have to deal with. I’ve never used SP or instant booking and never will. Airbnb just cares about their money, and getting more bookings. They don’t care about your costs, if you are doing laundry all day or cleaning trashed toilets for a penny, and when you have damage, if it’s expensive, even with “hosts guaranteed “ they’ll always invent something with the paperwork or something to not charge the guests to cover you, even your security deposit. Just to spoil the guests and keep the business going. I have been very disappointed with Airbnb with the host business with my endless losses and not being covered.
SP and instant booking is just another way to lose and attract cheap, ungrateful and potentially bad guests who can cause trouble and can end up giving you a lot of problems like I had with a guest performing a prostitution business locked inside my apartment with a fire gun, which ended with the police outside for 15 hours with 12 police cars waiting for the judge ‘s permission to invade the apartment and take them to jail.
Keep your prices hosts, you know the quality of your listing and the value of your work.
I leave my listings empty all month before I offer it for almost free.

[Sandra-and-DeWitt0]

I have a 3 bedroom condo at a ski resort and smart pricing wanted me to charge $200/night around Xmas.  I got $500+.  I agree, this is not the way to go.

[Basha0]

I agree with all of you that only you know  what the value of your home is and what you should charge. I did a major remodel on my home. I now have higher property taxes to pay and I use renting my house to pay those  taxes. I would rather have better quality guests and rent less often than work my tail off for a lot less.

[Mary672]

HAS BEEN VERY HELPFUL.............BUT WATCH OUT FOR HIGH DEMAND DATES THE SYSTEM MIGHT BE MISSING.....LIKE CONCERTS OR FESTIVALS. 

[Kitty-And-Michael0]

Thank you for clarifying smart pricing. However, there are factors in how we set the price that I'm not sure the algorithm can catch - the main one being that there are some listings that are very unique and book up way into the future. How can the price be anticipated 6 months in advance?  But keep trying - I love you guys!

[Roberto119]

By now the great majority has expressed a lot of negativity towards SP. I have also talked to several other owners in person and in a couple of FB forums, and I have yet to find someone liking or trusting SP. I wonder why AB continues to push it?

[Kenneth82]

At the end of the day it remains a matter for the host as to whether to use Smart Pricing or not so I can't see why there is so much concern over it ?. On occasion it may lead you to review your prices although I largely rely on regularly checking out what other local hosts are charging which is at least a rough guide to the market   

[Francine18]

Why smart pricing is a concern? Because people may not understand that many hosts may end up undervaluing their property.  The same way one house may list for $75,000 more than another, it's based on a lot of information that some algorithm will not capture.  I saw in one of the comments that bringing in smart pricing in various places around the world (e.g. Spain) has actually reduced the prices by half! Given how much effort I put in keeping my unit top notch, I'll be off Airbnb in a minute if it happens here.  

[David786]

After reading the first two pages of this thread, I agree with just about everything the other hosts have experienced. SP in my area tends to recommend prices that are below $40 a night. We have 3 nicely renovated and decorated 700sqft apartments or small houses that cost thousands of dollars to bring up to our standards.

Everything is nice. Nice furniture, nice kitchen, patios, yards, electronics, etc. I’m charging $70-$73 a night which is about average for a motel room in the area, but better. It’s a lot of work. There is yard work, maintenance, cleaning and expenses and things to stay on top of. When we hire a cleaner (which we do about half the time now for short term stays, it costs $45) our monthly stays are running around $42 a night (after the discount) which comes out to about $1,200 a month.

I’m sure there are lots of bedrooms or sub par properties out there that are renting for $25-$35 a night driving these recommendations, but If I had to go below $65 a night for less than a week, then I would just rent to someone on the regular market and not do this at all.

I’m not going to get in a race to the bottom.

[Francine18]

"Smart pricing" sounds like a race to the bottom, Uber style. 

[Shelly40]

The word should be answer not answered on line 3 of this article.

Cheers