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

[Rick-and-Deana0]

I think it SHOULD relate to Hosting since that is the way AirBnB explains and tells us who it's for.  But clearly you are correct.  It has "NO" value for Hosts. As such AirBhB should stop telling it's users that is who it benefits because in my opinion they lack a significant amount of integrity because of this.

[Cindi3]

What was your minimum price set to?

[Linda108]

@Cindi3   That is the question I have.  I do not use Smart Pricing, but if SP is using the minimum and maximum rates entered by the host, how can it be too low for the host?  

@Lizzie   Your posting certainly hit a sore spot with almost every host who has posted.  It blew up my email!

[Rick-and-Deana0]

That should not have anything to do with it.  My minimum is the $115 which is for off season dates in fall & last spring (non ski seasons and not in summer.)  The demand in the ski country where we are located is much higher this time of year and if the AirBnB algorhythm was written to benefit the Host - they would see what I can see with my 30 minutes a month check on pricing.

[Lisa723]

So... don't use it in your high season. You can always override it.

[Lisa723]

I don't understand all the angst about smart pricing. If you don't like it, don't use it. It works for me. I set my minimum price to what I think is a reasonable price for the area and my listing, and the algorithm bumps it up from time to time, increasing my income. You do not have to accept the "recommended" minimum price if you don't want to. It's a lot easier than other sites where you have to explicitly specify weekend/seasonal rates and there's really no easy mechanism for any kind of dynamic pricing. And why be "insulted" about automatic price suggestions? Just ignore them if you don't like them. It's not personal.

What's interesting to me is how few guests seem to comparison-shop between Airbnb, VRBO, and Trip Advisor!

[Jan288]

I think that some do not understand how smart pricing works.  I was in a pickle in September, lots of time to rent out, and due to other advertising sites changing around, I was not being seen.  My daughter said to go on Airbnb.  I didn't want too, thinking an oceanfront condo on West Maui would not be suited to a site that rents out a couch!  However, I have bills to pay!

But desperation driven, my Airbnb site when live the middle of September.  Within mid-September to October 4th, I reserved 112 nights and made $17K.  I sure was busy, I absolutely discounted, and I made enough to pay bills. I am now also getting an established bank account for repairs etc.

You know what your condo is worth.  I don't discount winter season, that is my snow bunny season.  I decide what my lowest price is.  I set that.  If they charge more than I would, it kind of makes me cringe but in reality, my prices are too low I have been told.  I am compared to some condos that are nowhere near as nice.  But I do not care if Airbnb says I would book my condo if I set the amount to less.  It is just letting me know about guests who are looking for last-minute bargains, not a put down of what my condo is worth. If the time is close, I may lower the price, or I may not.  However, it does tell me what price point people are looking for and when they are looking in my area.  Very helpful!  I am not insulted, it is just knowledge about what the market in my area is doing.

[Autumn5]

I do use smart pricing, but seldom see the price change as I have my minimum set at the point below which it is more trouble than the booking is worth. Additionally, I don't like to be a bottom fisher as I have found those who are primarily price sensitive also tend to be demanding and ungenerous in their reviews.

[Ron112]

Smart Pricing does not take into account apple to apple comparison of the properties it is looking at. We offer upscale facilities and are grouped with hosts who are 50% cheaper, yet have the same property description. We just stayed as a guest in another city and the property was minimal in quality compared to ours yet they were charging nearly 90% more than we do. Computer algorithims create volume sales, which is good for AirBnB, but is not always fair to those of us that want to offer high quality at a fair price.

[Beth165]

When I first signed up with ABnB I didn't quite understand how their pricing was determined and stupidly thought my actual area and time of year was factored in. Soon found out that wasn't the case but not until I was totally hosed for the time I could have made really good money for my listing. I learned quickly to set my own prices for some dates, but do also use their pricing wisely for off season to help defray expenses.

[Rachel33]

You say that you appriciate feedback from hosts and how much you care about us helping Airbnb improve, then read all the feeback and see that hosts don't like it.  I don't like getting these emails about SP or messages on the Airbnb site, the places that they compair my places to are nothing like my places and most of the over 100 kms away and my guests would not be staying there anyway.  

[Ray104]

How does one turn SP of for certain days

[Stephanie27]

Ok so this morning you are are telling me that I should charge 23 euros per night for a cottage that sleeps 4 people.

It would cost me at least 5 euros for the heating.

A double bed laundry change is a minimum of 12 euros. =                  17 euros

The toiletries =  2 euros                                                                               19 euros

Complimentary coffees / teas = 2 euros                                                  20

Cleaning, I charge 10 but it actually takes about

2 hours to do a good clean at minimum wage of 9.27 = 19 euros        minus 16 euros

Taxes on 23 euros 5.52                                                                                minus 26.52

Would you pay to go to work?????

Get the message that this entire thread is telling you. Hosts hate Smart pricing it is an insult. Every time I get this message I feel insulted and consider removing my property from Airbnb.

Commerce is a two way relationship it is not all about the end consumer getting the cheapest product. Hosts are important too because if you didn't have hosts you wouldn't have a business.

Smart pricing is the concept that does the most damge to your airbnb /  host relationship. When will you wake up? We aren't buying this.

When you stop insulting me and my product on a daily basis I might start feeling a bit more civil towards you.

Stephanie May 

[Harriet5]

Thank you Stephanie. Very well put. 

And this is a bit off topic, but I do get annoyed every time I’m asked to get new hosts, and how they will pay me $100 or $300 US for a new host. The last thing I need are more hosts in my area. On the good side, I will thank AirBnb for the no questions asked when a guest needed to cancel his booking the night before arrival when he was stuck in a hurricane in Florida!  Neither the guest nor the host was ‘punished’ for this, and he got all his money back!  

[Bill-And-Debbie1]

We really appreciate all the comments and thoughts that have been contributed to this discussion.

Our view on Smart Pricing is that we ignore it!

Fundamentally we are all so very different and for AirBnB to develop an algorithm that appropriately suggests a suitable host price would require consideration of every influencing factor including location, time of year, what "success" means for each host, how many bookings we want, what classification we might consider ourselves (hotel, homestay, etc), what guests we are targeting (tourists, local, etc) and so on.

Be like us and jst look at the Smart Pricing suggestion, smile and move on!!