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

[Garth10]

Like many I have resisted smart pricing for a long time but caved in recently. I simply put my normal figure (or a little below)  as the lowest figure and got rentals higher than my original pricing. The other real benefit is that I stopped getting those tiresome reminders to activate smart pricing!

[Rafael267]

Smart pricing doesn't make sense to me. When it appears to compare my place to someone that is just offering a bed room. My place can fit an entire family

[Helga0]

One idea: SP compares with competition. I offer a shared room, which could pass for a full unit for most of my one night guests, but the offer of possible conversation attracts some very nice people. 

Close by, there is an illegal hostel, offering six or eight places in bunk beds per room in a normal apartment, possibly several rooms and one bathroom. No breakfast. Share the room with several unknown sleepers. Maybe a bit cleaner than 

[Helga0]

... cleaner than a homeless shelter, but I would not bet on that for the single bathroom for 16 people. As they have one shared room listing per sleeping place, the computer shows me  that my competition are four bunk beds and a cheap room, maybe already in the suburbs. 

There should be a means for hosts to click on competition in the comparison and shoose Remove from Comparison. Maybe when we have removed individually the absurd choices, the tips get more reasonable. 

[Colin4]

One (of many) problems with 'Smart Pricing' is that it does NOT look at the local market (hotels, motels, bed and breakfasts etc.).

It seems pointless if the review is restricted just to AirBnb.

Local prices are going UP for last minute bookings, yet Smart Pricing is going DOWN ????

[Sigiri0]

hi

dear sir

[Gia9]

Hi

[Leigh-Ann1]

Hi Lizzie,

After spending 10 minutes trying to navigate the site to find smart pricing (to try it out), I couldn't see where to set the min and max prices per night! So, could you screen shot where to find it to set those parameters, please? Thanks, LA. 

[Amy38]

Go to your calendar, click a date and  it will pop up suggestions on price Just look to the right o f the screen and the there is a section on pricing...very easy

[Lesley104]

I look at Smart Pricing once in awhile and find it to suggest ridiculously low nightly rates for my four-bedroom, four-bathroom, nicely-appointed, well-located rental. If I rented my place for these low prices, I would attract groups of young people who would likely damage my place well in excess of the damage deposit and create a nightmare for me in terms of repairs.

The nightly prices are so low that each person would be paying just over ten dollars a night. This rental is located in an expensive area in a popular resort region and these prices make no sense whatsoever. I regularly look at how other four-bedroom places are priced in my area and have NEVER found prices this low so I think the algorithm is using ANY rental for its pricing, whether it's a one-bedroom or camp site or hostel. Who would rent their place for ten dollars a night per person otherwise?

[Gordon65]

LOL

I see a lot of negative complaints and lack of faith in smart pricing , and unfortunately i had a really bad experience with smart pricing: 

i signed up and put my trust in airbnb’s algorithms on smart pricing , and a year in advance someone swooped in and booked our highest peak season (holiday xmas newyears) at an unheard of price “below market”. 

[David126]

@Gordon65

I think Smart Pricing is mainly a newbie thing, people who have been doing this longer generally avoid.

My new Email for AirBnB:

Try Smart Pricing to keep your price competitive

It looks like you’re not getting as many bookings as other listings like yours in Breckenridge.

To help get your share of bookings, try Smart Pricing. It lets you set your prices to automatically go up or down to match demand in your market, but only within the price range you choose.

To be fair they are getting closer, 45 minutes from me instead of 90. Well the Pass is closed so several hours at the moment as you would need to go back to Denver and up I 70.

There are no listings like mine in Breck, but aside from that I would be charging a lot more if I was in that market.

[Leslie171]

So far SP has seemed an insult to the fact that I have a beautiful, spacious  home that people seem shocked to behold when they walk in (makes me wonder what they stayed in previously), AND a hot tub, AND an incredibly attractive, elegant bedroom, etc. So No, I will not try to compete with dingy, depressing or unattractive listings nearby. Smart pricing has to get a lot smarter or most of us will ignore it and what seems more like a computer generated  "Lizzie."

[Harriet5]

Good Morning from Seattle,

I do like knowing that other hosts in my area are taking bookings for $30 and $40 less per night, while my apartment stays empty (and quiet, and clean).  The prices I've been told about are so low that I think any host (and Airbnb itself) should consider what sort of guests you're getting. Here in our legal marijuana city I have experienced guests who have come here to smoke!!  And that's all they do. Despite my rule against any smoking indoors, they managed to stand in the rain, or turn on the indoor fan at super high levels to hide the smoking. 

I have been a host for 7 + years now and the most annoying guest ever was a couple who paid my lowest price and complained non-stop.  First, despite my telling the man that the fireplace did not work and could not be used, he very shortly gave it a try.  Of course it set off the smoke detectors all over the house, and he "explained" to me that there was something wrong with the fireplace.  Which I had clearly explained to him!!  After that, when they were checking out, they told me that there was an odor that made them sick.  They had headaches and couldn't sleep.  I asked them why they hadn't left, and they just stared at me blankly.  So pricing too low (this was in my first days of Airbnb) can be a bad choice for some of us.  My apartment is on the ground floor of my house, and I do like to feel safe with normal guests.  

And know that there are so many more hosts here, most of us (even SuperHosts) have to drop prices and yet Airbnb keeps offering me money to get more hosts for them.  Why would I want more hosts when I have to charge prices that were low even 7 years ago!  The $100 they offer, or $300 for 25 new hosts) doesn't cover all the lower prices we have to charge.

Thanks for reading!

Harriet

[Kathryn52]

Thanks for the information on SP @Lizzie. Does Airbnb follow up on those hosts who lower their prices to get a booking and see what kind of reviews guests are giving these discounted stays? If guests are giving less than stellar reviews and ends up not recommending Airbnb to others because of negative experiences, what kind of impacts that has on it's brand?

I'd rather keep my listings empty than than discount to SP levels. BTW-I do have smart pricing turned on, but the minimums are set to not go below my asking price for each listing.