Prices dropping by 50% - is the pricing tool a complete disaster?

[Claudia11]

What is happening with the prices in London? I have been an airbnb host for 3.5 years and the prices are tumbling like I have never seen before. Am I the only one experiencing this? 

I have two listings, one for a private room with own bathroom in my large 2bed home, the other one is for the entire home for times when I’m away (I only started doing this one year ago). Ever since the pricing tool was introdcued I looked at it in disbelief of what it suggests and could only ignore it. To me, it actually feels unsafe using the recommended prices, yet I totally and utterly rely on the income from my place being rented and, for the first time ever, this month has been incredibly slow. When I first listed my entire home over Christmas last year I charged £140 plus cleaning as an introductory price, I since had regular bookings throughout the year for £200 per night with all all the reviews saying "good value", now I am suggested to charge £100 and even less. I have also checked a website called Pricelabs, who is making similarly low price recommendations. If I had followed the suggestions by these pricing services all year, I would have had a much lower income. Instead I do what I always did: regularly check what similar listings in the area are charging, or what the average price is for listings like mine seen on the home page. But I am now wondering whether overall prices will be affected, if every new airbnb host sticks to the price recommendations by the pricing tool? Understandably, if I was new I would do the same. However, this is London - everyone knows that a million dollar mansion could be right next to a council estate and a computer just won’t have an algorithm for that anomaly. 

What is everyone else experiencing? Especially longer term hosts - are you experiencing drastic price drops? Are you following price suggestions from airbnb or other services like Pricleabs? Are you finding them useful? Any info would be much appreciated as I’m at a loss as to what to do - drop prices drastically (and risk opening my home to people who might not appreciate it for what it is worth) or keep taking the risk of higher prices and a potentially empty home?

[Claudia11]

Hi Earnest,

that's very interesting indeed. Congratulations! What's the price difference in %? 

London is not low season in December, people from all over the UK and Europe come here for their Christmas shopping. And it's a hugely desirable place for New Years Eve. I have had a very good month in the end, as always, and NOT following the pricing tool at all. However, the majority of the bookings came in when I was already abroad and therefore caused more organisational heartache. I just cannot reduce the prices of my home when I'm not there as it will attract a different clientele to the one I would like. I was lucky again. However, my main concern really is long-term. If the majority of airbnb hosts suddenly relied on the prices suggested by airbnb, overall prices would fall and for many people it would be pointless offering their homes up through this website. Interestingly enough, many people here feel the same so I am feeling less concerned myself now. I'm very grateful for everyone's contribution here! Although, strangely enough, there haven't been many London hosts...!

[Raymond3]

I totally agree that the pricing tool makes no sense. I started to listed my two apartment in Beijing three weeks ago. And I have hosted 8 groups this month.

These two apartments are almost the same - location, funiture, design... One of them were suggested an average of around $25, the other was always around $45. They are on the same floor, and we renovated them with the same company. 

I don't know how airbnb's pricing tool works, but obviously, the one that cost lowers attracts far more guests than the other. But it reversed, when I rose the room suggested $25 to about $40. And the inquiries and bookings dropped dramatically. 

But the thing is that if I rent the room in $25, which is about 50% of the price for a motel room around my apt, it doesn't generate any profit compared to a long time renting, or even less. But I have to cost much more time.

So I rose my price to a higher level now, regardless of the occupancy. I think airbnb needs to think about it, if the hosts don't make enough money while spending more time and money for maintenance, my passion will slip down.

[Edith0]

I do agree with u Raymond.
Hosting isn't an easy job. I share my home, I live there, sometimes it's great. sometimes it's stressing. Airbnb is a great concept but first of all its purpose is money. May be it could be the victim one day of its success? If everybody hosts for nothin we will stop hosting! That's sure. Add taxes and fees and substrate your liberty...it's under zero!
Ask visitors sometimes advices or their own feeling about our price, it can help to adjust.
Some of them have stayed some place else in Paris and they can compare. I prefer to " sell " my rooms at their right price at the risk of receiving less.
Very happy new year to you!
Edith

[O-D-0]

I'm not too familiar, but I hope that guests don't have a pricing tool too, because that would certainly impact prices for hosts. I personally only use the pricing tool as a suggestion, particularly for slower months. In Brooklyn, NY that is from October till March. I haven't been too effected by pricing, since there is less inventory now that NYC is clamping down on illegal hosting. With less competition I have more pricing flexibility. I slowly raise my rates when I notice I'm getting more concurrent inquiries.

[Robin4]

Hi there Claudia,

The pricing comparison tool is a completely useless bit of software that will eventually do more harm than good for exactly the reason you have brought up!!

You cannot compare 'brick and mortar' with 'bricks and mortar' and that's all there is to it!

Every property, and host, will have strengths and weaknesses.

I charge $80au per night for our self contained cottage. Another listing in my area charges $59au for their private room. The comparison tool suggests I should charge $60 instead of $80!

What escapes the comparison software entirely is the fact that (although listed as a private room because of council approval) my facility is, self contained....you will not run into some stranger in the hall heading to a communal bathroom! I provide a full breakfast including freshly squeezed juice, toast, eggs and bacon, 3 different breakfast cereals, black tea, green tea and Camomile, coffee both instant and brewed, 6 different Beerenberg jams, 5 various packet soups, a big bowl of the best fresh fruit I can find in the area, milk both full cream and skim.....even a couple of beers and a couple of ciders in the cottage fridge.....all on a no charge basis! The bed has been specially made! It is 2.4 metres long to suit tall guests, is electric and has massage function....All our guests say in their reviews that it is either the best, or one of the best beds thay have ever slept on. I provide chocolates on the bedside tables, a safe for their valuables. In their own bathroom there is a washing machine so they can do their own washing. The cottage has an extensive library, is refrigerated air conditioned with the best in ceiling unit I could purchase....it will hold 20c on a 44c day with ease!

Claudia, Ours is not a facility that offers a spare bedroom with a possibly left over double bed in it and, although the listings read similarly to other 'private room' listings all our reviews will tell you that they are like chalk and cheese.

Drop my price to $60.....not in your life, we provide outstanding value for the money and no pricing tool will convince me otherwise!!!

Stick to your guns Claudia, keep hosting to your standard....not some bloody pricing tool!!!! ....Cheers...Rob

[Ann10]

Before the price suggestions I got the price I was charing every night with no problems. I live in NYC and I also have 2 places. Pricelabs gives much higher ptice quotes here. I would never dream of using Airbnb's pricing for the one I live in. I never ever went below $75 a night for the space room and I never will. I will go higher, but if I am going to go lower, what do I need them for. They have caused so many problems for me anyway. As far as my other rental, last year it was empty for almost all of January and February so I will accept their low prices for January and Februray out of desperation. For the other months, I will use my own prices or get them from Beyond Pricing or Price Labs. I pretty much think the pricing tool is a joke. I would never ask one of my friends to host with this company after the incompetent stuff I have been through with them. They want to get a lot of hosts because it is more money for them even if the hosts are forced to lower their prices.

[Deepak-Rally-Chopra0]

ITS A DISASTER , STICK  TO OUR PRICES AND  WE HAVE NO CHOICE , A EMPTY LISTING AND TO AIRBNBS PRICING ....... WE ARE DONE IN BOTH WAYS .

[Sylvie4]

I'm in London too. I rent two rooms in our house for £64 a night - they share the house with my husband and me. I've been slowly increasing the cost, not much but I think I started at £58 a year ago. I completely ignore the suggested price as it has no idea what we are offering. The best indicator is whether you get the business and we've been fully booked all year and achieved Superhost status - so everyone is happy, including me.

[Donovan0]

The pricing tool is not reliable and tends to suggest ridiculously low prices.

[Lynn7]

The reason the prices are dropping is because supply is outstripping demand because AirBnB is constantly recruiting new hosts and not enforcing the licensing laws required by major cities.

[Art-House-On-43rd0]

I don't agree that supply is outstripping demand. These is plenty of demand. However there is a widely growing plethora of choice, with a glut of boutique, stage and rent properties offered by not just mere individuals but also much monies, realtors. Regarding city laws, just last week Airbnb and funnily enough, the hotel motel assoc. were highlighted sponsors of the Mayoral convention for the greater USA. At the conference they spoke to the mayors en masse about how they"d love to start collecting city tax and hotel and motel tax from all Airbnb hosts. Yay. Yet even more income cuts for me. 

[Lynn7]

 I'd love to think that there is still plenty of demand.  That brings up the question of what the algorithm is based on.   I assumed it was a reflection of supply and demand.   Is there a place I can find out more about how those prices are actually determined by the algorithm?

I'm paying the 19.6% hotel tax required by Chicago which puts me at a competitive disadvantage compared to hosts who don't legally license their units.  Maybe that makes me a chump 😞

[Joseph9]

I'm a host in Seattle, and in the past 4 months or so, the price suggestions on my place have plummeted.  After 2.5 years as happy airbnb hosts, were considering returning to permanently leasing our listing.  The decreases did coincide with when I first heard about the outside algorithm services, as well as Airbnb daily price suggestions.  The difference between leasing and hosting is no longer justifying the time, money, and energy we put into being Airbnb hosts.  I think it'll still be worth it over the summer months, but after this summer, I think we'll have to quit.  I mean, we've never hosted for less that $100 a night, which we see as quite low for a two-bedroom duplex in a very desireable Seattle neighborhood.  Over the last few months, Airbnb's suggests have just kept dropping, and the latest suggestion is $57 for many nights.  That is cheaper than 2 bunks in a 6 person dorm room in a local youth hostel.  Seriously?  Is Airbnb turning into an Uber- providing value for everyone except the actual value-producers (the drivers, or in Airbnb's case, the listing owner)?  What a bummer!  

[Edith0]

I too will probably leave Airbnb July 1 and manage my B & B by the City of Paris (as self entrepreneur) because fiscal conditions will be more interesting that way.

[Chayne0]

I live in Maui my rental is on Kauai. Maui has a lot of visitors. But Kauai is for some reason not doing well even when I drop my price. I advertise on Homeaway and they are going to start charging a percetage of the rent along with their regular fees.  Greed is the problem. And to think Hawaii already has the hightest Transit tax in the country. It wil hurt Hawaii more than any other state