I refuse to do Smart Pricing because of what I've seen suggested in their "price tips." So I don't know exactly where they get their smart pricing rates, but I do occassionally use price tips when trying to increase my ranking. And from what I've seen recently, I'm convinced that their suggested rates have absolutley nothing to do with anything except what they think they can get the hosts to lower their price to. Here's why:
Usually the price tips I get suggest lowering my price by about $10-$30. I recently started using Beyond Pricing and they increased my rates by about $20-$40, and in some cases by almost $100. So if the price tips were actually generated by what Airbnb says they are (seasonality, location, how far out the date is, etc), then you'd think that the price tips would now suggest lowering my price drastcally, by $50-$100. But guess what? Price tips STILL suggest lowering my price by only $10-$30!
So now I'm convinced that it's just a calculation of what suggested price is lower than the host's current rate so that more guests will book, but not so low that hosts would just dismiss it outright as ludicrous because of how much lower it is than their original asking price. I mean, if I haven't had a booking for a few days and Airbnb was suggesting that I just lower my price by $10 to start getting bookings again, then I'd be WAY more likely to believe them and use their price suggestion than if they suggested that I lower my price by $50. And because more guests will book if more places are listed for cheap, Airbnb's price tips and smart pricing have to have more to do with convincing hosts to continuously lower their prices.