Smart Pricing Can Work – If You Do It Right

[Ann72]

Last winter I spent a lot of off-season time drilling down into my nightly prices, seeing what had worked best over four years of hosting.  I came up with a “sweet spot” for each of the three listings and set that number as the minimum with Smart Pricing.

My prices were already higher than most of my competitors.  But here’s the long story short:

*by May, my booked income for 2019 was 100% of my booked income for 2018

*overall income for the year so far has now increased 25%

*number of nights booked has gone up 13%

*average nightly price across three listings has gone up 10%

*at this point last year, I had 34 bookings; this year so far, I have 68 bookings.

Before using Smart Pricing, I looked into Beyond Pricing. (Wheelhouse is not available in my area.)  Their demo showed that, on average, they would be charging less than I was already charging.  So I decided to try Smart Pricing, which many hosts hate.  They hate it because it “tells them” to set a lower minimum price than they want to charge.  But if you SET YOUR MINIMUM AT WHAT YOU WOULD NORMALLY CHARGE, rates will go up dynamically.

And by adding the Smart Pricing tool to Instant Book, I found my listings rose dramatically in the rankings.  I signed on with Rank Breeze and found that they were almost always on the first page.

Other discoveries:

*after a few months, I found that even when I used Airbnb’s suggested minimum, Smart Pricing set most nights at my “sweet spot” rate – showing me that the algo drew the same conclusion I had drawn.  However, I never left it at the minimum rate for more than a few minutes!  🙂

*Smart Pricing’s suggested maximum changes often, and I always use their suggestion for the maximum, even though my prices have never hit the maximum.

*in an effort to keep the listings fresh and drive them up the rankings, many of us make changes regularly.  Changing or adding photos doesn’t update the listing, but changing ONE LETTER of the listing description does.

*when your prices are up, you might get a suggestion to send out a special discount offer for a period of days.  In the off season, I always did that, because Airbnb sends an email with the offer out to people searching those dates.  It mattered less to me that I got bookings than that I got more eyes and clicks.  And more eyes and clicks raises you in the rankings.

It seems like your listing will get more favorable treatment the more Airbnb tools you use.  I know there are a lot of Smart Pricing haters out there, but why not give it a try, making sure you always use your own minimum, and see what happens?

[Ann72]

@Rich-and-Yan0  Definitely report back - we'd love to hear!

[Rich-and-Yan0]

Will do

[Katrina79]

@Ann72 @this is absolutely true! One of the reasons I love the airbnb platform is it’s built in marketing. I take advantage of almost everything airbnb can do to boost my listings and get me booked! I always use smart pricing because obviously airbnb knows best, they have all the data. That’s the main reason I don’t mind paying host fees. 

[Lilly28]

@Ann72 , Please could you let me know is Smart pricing for the whole unit/apartment, house/ and does it affect the price I set for an additional 3rd and 4th guest?

[Ann72]

@Lilly28 I'm sorry not to have answered - I've been traveling.

Smart Pricing can be applied to any offering.  You can turn it on for the whole home if that's how it's listed, and you can turn it on for individual rooms if that's how they're listed.

The extra guest prices will still be applied on top of the listing price.

[Caroline443]

Im sorry but I very strongly disagree with you.  Most of the smart pricing suggestions I have received over the past 5 years are so low that I would make a significant loss.  Smart pricing does not even begin to take into account any of the local taxes, heating/ elec bills,  cleaning costs, maintenance cost, WIFI, or general costs (shampoo, coffee, tea, milk, toilet paper, etc etc).

AirBnB is very guest centric.  I understand that is necessary in order for them to gain market share and maximise their revenue stream.  However, I think it is not surprising that many hosts are now starting to go back to full time renting after hosting for a couple of years.  Hosting is no longer as profitable or as easy as it was several years ago.  Guests have much higher expectations for the same reduced price these days  and the margins for hosts have been eroded significantly.  AirBnB have pushed hosts very hard to up their game and meet the increasing expectations, but it is often no longer realistic.  Guests expectations of airBnB hosts often exceed those required from 4-5 star hotels.  That is not realistic long term.  As this trend continues, it becomes more profitable and much easier to go back to offering long term rentals via local estate agents.

[Ann72]

@Caroline443  “Most of the suggestions I have received” - as we say in America, there’s your problem right there.

If you read the original post and the answers from other successful hosts you would understand that none of us ever, under any circumstances, uses SP’s pricing suggestions.  We set the price and use the tool.

As a business owner, why would you take anyone else’s suggestions for what the price should be?  Only you know what your costs are and only you know the value of what you have to offer.

[Emilia42]

@Caroline443 you may be getting smart pricing confused with the "price tip" suggestions. When you use smart pricing, YOU set your minimum price so your rates never drop lower than you want them too.

[Kat84]

Never look at the minimum price suggested by Airbnb. There is no such price at all in my area. Even hostels are charging higher than Airbnb suggested price. I wonder where do they get it? It seems to me that the formula is something like this "lowest rate possible in that city minus 30%"

[Kira32]

This is very interesting thank you @Ann72 !

[Lilly28]

@Ann72 

I have the same question as Branka and Silvia. I put Smart price on, and the only difference is that when I am choosing to mark on a given date to be with SM - the price goes to the lowest I have chosen to be my smart price. Well, at some dates - it shows the same price, but with an arrow going up. Only at the dates around New year it is with a dollar up - again with arrows up.

Please, explain - what these arrows mean? Does it mean that I have to change the price up for each date I see an arrow? As for the tips of SM - they give too low suggestions for the lowest price and too high for the highest price. As I cannot agree with either of them - I have chosen a middle price, just added 65% to their lowest tip.

I agree with Caroline - guests are expecting at least 4-stars hotel, 24 hour "receptionist" - meaning host to be available for every kind of help, not just questions and answers through messages, want many things for free and are interested only in themselves. Rare exceptions when guests are interested how locals are living and making their ends, and null interest how much work was invested before their arrival in order to allow them the best experience and relaxing time. Still - I enjoy these exceptions...

But the problem stays and it is open for almost 2 years. And it CAN be solved by airbnb - as brokers can tell different prices for each property depending on location, design and amenities, so could airbnb rate the different accommodations - perhaps using stars as hotels are rated, and for each stars rating the price to be allowed to flow in a given amount ''from" - "to".         

[Ann72]

@Lilly28 The squiggly arrows are simply an indication that SP is turned on for those dates.

I don't know why you wouldn't choose the suggested MAXIMUM - it will never get to that rate, but you're giving the algorithm a range to work with.  Just use their suggested maximum.  But never, ever, ever use their suggested MINIMUM.  Make the minimum what you want it to be.  There will be plenty of days when the place is booked at that rate, and you have to be happy with it.

Also, if your rates aren't going up with SP, it only shows that the algorithm has discovered that you have been booked most frequently at that rate.  If you want more, raise the minimum.

Overall, though, prices for nearer dates will be at or close to the minimum, prices for dates farther away will be higher.

[Aj0]

I am with you Ann and have been doing that since it was introduced and use it as a guide and it works for me. 😀

[Nikolai12]

Great information. Thank you.  I was wondering how you can set a minimum price that is different at my high season. I would like to set it higher for next summer wo changing the current price but it doesn’t let me change it and keep smart pricing on.

[Ann72 · Accepted solution]

@Nikolai12  You're right, you can't set two different minimums.  And pricing rule sets won't work with Smart Pricing on.

I would change your availability to three to six months out, instead of a year or forever, and change the minimum in November or December, ahead of the summer bookings.