When you decide to list your place on Airbnb, one of the most difficult decisions to make is setting the nightly price. I’m going to walk you through how I set my prices and how using Smart Pricing maximized my bookings and my income.
With this house, I set the nightly price at $209 the first year (2015). I came up with that price not by looking at nearby listings, but by deciding that this very beautiful little house with high end finishes and great interior design set on half a dozen acres shouldn’t be priced too low, yet I needed the price to be somewhat modest to attract bookings the first year.
After achieving SuperHost, I raised the price to $297 the second season. By setting such a high price, I wanted to convey that I valued the property highly. I left that price for three years and had a good number of bookings and consistently excellent reviews. After a few years, more Airbnbs flooded our local market, but I still had bookings.
Last year I had fewer bookings, partly because the calendar was blocked for half the short summer season. Over the winter I decided to look closely at my prices versus my expenses in maintaining the house. I saw two things: that $297 was the “sweet spot” – most of my bookings had come in at that price – and that a lower price wouldn’t be cost-efficient.
I decided then to try Smart Pricing. But I knew that I would have to set my minimum at the “sweet spot” of $297 a night. I simply couldn’t afford to accept a lower price.
If you haven’t used Smart Pricing, here’s how you go about it.
Go to your listing and choose “Pricing.” Next to “Nightly Price,” choose “Edit.”
Before going any farther, look at that sentence at the bottom of the screenshot: “You are responsible for choosing the listing price.” Keep that in mind.
After choosing “Edit,” you’ll see this screen for editing your nightly price:
Right under “Nightly price,” you’ll see “Smart Pricing.” Turn it on so the check mark looks like the one in the screenshot above.
Then go to the Minimum price. You’ll see a tip in green. Mine says $177 – 40% less than my chosen minimum. That’s too low, but let’s talk about why the tips are so low.
Airbnb’s data shows that lower prices attract more bookings. That may be true, but I look at it this way: more bookings means more wear and tear, which means more things need to be replaced or repaired. And that costs money. Now, let’s say I would like to bring in $5,000 for the month. At $297 a night, I would only need to book 16 nights. At $177 a night, I would need to book 28 nights. I would rather have only 16 nights booked at my price than 28 nights booked at a lower price – because of wear and tear.
So set the minimum price at what you would normally charge. Then set the maximum price at the tip in green. The price will probably never go anywhere near that maximum. But the algorithm likes to have a range to work with.
Now take a look at the graph at the bottom of the screenshot. The green dots show some booked nights in September, October, and November. (This is a summer vacation kind of place, so the bookings dwindle after October.) The nights have been booked at $297. Then look at the black dots under the green line. They show the suggested price. But here’s what’s strange: the suggested minimum is $177, but the suggested price looks like $250. That’s weird. What would happen if I changed the minimum to $177? Take a look:
With the minimum set at $177, all the unbooked night for September, October, and November are now $253.
Yet look at the second half of December and the first half of January:
Prices now range from $253 to $422 a night! That’s okay, but since they range from $297 to $422 a night when my minimum is set at $297, I’m going to leave my minimum at $297, because I don’t want to risk getting a booking at $177 – which might happen when I’m not looking.
Another interesting thing about the screenshot above is this: Smart Pricing often does not raise prices for holidays. Why? Because searches for holiday dates are more numerous, and in keeping with Airbnb’s belief that lower prices mean more bookings, it wants to show lower prices for popular date searches. Many hosts who use Smart Pricing manually raise prices over holiday dates. In this case, however, Smart Pricing has raised my rates for the Christmas and New Year holidays. I will have to keep an eye on that the closer I get to those dates, however, because prices go down the closer you get to unbooked dates.
Last January, I switched to Smart Pricing for all three of my properties. All three also have Instant Book turned on, with all the requirements checked:
With Smart Pricing on and your minimum set, you might get a message on your calendar page asking if you’d like to send out a special discount for unbooked nights. The discount offer usually covers about 10 days and is sent by email to guests looking at those dates. In the off season, when I typically have almost no bookings, I frequently sent out this discount offer. In return I got half a dozen or more bookings when I typically had none. But the boost my listings got in the rankings was worth more than that.
Since turning on Smart Pricing, using Instant Book, and sending out a series of special discount offers, the following things have happened:
I concluded that the more you use Airbnb’s tools, the higher your place rises in the rankings. The discount offers get more eyes and clicks, and more eyes and clicks lift your listing in the rankings. As Lizzie’s post from a couple of years ago shows, Smart Pricing uses more than 70 factors to determine the prices on your calendar. But keep in mind the following:
To be honest, Smart Pricing worked so well that I almost got tired of all the bookings coming in! But with property taxes looming on the horizon, I couldn’t be happier with the results. Why not give Smart Pricing a try? You might be surprised at the results.