Help me out here

[Ann72]

As unbooked dates approach, Airbnb, Smart Pricing, and even some hosts suggest lowering your price to increase your chances of booking those unbooked days.

Thinking of a place like Maine, where most of the bookings happen in the summer, I've been scratching my head over this.  You get messages or pop-ups that imply people have booked other places cheaper than yours.  But wouldn't the available listings start to dwindle the closer you get?  And wouldn't you therefore be entering a seller's market, not a buyer's market?  So wouldn't it make sense to raise the prices as the unbooked dates get closer?

What are your thoughts on this?

[Ben551]

@Ann72  I struggled to get my head around this too.

Everything we know about flights says “last minute = more money”, so that’s the logic we are used to working with. I did some reading a while ago to try to understand how supply and demand worked in the hospitality industry, because I found it counter intuitive for my small brain 🙂

Bearing in mind I’ll probably explain this badly; what I took away from my reading was that prices only increase as you draw nearer to a date “if” there is an event that causes demand to remain greater or constant than the dwindling rate of supply. Apparently this is rare with accomodation, since supply can increase more rapidly and easily than with (say) an Airline.

For example, I know people who only unsleep their listing if there is a big concert or event in their area, making it worth their while to take a holiday out of town and rent their house to concert goers. In this way, the STR market takes longer (there was a percentage but I can’t recall) to run dry, to the point where the last few higher priced listings will still get booked. In most parts of the world, STR markets are easy to both enter and exit, with few barriers in either direction, so this makes it able to operate on almost a “just in time” basis.

Without an event causing a shortage, the accomodation market behaves like a “race”. It’s a race to see which listings can secure customers, before that pool of customers runs out. As you draw closer and closer, that pool of customers gets smaller, which means you run a higher risk of no booking the closer you get. This situation applies for 90% of the year where I live, unless their is an overall shortage from an event.

I found the best way to understand any of this is with real life data for my market. Otherwise I find it all feels like academic assumptions. I bought a short subscription to AirDNA and filled my boots with data for a month working all this out. The alternative, of course, is scouring your market manually through AlltheRooms and other listing hubs to see how “large” your STR market really is.. only looking at Airbnb data (which is what Airbnb pricing tips does) gives a narrow, incomplete view of the world. I find it unreliable and almost always wrong.

[Ann72]

Thank you, @Ben551, you have filled in the missing puzzle piece!  "The STR market takes longer to run dry, because it's easy to both enter and exit."

I didn't realize you could use Airdna for just a month, so thanks for that tip - I'm definitely going to do it.

We don't really have big events on the peninsula, so I'm going to look at the 4th of July to Labor Day as the big event.  The black flies disappear at the end of June, the mosquitos dwindle throughout July and August, the blueberries become ripe, sailboats are out of dry dock, all the ice cream stands and lobster shacks are open and there are farmstands and organic produce everywhere.  These are the reasons people vacation in Maine.  I think the song "Camelot" sums it up: 

"A law was made a distant moon ago here

July and August cannot be too hot

The rain may never fall till after sundown
By eight, the morning fog must disappear
In short, there's simply not a more congenial spot
For happily-ever-aftering than here in Camelot."

(Edited to fit the argument 🙂

I tested the places on Beyond Pricing yesterday.  The prices varied widely and in the end, did not average as high as my own pricing.  So I'm going to stick to my guns but get some intel from Airdna.  You're right - I can't check every calendar of every likely place on the peninsula!

And finally, although the last week of August through Labor Day used to be a popular time to be there, I've noticed that Smart Pricing and other pricing tools bring the prices down that week.  I can only attribute it to how many US public schools start during the third or fourth week of August.  (Gosh, I feel sorry for today's kids!)  But I won't lower prices for that week yet.  And all three places have been booked for the 4th of July weekend for weeks.  That has never happened before, so I'm stoked.

In the meantime, I've turned Smart Pricing off for certain periods, turned it back on for others.  The prices are generally climbing, though there are odd gaps where it sticks to the minimum.  But as I've said elsewhere, my minimum is what I would charge normally, so while that perplexes me a bit, it doesn't really bother me.

Thanks again, Ben - you've really cleared something up for me!

[Ben551]

No problem at all @Ann72 - I did the AirDNA thing early on, to understand my market fully, then moved to a better and more permanent solution with Wheelhouse and have never looked back... I can’t rate it highly enough, it has saved me hundreds of dollars (and my friends too! I have set my family and friends up on it and they too have reaped the rewards already).

You get some free credit if you sign up to Wheelhouse with this link: https://www.usewheelhouse.com/u/account/register?referrer_id=aYqQy

I originally posted about it here:

https://community.withairbnb.com/t5/Hosting/What-third-party-intelligent-pricing-tools-are-people-us...

Definitely forget smart pricing. It’s a farcical mess of limited data, rigged to keep you over booked and under paid!

[Ben551]

Oh @Ann72 one more thing, that reminds me...

I posted some findings a while ago on the sensitivities of SEO and pricing. While looking at my SEO rankings for different types of guest bookings (2, 3 and 4 guests) I noticed that my price for additional guests was completely wrong!

Detailed post here, with graphs:

https://community.withairbnb.com/t5/Hosting/Has-anyone-tried-AirBnb-search-engine-optimisation-SEO/m...

I found that Airbnb, AirDNA, and even Wheelhouse could only help me with my base price “excluding” extra guest fees. They couldn’t help me with my extra guest fees price. When I analysed this using an SEO tool, I found a whopping problem!

I went from charging $10 for a 3rd and 4th guest to $35 extra! And I am booked just as often (100% occupancy this month!). Quite frankly, Airbnb smart pricing can eat my socks.

[Ann72]

@Ben551 Thank you, I'll definitely check that out!

I charge $50 per extra person over six people per night.  At the main house.  The other two listings are strictly limited to two people.  Having built/renovated/decorated five properties over the years, I know too well the difficult-to-determine costs of wear and tear.  More than two people at either of those properties equals too much wear and tear that no extra-person charge could cover.

[Ann72]

@Ben551 Thank you, I've read your other posts about Wheelhouse, and I'm dying to use it, but it's not available in Maine at this time.

I'm not sure why every time I say, "Smart Pricing has RAISED MY RATES HIGHER THAN EVER BEFORE," someone tells me not to use it?

After turning it on this winter, all my listings rose in the rankings, and my year-to-date bookings have more than doubled - I have 110% more reservations compared to this time last year.  Two of the listings book up more in advance, and the third will continue to get bookings, some quite last-minute, throughout the season.

Today is the last day of March, and my confirmed earnings for the year are at 58% of last year's total.  And last year was a very busy year.

All of this is to say that, when used correctly - YOU control your minimum, ignoring all bot-like suggestions - and judiciously - turn it off when it's not optimizing the prices and set them manually - it can be very helpful.

[Ben551]

@Ann72 Wow... it sounds like Airbnb smart pricing actually “works” for your region! Who’d have thought... well if it ain’t broke don’t fix it.p, as they say. It’s a shame it doesn’t work for my part of the world, I’d very much like to reduce and consolidate on the add-on-tools front...

[Helen3]

Hi @Ben551 

Interested in your comments around Wheelhouse.  What is it exactly?

And how has it saved you hundreds of dollars?

Thanks.

[Ben551]

Hi @Helen3 a sorry I don’t know how I missed your post...

I originally posted about it here:

https://community.withairbnb.com/t5/Hosting/What-third-party-intelligent-pricing-tools-are-people-us...

Most recent example of its usefulness is further down in this thread, though here is the link for convenience:

https://community.withairbnb.com/t5/Hosting/Help-me-out-here/m-p/979682/highlight/true#M245396

For my situation, I had several problems to overcome:

1. The Wellington market has a hotel accomodation shortage due to earthquake damage. The consequence of this is that the STR market “surges” at a moments notice when new events are announced. Even if I scour the internet everyday, I wouldn’t be able to keep up with the overnight peaks and valleys it creates. Having a dynamic pricing model is therefore essential in my region. A fixed price would make no business sense.
2. Airbnb smart pricing isn’t configured for my region. I used it for the first month and lost a tonne of money when I didn’t know what I was doing. For some reason it applies winter “low season” prices in the peak of the NZ high season. It was selling my property at $109 per night on nights AirDNA later told me we’re worth $212 per night. When I checked the calendar and noticed Airbnb Smart Pricing was suggesting to increase my prices to $209 per night in NZ winter... I turned it off and went looking for an intelligent pricing engine configured for my region.
3. Airbnb smart pricing is reported to be only relying on Airbnb data, not other market data. I wanted an intelligent pricing engine that knew far more than just the data within one platform. The one I chose hooks into a massive data engine that connects with the hotel industry as well as the STR industry. This means it spots those peaks and troughs faster than a single market database can.

The levers in Wheelhouse are what I need to keep my base pricing competitive. There have been days I’ve sold up to 286% more than when I was using Airbnb Smart Pricing (I kept a spreadsheet during my free trial to track the value return). I’ve seen enough to know it’s a no brainer for me.

I hope this is helpful. I think the best thing to do is what @Ann72  is doing. I got to know my market, did the research through AirDNA, then adopted a strategy that worked. For me that’s Wheelhouse, for Ann that’s Smart Pricing. I expect everyone is different. Markets are different... properties are unique... I doubt there is a silver bullet out there, other than research, time and patience.

[Ann72]

Brilliant summary, @Ben551!  Thank you!

[Susan151]

@Ben551 @Ann72  I found Wheelhouse so inaccurate that I couldn't get rid of it fast enough. It didn't notice the Harvard or MIT graduation dates, one of the two most lucractive [and housing frenzied] weeks of the year! Since Maine is closer to me that NZ, I would recommend that @Ann72  watch their suggestions for a while before setting it up to automatically adjust her prices.

[Ben551]

@Susan151 wow I’m surprised at that. I wonder if their data engine is lacking in your area.  What tools do you use for intelligent pricing?

[Susan151]

@Ben551 Ummmmmm.... my brain. I wrote a little database tool. I spend some time reviewing my area listings/market. I have about 5 price points and I tweak. I decided that no one knows my market better than I do, or what prices I am willing to use based on my costs.

[Ann72]

@Susan151 That's what I'm talkin' about!  My costs, my prices.

Can I buy your database tool, please?  :):):)