Hosting Tools : How to calculate your break even

Ben551
Level 10
Wellington, New Zealand

Hosting Tools : How to calculate your break even

DynamicPricing-Blog-AL-02-03.jpg

 

Greetings ~

 

I wanted to drop a quick post to share a link to a crude little Pricing Model I have been working on, that others might also find useful.

 

Some time ago, I posted a thread about how to go about calculating your break-even pricing.  Being new to Airbnb, I was curious as to how other hosts went about looking at their costs and overheads.  I was trying to take a leaf out of Alex Polizzi's book; host to one of my favourite British show's The Hotel Inspector.  One thing I often heard Alex emphasise to hoteliers was the importance of knowing the minimum nightly rate you should charge in an accomodation business.  So, that's exactly where I started - working out the minimum I needed to charge in order to make a profit.

 

From there, I dug deeper to try to determine the maximum rate I could charge in my particular market.  I looked at a number of tools AirDNA, RankBreeze, and Wheelhouse.  Through the many, many graphs I discovered very quickly that whatever I did to increase my pricing significantly lowered my listing in the Airbnb search results engine.  This meant that the amount I could charge was ultimately limited by how far into the toilet my listing would place in search results... so I got right stuck into understanding SEO, to learn exactly what I could do to maximise my search results and give myself room to increase my price.

 

Over the past 2 months I have tracked my listing via RankBreeze and, slowly but surely, make small changes that have lifted my listing in search results.  Each time I made a gain, I offset it by increasing my daily rate.  Day by day I have lifted my rate in small increments, to take up the room made by my other changes to photographs, amenities, word density, and all the other 28 known things that drive Airbnb SEO.

 

As of today, I am pleased to report that I have managed to successfully lift my market rate by 49% without negatively impacting the placement of my listing in Airbnb search results.

 

It hasn't been easy, and has required no small amount of reading, learning, reading some more... I can't tell you how many cups of tea... but slowly but surely I've seen results to more than justify the time I have invested in this little project!

 

Now for the model...

 

I expect for some people much of this will seem like internet voodoo.  If I'm writing it, it probably is 🙂  So to make life just a little bit simpler, I thought I might share the nifty little model my wife and I have been using to keep an eye on some key pricing things for our Airbnb.  This little model is actually what I was looking for when we started out... something to take our numbers, do the math, and spit out the basics. 

 

We built ourselves just such a model and the output looks like this:

 

Crude Model Outputs.jpg

 

You can find a link to the model here:  https://1drv.ms/x/s!Aq1ZZumgta_Zki5gbhrmE3MLTpzG

 

If you can use Excel to a comfortable degree, then you'll have no trouble saving a copy of this and having a go yourself.  It's very crude and doesn't reflect planetary complexities across international tax systems, but it does the job reasonably well for a simple calculation.  We also find it helpful to have, since our own Tax system keeps bloody changing.. at some point we need to know when all this isn't worth it!

 

If you want to edit the spreadsheet, you will need to save it down to your computer or your Onedrive, then edit it in your own copy of Excel.  Don't ask me how to transfer all this into some free version of a spreadsheet like Google docs... I have no clue, but I expect someone else might 🙂

 

That's all folks - happy number crunching.

 

~ Ben

8 Replies 8

Hotel throughout the world got affected by COVID-19, and financial planning becomes more crucial for hotel owners than ever. A good financial plan for a hotel like this one **  will help managers to control expenses and manage cash flows that are critical for survival.

 

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@Ben551 

It's great of you to share this spreadsheet with fellow hosts 🙂 Airbnb *REALLY* needs to hire you as a consultant. Seriously! 

 

I remember when Henry and I decided to host and we were wondering how we should price ourselves. We sat down with a piece of paper, some reciepts and a glass of beer (each) to talk about money we spent to get the guest room ready, cost of expendable amenities, cost of additional cleaning and laundry Henry would have to do (business owners should always be able to pay themselves a fair wage for the work they do themselves), and expected increase in utilities with an additional guest at home. 

 

We also looked at other listings in the area, guest houses, share houses, goshiwons, and other budget accomodations to get an idea about what we could charge and what the market rates seemed to be. 

 

Henry is good with numbers so I had him do the number-crunching but we always know what we need to charge at a minimum to make hosting worth while for us, and have a fairly accurate (if not exact) idea of what our net profit is is on a monthy basis. We didn't feel the need to break it down into daily or weekly since we host longer stays. 

 

For those who are having difficulty grasping how to break down costs and understand how much money they are *actually* making, your spreadsheet will be a real lifesaver! 

Lizzie
Former Community Manager
Former Community Manager
London, United Kingdom

Wow, just wow @Ben551 this is amazing! What I loved reading your overview here is the sense of excitement to get to the bottom of what would work best for you and the dedective fun you can have along the way. 

 

How long have you been working on this? Since you posted your previous topic on calculating your break-even price? 

 

Any surprises along the way?


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Ben551
Level 10
Wellington, New Zealand

Hey @Lizzie - I suppose it’s something I’ve dipped in and out of.

 

One of the first things I did was put together a “back of a napkin” calculation and share it for discussion. I remember @Robin4 being the first to reply. It was a useful first discussion, but I really thought there should be a simple model for people to grab and use... it’s what I was looking for when I started. I figure if a grubbins like me can get the money part of this right, then anyone can.

 

I suppose once I reached the point where I knew enough to make my model.... I got started. Like @Robert969 said, most people go cross eyed at the idea of a spreadsheet. I’m no exception, so figured it was long overdue for sharing.

 

The most surprising thing is that stories like the one @Robin4 describes are perhaps more common than you think. I’ve recently worked with friends to fix their pricing and do the same maths. I do think it’s quite likely there are hosts out there not making 2 pennies to rub together, after all the service fees and expenses are paid....they could use a few tools like this up front.

Torbjörn-And-Amila0
Level 2
Norrtälje, Sweden

Thanks for sharing @Ben551 very appreciated!

 

I have another request.

 

I am no expert in Excel but if someone has an Excel template where you could add bookings (nights booked x nightly price)

per listing from multiple booking sites on preferably monthly bases (6-12 months ahead). 

 

Or some other useful Excel to keep track of your income per listing.

 

BR

Torbjörn

Robert969
Level 3
Trumbull, CT

This is awesome.  I'm in the creative end of business and quite honestly, spreadsheets make me cross-eyed!  Thank you for releving me of the pain of creating one!

Robin4
Level 10
Mount Barker, Australia

@Ben551 

Seems like we have done this one before Ben, we gave it a pretty good work-out a couple of months ago but good on you for bringing it up again.

Many hosts have absolutely no idea if they are making money or loosing it! And if you can give them a framework where they can do a bit of personal calculation for themselves.....that can only help.

 

I had a fellow host in this area and I gave her our last effort at a profit and loss and she suddenly realised by using Airbnb's pricing tips she had been operating in negative equity for almost 4 months.....She had been loosing money purely to give Airbnb a service fee......no kidding!

This is the sort of information that should be kept front and centre on a site like this because it helps keep hosts focused on why they are here.....to make a bit of money on the side!

 

Cheers......Rob

Cathie19
Level 10
Darwin, Australia

Excellent  and well done @Ben551. Thanks for sharing your hard work. Being able to see the expansion and possibilities is wonderful. 👍🏼

Cheers!

💐

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