The short-term rental business has become increasingly competitive in recent years. Thanks to Airbnb and Expedia has made the vacation industry a comparatively easy route for investors to get into the property industry. The downside to this is that the competition is making it increasingly difficult to create a profitable strategy for the business. So, how does a new investor create a profitable pricing Strategy for their Airbnb? Below are a few tips courtesy of the Short Term Shop.
The Short Term Shop is a real estate agency that helps short-term rental investors navigate the property industry. We provide insight and technical expertise on how to start a rental property business. As you venture into how to start a rental property business, you should analyze the differences between the Airbnb pricing model and other short-term rental platforms. A look at VRBO Vs. Airbnb, for instance, can set the foundation for your pricing strategy.
The Short Term Shop can help you identify, acquire, and manage short-term rental properties for investment. Here is a step-by-step guide on how to price an Airbnb property.
I. Review Airbnb's Dynamic Pricing to See if It Works For You
The first thing to do is to check if the dynamic pricing feature works for your Airbnb investment. The dynamic pricing strategy adjusts nightly rates based on market demand, local events, and other factors. This feature aims to maximize revenue for hosts. However, it is advisable to evaluate it to verify if the model aligns with your Airbnb investment goals and the specific nuances of your property. Some hosts find this automated pricing beneficial, while others prefer more control over their rates.
II. Conduct Market Research on Similar Properties
Do your research. Begin by exploring similar Airbnb listings in your area to understand the average nightly rate and what amenities or features are driving those prices. Look for patterns in pricing strategies adopted by top-performing properties. When you understand what guests are willing to pay for comparable listings, you will be in a better place to price your own listing.
III. Identify Your Property’s Unique Value Proposition
What makes your property unique? Can you identify the "x-factor" that draws guests to your Airbnb listing? Leverage your property's unique value proposition to justify a premium over the base price or set competitive rates that reflect the value guests will receive. If your vacation rental offers stunning views or is near a popular tourist attraction, for instance, it can command higher nightly rates than other properties.
IV. Review Pricing Manually Depending on Demand and Season
Despite the convenience of automated tools, manual pricing is still a great approach to pricing strategy. Local holidays, festivals, and events might not be factored into Airbnb's automated pricing features. Adjust your rates based on specific events, seasons, or even lengths of stay.
For instance, if you're aware of a major local event that's likely to increase demand for short-term rental business, you can adjust your rates accordingly. Similarly, offering weekly or monthly discounts can attract longer stays, ensuring a steady stream of revenue.
V. Use Technology and Tools to Monitor Pricing
These tools monitor market trends, analyze competitor pricing, and offer recommendations to increase revenue. They can automate adjustments to your nightly rate based on real-time market demand, ensuring you're always competitively priced.
Mastering the art of pricing in the short-term rental market demands a strategic approach, meticulous research, and the right blend of manual and automated methods. These general steps will put you in a better position to maximize your Airbnb investment's revenue potential and ensure long-term success in a competitive market.
Keep in mind that not all listings are the same and therefore you can adjust and customize these steps based on your property's needs.
Tips for Maximizing Profits for Your Airbnb
Offer Length-of-Stay Discounts
One effective way to boost your occupancy rate and reduce operational costs is by offering discounts for longer stays. By doing so, you can reduce the frequency of turnovers, cleaning fees, and maintenance costs, all while ensuring a steady stream of revenue.
Set your pricing to provide discounts for weekly or monthly stays. This can attract guests looking for extended stays but also allows you to compete favorably in terms of nightly prices. A dynamic pricing tool can help you determine the right price by analyzing market data and competitor pricing.
Provide Additional Services at an Added Fee
Consider providing additional services like airport pickups, guided local tours, or even breakfast options. This will allow you to increase your average price per booking. Besides the additional revenue, these services will enhance your guests' experience. However, always ensure the fees are transparent and justified, especially if they surpass those of listings similar to yours.
Leverage Reviews from Guests
Your Airbnb business thrives on the feedback of previous guests. Positive reviews can significantly enhance your listing's visibility in search results on the Airbnb platform. Encourage guests to leave reviews, highlighting the prime aspects of their stay. The more positive reviews you accumulate, the more potential guests will trust your property type and service, allowing you to slightly increase nightly prices without deterring future bookings.
Provide Flexible Check-In/Out
The modern traveler appreciates flexibility. Offer variable check-in and check-out times to attract guests who might be seeking convenience over everything else. This can be especially lucrative during special events or peak seasons when travelers might be arriving or departing at unconventional hours. That being said, always factor in cleaning and maintenance turnaround times to ensure the property is at its best for the next guest.
Consider Local Partnerships
Forming alliances with local businesses can enhance your guest's experience and your revenue. Collaborate with local property managers, cafes, tour agencies, or event planners. These partnerships can provide your guests with exclusive discounts or access to special events, making your listing more attractive. In return, promoting these businesses in your listing description can earn you a commission or a mutual promotion, thus creating a win-win situation for both parties.
Talk to The Short Term Shop about Your Airbnb Investment
The Short Term Shop focuses exclusively on short-term rental properties. Our team of dedicated professionals provides knowledge and assistance to property investors in the vacation space. We help you to buy, sell, and earn from your short-term investment property.
Talk to us if you are looking to venture into Airbnb investing or are experiencing management difficulties like how to price your Airbnb. For inquiries about the short-term property business and how you can expand your investment portfolio and grow wealth. Contact The Short Term Shop today
What Investors are Asking About Airbnb Pricing Strategy
1. What is a smart pricing strategy for Airbnb?
Smart pricing is one of Airbnb's pricing strategies that allows hosts to set their prices to automatically adjust based on a variety of factors. These factors can include the demand in the local area, seasonality, local events, and other market dynamics.
With smart pricing, Airbnb aims to optimize the nightly rate of Airbnb listings to ensure competitive pricing while maximizing potential earnings for hosts. This feature is particularly useful for hosts who may not have the time or resources to constantly monitor and adjust their rates manually.
2. What is a dynamic pricing strategy for Airbnb?
Dynamic pricing is a broader concept that refers to adjusting prices based on real-time supply and demand. In the context of Airbnb, dynamic pricing strategies involve changing the nightly rates of Airbnb listings depending on factors like local events, competitor prices, time of the year, and length of stay.
While smart pricing is Airbnb's built-in feature, dynamic pricing can also be achieved through external tools or manual pricing adjustments by the hosts. For instance, hosts might offer monthly discounts during off-peak seasons to attract longer stays, turning their vacation rental into a more consistent revenue source.
3. Does Airbnb have a pricing tool?
Yes, Airbnb offers an in-built pricing tool known as "smart pricing". This tool automatically adjusts the price of Airbnb listings based on an algorithm that takes into account various factors such as local demand, seasonal trends, and other related data points. While this is convenient for many hosts, others opt for third-party dynamic pricing tools to gain more comprehensive insights and controls over their pricing strategies.
4. What is Airbnb's simplified pricing?
Airbnb's simplified pricing is an initiative by the platform to make the pricing process more transparent and straightforward for both hosts and guests. Instead of adding multiple fees at different stages, the simplified pricing model consolidates the majority of costs into one upfront price. This helps guests see the total cost of their stay without hidden fees, making the booking process smoother. For hosts, it provides a clearer understanding of how their earnings are broken down.
5. What are good examples of dynamic pricing?
Dynamic pricing is used across various industries. In the context of vacation rentals like Airbnb, dynamic pricing examples include:
- Seasonal Adjustments: Increasing prices during high-demand seasons like summer or holidays and decreasing them during off-peak times.
- Event-based Pricing: Adjusting prices upwards when there's a major event in the city, like a concert, conference, or sports event, leading to increased demand for accommodations.
- Last-minute Deals: Reducing prices to fill unbooked dates and maximize occupancy.
Length of Stay Discounts: Offering reductions for longer stays, like weekly or monthly discounts, to attract guests seeking extended stays.