How To Find The Best Airbnb Pricing Strategy?
- 1. Most Effective Pricing Strategies
- 2. Things To Consider Before Framing Airbnb Pricing Strategy
- 3. Elements Of Airbnb Pricing Strategy
- 4. How To Manage The Airbnb Pricing Strategy
Airbnb pricing strategy is a key player in your Airbnb business. You have to make sure the price defines the maximum value of the product and at the same time it must appeal to the customers. Similarly, for your Airbnb listing, you have to find the best pricing strategy. You shall neither under-price nor overprice your listing. If you under-price, you lose value and if you overprice, you lose customers.
The direct impact of your Airbnb pricing is the number of bookings you receive. Pricing is probably the first detail that a potential guest will notice. It will decide the first and last impression. If your strategy is in the right place you will experience an optimum number of bookings otherwise the vacancy rate tends to be high. Airbnb pricing can affect your reviews and ranking as well. If you hide any costs from the guests then they tend to leave a bad review and if you charge more than you are offering then you tend to lose the number of bookings and indirectly you lose ranking in the search results.
Airbnb pricing strategy is an integral part of your business plan and you should carefully draft the strategies considering all the different types of strategies, the factors to consider, the different elements in Airbnb pricing, and the methods to manage the pricing strategies.
Most Effective Pricing Strategies
- Maximum Fill Rate Strategy
In this strategy, you will have to play along with your competitor’s pricing strategy. You will attempt to offer the best experience in the area. Your aim will be to ensure the maximum occupancy rate. For this, you will have to offer more value than other properties in your region. The nightly price will be less than the average, but your income will be stable. You have to offer to your maximum capacity in order to ensure maximum filling.
- Maximum Rate Per Night Strategy
As the name suggests in this strategy you will set a high rate for nightly charges. This strategy will help you to increase the net profit from individual bookings. The number of bookings will be less, but the income will be satisfactory. The aim is to ensure maximum profit with lesser effort. If you use this strategy, then your fill rate will be low but as an advantage, you will have to deal with few guests.
- Long-Term Rentals Strategy
In this strategy, you set the Airbnb pricing strategy according to the long-term rentals (monthly rates). This strategy will require a rental agreement and maybe a house tour before confirming the booking. You will have to work on promotions of the listing, but management efforts will be reduced. It also helps you to minimize risks in the highly regulated regions.
- Balanced Airbnb Pricing Strategy
This is an integrated pricing strategy. You will wisely combine all the three-pricing strategies in order to efficiently manage your business. In this, you will have to adopt a dynamic approach. You will change your pricing strategy according to season and demand. For instance, in the seasons with low demands, you can employ a longer-term rental strategy for reducing the risk of vacancy. Whereas during the seasons with increased demands you can practice a maximum full rate or maximum nightly charge in order to ensure maximum profit.
Things To Consider Before Framing Airbnb Pricing Strategy
- Type Of Property
The type of property plays an important role in your Airbnb pricing strategy. Airbnb allows you to list numerous types of properties. From an island to a city apartment you can list anything. But you have to be careful that your price aligns with the type of property. If you are offering a generic property like a shared room or apartment, then a maximum full rate strategy will help you to maintain a stable income. Whereas if you have a unique and luxurious property then you can go for a maximum night rate strategy. Guests will agree to pay more only when you will offer them something special.
- Location Of Property
Before settling on your Airbnb pricing strategy, you have to study your location. You have to research the standardized rental price in your area. You have to find out the demand rate in the region. Some cities may be in-demand throughout the year while some may experience seasonal demand. For seasonal demand regions, you can use a balanced pricing strategy while for high demand regions you can employ a maximum-full rate. If your property location is in a low-demand region then you should employ a Long-term rental strategy to minimize the risk of vacancy.
The uniqueness of the location is also important to consider. If your property is located at an extraordinary location that will offer a unique experience to the guests, then your maximum night rate would be a wise choice for your business. Whereas if your property is located amongst the hustle of a city then you should try a maximum fill rate or long-term rentals strategy.
Some tips about choosing and buying a property for Airbnb you can read in this article.
Your potential guest is your competitor’s potential guest as well. Every customer tends to consider and compare before booking a property. If you want the potential guest to book your property then you have to offer better than your competitor. You should conduct regular competitor analysis to study their pricing strategies. You have to adopt the strengths and overcome the weaknesses in their strategies.
If you offer less value than the competitors for the same price, then the guests will book them over you. But if you will set your strategy according to them and offer the same or more value, then your number of bookings will increase. You have to be sure that your pricing strategy makes you stand out and not left out.
The number of competitors is essential to consider. If you have a large number of competitors in the area then the Maximum fill rate or balanced Airbnb pricing strategy would be good pricing strategies to fight the fierce competition. On the other hand, if the number of competitors is less then you will be able to gain more from the maximum night rate strategy.
Guests pay you in exchange for the services you provide them. If you offer them a semi-furnished shared room with a smaller number of amenities, then you cannot expect them to pay a huge amount. Whereas if your property is a luxurious bungalow offering numerous amenities then you can charge more. Thus, if your listing is offering high-quality services you can try a Maximum night rate strategy. Otherwise, a maximum fill rate would be advisable.
- Target Audience
You can not decide on your pricing strategy without considering the people who will actually pay. If your target audience is the backpackers and you use the maximum nigh rate strategy then your number of bookings might decline. Whereas if your target audience is people on family vacations then the maximum night right strategy will help you to increase your profits. Similarly, you should use a long-term rentals strategy when your target audience is the corporate employees who might need your property on a monthly basis. Thus, if your target audience is the low budget group who stay for a shorter period of time then the maximum fill rate would be best for your listing.
- Time And Dedication
The amount of dedication you are planning to invest in your Airbnb business plays a significant role in deciding your pricing strategy. With less time and effort, it’s advisable not to try the maximum fill rate strategy. This strategy requires a lot of attention and dedication. Similarly, a balanced Airbnb pricing strategy will be a good option only when you are able to devote time to this business. On the other hand, you can gain profit with comparatively less effort and attention through maximum night rate and long-term rentals.
- Your Goals
Your business goals, annual goals as well as monthly goals are important for your Airbnb pricing strategy. For example, if your goal for the annum is to increase the number of bookings then maximum fill rate will be a good option. Whereas if your annual goal is to maximize profit then a maximum night rate or balanced Airbnb pricing could prove to be gainful strategies. Considering your business goals makes it easy for you to settle on an effective pricing strategy.
Elements Of Airbnb Pricing Strategy
- Nightly Charge
This price is decided by you. After considering all the essential factors mentioned above you will decide the nightly charge for your listing. This will be the visible charge that may or may not attract your potential guest.
- Cleaning Fee
This is an extra expense that most of the hosts prefer charging. The cleaning fee is for the cleaning services required during and after the stay of the concerned guest. There are both plus and minus sides of charging a cleaning fee. On one hand, it keeps your cleaning expenses covered and encourages the guests to take good care of your property. But on the other side, it may act as a repellent for numerous guests. This decision is based on numerous factors such as the type of property, cleaning services you hire, and your target audience.
If you decide to charge the cleaning fee remember to mention it in the listing. You don’t want to earn bad reviews because of any hidden costs.
- Extra Guest Charge
Sometimes the guests book the property for themselves and then invite over friends and family to stay. While some hosts are fine with it the others charge for this kind of extra guest. You can charge for an extra guest too. But again, you have to consider all the relevant factors and then decide whether you want your guests to pay for an extra guest or not.
- Security Deposit
A security deposit means the amount you charge in advance to cover any future damages to your property. This encourages the guests to protect your property since they have to pay for any damage caused by them. It is good to be covered and protected by the security deposit but does not attract guests. Some guests consider a security deposit as a deal-breaker because it suggests that you don’t trust them. You have to wight both the pros and cons and how much do you need a security deposit and then decide. If you decide to charge, then do mention in the listing.
A discount is the only element that reduces the price. Discounts are for sales promotion purposes. They are beneficial for spreading the good word of mouth and may also result in an increased number of bookings. There are special discounts which you can include such as weekly discounts, monthly discounts, referral discounts, etc. You can use discounts to persuade people to stay for longer. However, you have to carefully decide on the percentage of discount because you don’t want to land into a loss.
How To Manage The Airbnb Pricing Strategy?
Everything is done by you. From conducting the research to deciding the final price you are in charge of every activity involved in Airbnb pricing strategy. Manually managing Airbnb pricing strategy demands a good amount of time and effort. You will have to devote a long time just for the research purpose. Manually may be a satisfactory method for managing pricing strategy but for some people, it is not practical.
- Airbnb Smart Pricing
People who don’t prefer manually managing the strategy can go to Airbnb smart pricing. In this method, Airbnb does the research on your behalf and then gives you suggestions regarding the prices that will help you benefit. Ultimately, you have to figure out which price will help you extract the maximum value possible.
- Use Automation Software
This is by far the most popular and effective method. You will use software to generate automated pricing suggestions that are accurate and probably gainful for your business. For example, if you use Hosty’s Airbnb management software then with the help of Auto price you can determine your suitable pricing with just a few clicks.
Now you know how to frame a beneficial Airbnb pricing strategy. You know the elements involved as well as the tools to use. Remember you are not only pricing your property but also your service. Your aim should be to get the real value of your listing. But in order to find that real value, you have to follow a time taking the path. Airbnb pricing strategy may demand a lot of time and effort but at the end of the day when you start progressing due to the correct pricing strategy, it all seems worth it. If you want you can even shorten this journey and have software suggest an accurate amount of money you should charge in exchange for your services. The Hosty Auto price feature conducts thorough research and then gives you the relevant suggestions that would be beneficial for your business. From the regional competitors to the standardized prices, it checks all of it. You can save time by using Hosty and invest your savings in a more gainful task. All the best for finding your perfect Airbnb pricing strategy.