How to price your Airbnb listing as a host
I’ve told you before that Airbnb is about two things, photos and prices. Arguably, it is about just one thing: pricing. That is the name of the game.
The price gets people to book after the photos and reviews sold them. Price determines how people perceive your listing and is the most important filter for who your guests will be. If you set $400 for an apartment in Manhattan, people expect a place worth $400 a night. When they see pictures from a Manhattan skyscraper, they understand: that is what you get for $400 a night on Airbnb in the City.
If you had the same pictures for $200 in Manhattan, people would be checking to see what is wrong with your place. They will actually read your listing, but with skepticism. That “deal” of a price will pique their interest, but it will also make them wary. Are the reviews bad? Is it in a bad neighborhood? What is wrong?
You want the first example, not the second. You want your price to be perfect, not to arouse any suspicion, and to ensure you get paid as much as possible.
To get back to the college town we were talking about at the beginning, I had three different groups of guests: students, parents, and businesspeople.
Your price has to cater to exactly your target demographic and slightly above the “cheapest” demographic. Your price determines your guests as much as your pictures do, if not more so. A student is looking for a cheap place; they aren’t typically very picky. But older adults (read: parents and businesspeople) will be willing to pay more for a better place.
Obviously, you want to maximize profits, so you have to be smart about when you increase prices. If there is a parents weekend at the school or it’s the first week before school starts, you would put up your parent pricing. During the weekdays, you might put up your business pricing. If you did not get many bookings at business prices and have two weeks until those dates, then put up your student prices. These lower prices are what I think of as “risky” prices.
I call them risky because you are not guaranteed to get students. You are also likely to attract cheapskates. Cheapskates are a class of guest that you want to avoid at all costs. These are the people who might look at your pictures and think they are getting a really good deal. They will expect something akin to hotel quality for motel prices (your student prices), and they will give you a lower rating plus a potentially bad review for seemingly no reason other than they are hard to please.
All your pricing schemes are to avoid these cheapskates at all costs. Cheapskates cost you more than they are worth.
In today’s world, the rich are somewhat vilified. But when you’ve been an Airbnb host for as many years and hundreds of guest as I have — including your fair share of cheapskates — you realize that the cheapskates are the worst. The people who are the least willing to spend market rate on themselves end up being the least satisfied. Demanding thicker carpet, a nicer bath mat, and thicker more soundproof glass windows, a firmer mattress, and other. These are people who paid $70 a night for a place I typically rent out for $150 a night. There is no pleasing them, so there is only avoiding them by pricing them out.
This class of cheapskates comprises your lowest level. After getting a few cheapskates, I established that I would never go below $100 a night. (In my area, this was a bit below average, but not the lowest price.) That said, also understand that staying above a certain price does not guarantee you will avoid cheapskates. I missed that there was a massive concert in Ann Arbor one weekend and was inadvertently the cheapest available Airbnb in the area. A cheapskate booked at $140 a night, and she privately complained that my rugs were too thin and there was no makeup mirror for her. Try and find the threshold where you are not the cheapest listing in your city. There is never a reason to be the cheapest, no matter how worried you are that you won’t get booked for a few nights.
Getting back to pricing. If a place was not booked for dates two weeks away, I would put it at my lowest comfortable pricing for the reasons we just went over.
For your maximum, there is no maximum. Go as high as you can as far in advance as you can and see what you get. Your place is worth as much as someone is willing to pay for it. My personal record was $650 a night, and the guy booked for three nights during the University of Michigan’s graduation. He was a great guest and gave me a great review. Mind you, this was the same place that someone else complained about spending $85 a night on.
For event prices, people will be thinking about this as far as nine months in advance. You need to plan out your calendar as far out as possible to the best of your abilities. The farther out you can post your calendar, the more likely you are to get a booking. As I’ll go into more depth on later in chapter 20, you also need this calendar to be absolutely accurate so that you do not have to cancel any guests.
By maintaining availability up to a year in advance, you help the long-term planners book. Also, most hosts won’t open up their availability for more than six months out, so you also have an edge on your competition when you’re able to plan so far in advance.
To keep this organized, let me summarize.
- Have a minimum price above what cheapskates will pay for. If you are in San Francisco or New York City, this lowest price might be around $170 a night.
- Have prices targeting each of your guests. In my case, that’s parents, businesspeople, and finally, if no one has booked, students.
- Have event pricing where you shoot for the stars as far in advance as possible and see how high a price you can get booked at.
Event pricing is very important. If you do it right and are in a prime location, you could end up making half your income for the year just off of these events. Now, like I’ve been saying, I was in Ann Arbor. This meant D-I college football games and five home games a year with more than 50,000 people flooding the college town as well as large population influxes with students and parents attending school events. The town also had summer concerts, conferences, and other events that would bring in more people. All told there were about 15 major events a year. These events accounted for about half of my revenue and just about all of my profit.
Moral of the story, make sure you are keeping track of the big events near you and price your place based on the demand you anticipate and the prices of other comparable Airbnb’s in your area. Hotels fill up first, then Airbnbs start getting booked. I would often quintuple my nightly rate for the event dates a few months ahead of time just to maximize views and the likelihood of getting booked at that higher price point.
When pricing the event, be sure to maintain your elevated pricing for the day before and the after. In the case of a three-day weekend I would also have elevated pricing for the third day, albeit maybe half the event day pricing to help incentivize a guest to stay an extra day. So, say there is an event on Saturday. You would price Friday night and Saturday night at $500. If it was a three-day weekend you might then price Sunday night at $250. This way, when the person is looking at the three day pricing it comes out to around $475 a night for the guest (including taxes, Airbnb fees, and cleaning) which might be cheaper than your completion. This helps you book three days instead of two and avoid losing out on the third day of the long weekend.
Stay on top of events and you can easily double your revenue for the year depending on how many big events there are. Another idea is to time your vacations and travels with these events. During that graduation, I planned to go home to DC for the weekend. I saw my parents and hung out with friends in my hometown, all while making nearly $1,900 in profit for the weekend. (I’m sorry I keep harping on that, but I was really happy about that massive single booking.)
Anyways. I’ve gone on a tangent, so let me give you the most important information for you to actually remember from this page: Look at similar listings to your own, and price in the middle of them. That’s how I first did my pricing, and that’s how you should do your initial pricing as well. Everything else will come later, but for now, do a bit of competitive analysis (you will need to do it almost every day) and price in the middle of your competition. Typically, when you first list your place, the urge is to price below everyone. But, like I talked about, you want to avoid the cheapskates, so you need to price in the middle initially. After you get more reviews and gain a stronger reputation on Airbnb you can increase your prices to the higher end of similar listings in your area.
Of course, if you just priced in the middle and waited, no one would likely book for a while…unless you get the book to find out how I eliminate that problem.
Pick up the book and learn my full pricing strategies to take in up to 30% more revenue: https://amzn.to/3gUwjh5
