What's the easiest way to increase your profits as an Airbnb host?
Optimized prices, that's how.
But how do you know if your prices are competitive? And how do you know you're not losing bookings because of it?
It's almost impossible.
Sure, it's possible to go through lengthy competitor analysis to work out an accurate pricing model for the next 365 days, but what happens if those prices fluctuate?
As you can see, pricing your Airbnb listing correctly can be a big headache. And, when it pricing plays such a pivotal role in your end of year profits, unfortunately, it just can't be ignored.
Fortunately, a few very clever people have built Airbnb pricing tools for this exact problem.
Not only that, but they'll automate the entire process for you.
What is an Airbnb pricing tool?
An Airbnb pricing tool will add dynamic pricing - based on numerous market forces -to your listing. To calculate the price per night the tool crunches a huge set of data to build a bespoke pricing model unique to your listing.
Here’s just a small example of some of the data the pricing tool will use for accurate price discovery:
Just to name a few.
Now, there're a few different pricing tools on the market right now, each with it's own specific algorithm to crunch all of this data, and the results for each will vary.
But, that's what I hope to shed some light on for you in this post, to help you find the best Airbnb pricing tool for your listing moving forward.
Airbnb pricing tool vs Basic pricing strategy
Before I dive in and give you my opinion on the different tools right now, I first wanted to give you a quick example of just how powerful they can be.
The basic pricing strategy
Jane has x3 different prices for her Airbnb apartment.
Jane gets fully booked for high-season months in advance (40 Nights). She is super happy about this and thinks she’s killing it!
She does ok mid-season, she gets another 40 Nights booked.
Things don’t go so great in the off-season and Jane gets just 20 Nights booked.
So all up Jane gets 100 Nights booked (occupancy rate of 27.39%) at an average nightly price of $78p/n
Yearly Total: $7800
Not too bad on all accounts, but lots and lots of room for improvement.
Airbnb Pricing Tool - 100% dynamic bespoke pricing.
Sophie, on the other hand, is using a dynamic pricing tool for her Airbnb apartment. Her pricing structure looks a little different.
Sophie lets her dynamic pricing tool set all of the nightly pricing for her. In fact, she now has over 240 unique prices for the next 365-day horizon.
Because Sophie’s pricing is dynamically generated, her prices are highly competitive for every single date range for the next 365 days. This has some huge knock on effects.
As I’m sure you’re aware, price is a very important Airbnb ranking factor (probably the biggest). So now that Sophie's prices are hyper-competitive she now appears higher in Airbnb’s search results pages and her listing views increase.
Not only will she be getting more views, but more people will book as she won’t be overpriced.
All of these things add up to increased occupancy, plus potentially an increased average nightly price.
Here's a rough look at Sophies prices:
Sophie keeps really busy in the off season, she gets a few late bookings at her minimum base rate of $40p/n but she also picks up some good weekend bookings at $65p/n. She gets 40 nights booked in total for the Off season.
Off-season average nightly rate: = $58p/n
Mid season is good too. Sophie gets booked a long time in advance for an event she wasn’t even aware of, she gets $90 a night for the whole week. The rest of the nights get booked at $75p/n. She manages to get 60 nights booked in total.
Mid-season average nightly rate: $80
Sophie doesn’t get booked up quite so far in advance as Jane. Her pricing tool knows that it is peak season, so it holds prices at their peak until much closer to the time.
Sophie gets about 30% booked up 6 months out, gets another 60% before the last month (all at peak price), and then her prices are reduced to make sure she gets 100% occupancy for the last month. The last 10% of nights are booked at $90p/n.
High-season average nightly rate: $129
The prices will fluctuate depending on demand, but Sophie can rest well knowing that she’s getting the best rates possible.
Sophie ends the year with 140 nights booked (occupancy rate of 38.35%) at an average nightly price of $87.70
Yearly Total of $12,280
Obviously, the two examples above are purely fictitious, but it does give you a very real insight into how much of a difference a dynamic pricing tool can make to your end of year Airbnb returns.
What's the best Airbnb pricing tool?
In an effort to find out which of the Airbnb pricing tool is really the best, I wanted to give you guys a breakdown of the top four tools on the market right now.
Some are free, but most are paid, but either way I hope to shed some light on each to arm you with the right information to make an informed decision.
1. Airbnb's Smart Pricing Tool
Ease of use
Have you tried Airbnb’s Smart Pricing Tool? Me too, and it sucks!
Do you wan’t to know why?
Well, Airbnb doesn’t just want you to make more bookings, they also want to offer the cheapest prices to their users. So, whilst you will almost certainly see your booking rate increase, you’ll also likely see a dramatic drop in the average nightly price.
I’ve tried it, and I’ve ditched it. I’d almost (almost), prefer to have Janes pricing strategy.
You get the picture.
Try it out yourselves, and generate your own opinion, but for a small investment, there are some much better alternatives.
Price - Free
2. Wheelhouse - 1% or $19.99p/m
Ease of use
Wheelhouse is kind of the new on the block, and they are growing fast. Launched by one of the founders of Beyond Pricing, they are now in direct competition.
Competition is great in this space, and Wheelhouse is certainly at the forefront.
These guys are growing rapidly and are pushing the whole sector forwards.
If your area is not covered, no big deal. They'll input your area into their data cruncher, and in under two weeks you'll have super optimised prices for your Airbnb rental for the next 365 days.
I've written an in-depth Wheelhouse review here.
Price - 1% of revenue or $19.99p/m
3. Beyond Pricing - From 1% per booking
Ease of use
Founded in 2013 by veterans of revenue management in the airline and hospitality space, Beyond Pricing was the world’s first revenue management and dynamic pricing software exclusively for vacation rentals. Driven by big-data machine learning and predictive analytics, Beyond Pricing has grown rapidly and now dynamically prices over 120,000 listings in more than 1,000 markets worldwide.
Prior to founding Beyond Pricing, CEO Ian McHenry was an advisor for large airlines and hotels around the world on revenue management and pricing.
Being the first to market gives Beyond Pricing a head start in the big data game, the more data you crunch, the more accurate their pricing models will be.
Over the years the product has been refined, with newer and more relevant data sets being fed into the pricing algorithm pumping out ever more demand driven prices.
The cool thing about Beyond Pricing is that they don't just pull data from Airbnb, but also VRBO, Homeaway and TripAdvisor.
Having access to all of this booking data and pricing gives these guys a huge advantage.
Price - From 1% per booking
4. PriceLabs - From $4.99 per month
Ease of use
PriceLabs used to be the only tool in this list that charges a per month fee instead of a commission per booking (until Wheelhouse has done both), which, depending on the number of properties you manage could make a big difference.
For small scale hosts with just 1 listing the monthly fee is $19.99 which for many might seem a little expensive.
However, if you're a large scale property manager with upwards of 101+ listings that fee drops significantly to just $4.49!
Plus, another thing I really like is PriceLabs' integrations with numerous other hosting tools like Smartbnb in particular that sets it apart from the other tools in this space.
A premium pricing tool, for a premium service, which for many will be money well spent.
Price - $4.99 per month
1 - 5 Listings
For any host with under 5 listings I recommend Wheelhouse.
It's feature packed, powerful and great value for money.
6 - 100 Listings
For hosts with 6 - 100 listings it's a tough call between Wheelhouse and PriceLabs
Both tools will serve you well.
For property managers and property management companies looking after over 100+ listings then look no further than PriceLabs.
Dynamic Pricing Tool Comparison Table
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Airbnb Smart Pricing
30 Day Free Trial
30 Day Free Trial
Lots of customer resources available. Actual person to person support very difficult.
Yes it's free, but it fails in it's objective to improve revenue for Hosts, which is the whole reason why we're even looking at these tools in the first place.
Getting set up is so easy. The user interface is simple and elegant. This is the tool I use personally and would definitely recommend.
Design lets them down a little as does their pace of adding new areas. But if your area is already covered then they are well worth looking into.
A nice tool, but comes with stiff competition.
The pricing tool you choose will likely depend on the number of listings you manage.
Hopefully this post will help shed some light on which option will be the best suit for you.
As I mentioned earlier, optimised pricing is the single biggest measure you can take to increase profitability as a host, so go get yourself set up and start outpacing your competitors.