How to Charge for Airbnb (Pricing Strategy Tips)

JG - September 17, 2021

Pricing your Airbnb listing can be a difficult thing to do. Charge too little and you’re leaving money on the table. Charge too much and you might be pricing out guests. It gets more complicated than that and is definitely more of an art than a science. Here are some super helpful tips you can follow to understand how to charge for your Airbnb listing to maximize occupancy and profit. 

To begin, Airbnb does have a smart pricing option so that you can define a range of what you charge but this allows Airbnb to decide. No one really likes this feature of theirs. In order to actively price your listings (yes, manually), don’t select smart pricing and just set the base price.

1. Start With Understanding Your Local Market and Competitors

A good place to familiarize yourself with the market and your competitors is on the Airbnb platform itself. Just search for listings similar to yours (i.e. number of beds and baths, amenities, etc) and see how much other people are charging. This will give you a feel for what you can charge.

2. Understand Supply and Demand

Prices (i.e. listing rates) rise when demand is high and when supply is low. Similarly, prices drop when demand is low and supply is high. This is just basic economics.

As an Airbnb host, you cannot control demand. That is subject to travel trends, time of year, pandemics, etc. So you don’t really have to worry about controlling demand but what you do want to do is monitor when there’s high demand and charge accordingly during those times.

Supply, in Airbnb terms, is your inventory versus the other inventory on the market available at the moment or time frame. You can actually see how much supply is available in a market. For example, you can search by date to see how many listings are available for this weekend in Miami, zoom into your neighborhood, and the search will show you the listings available at the top left.

If this number is low relative to what it usually is, that means supply is low and guests have less options than usual. Knowing that, you would charge accordingly.

3. Understand Occupancy Rate

The occupancy rate is the “number of nights booked divided by total nights available to be booked” in a specific time frame. For example, if you have every night booked for a month, your occupancy rate is 100% for that month. Similarly, if you have half of the nights booked your occupancy rate is 50%.

Airbnb has a graph that you can look at to determine your occupancy rate compared to the average rate in your area. This can be a great source of information.

One thing that can be gleaned from this graph is if there are certain dates or days of the week when the rate is high meaning those days are, for sure, booked. This may be a sign to charge more during those times.

If an active pricing strategy is employed, the occupancy rate should be closer to 100%. 

4. Chasing Higher Prices and Longer Stay Durations

In the scenario where there’s a wide open calendar where nothing is booked, one strategy that can be followed is to charge the Airbnb guests at a slight premium to similar listings in the area. The idea is always to have as close to 100% occupancy as possible and if guests are booking short term stays, it gets more and more difficult to get a high occupancy rate.

So, if guests are booking short term stays like a few days at a time, theoretically, it’s desired that they are charged a bit more so the “maximum” amount of value can be squeezed out of those days as possible. Short term stays aren’t actually what are desired but if only those are available, getting the most out of them is warranted.

To encourage longer term stays, a strategy is to set the week duration discount and month duration discount to strategic values like, for example, 20% and 30% respectively. 

Take for example a scenario in which a property is booked for 5 stays at about 4 days per stay. That results in roughly a 67% occupancy rate for the month. If the guests are charged at $100 per night, this results in total revenue of $2,000 for the month.

Now, imagine instead of having those 5 stays at 67% occupancy for the month, there was one guest that booked 30 days for an occupancy rate of 100%. With the month-long discount, this results in a total revenue of $2,100, beating out the scenario of having booked 5 separate stays even with the 30% discount. This comparison can be summarized by:

That scenario is not only favorable from a revenue standpoint but also from an operations standpoint. The cleaners only have to come once. You only have to deal with one guest. Less work is involved with managing and communicating making this scenario more passive than multiple bookings.

5. Dealing with Short Duration Stays

If guests are only booking short term stays and it seems the rest of the calendar slots are not filling up as the dates get closer, then the strategy here can be to lower the nightly rate until the listing is competitive enough to fill up those slots. 

Generally, if the calendar is half full it becomes harder to fill it up. That’s because the listing becomes less searchable on Airbnb as well. For example, for a 4 day stay, the host has to have those exact 4 days available for booking otherwise the listing doesn’t pop up in the search. Conversely, if the host has a completely open calendar, they are always in the search results. So charging accordingly will allow you to become more competitive to compensate for not showing up in the search results. 

If there is, for example, a 3-5 day gap between bookings and a host wants to fill that slot, the strategy here is to manually update the listing on the day the guest, prior to the gap, checks out (or check ins) at a large discount to the normal price (i.e.40%). This will entice travelers to book that 3-5 day gap because it’s such a deal.

6. Large Property Versus Smaller Property

Small groups tend to travel closer to the last minute and larger groups tend to plan much more ahead of time. When slashing nightly rates to improve that occupancy rate as booking dates get close, larger properties will need to discount more than smaller properties to be competitive for those smaller groups. 

7. Third Party Pricing Services

Alright, if you don’t want to go through all the hassle of manually adjusting your prices or want to learn how to charge to maximize occupancy rates, there are third party services that will employ pricing strategies for you. Services like Wheelhouse or PriceLabs will gladly do it for you for a fee.

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