In order to optimise your income, it is important to have a pricing strategy in place and set a price which is right.
Being too expensive will not return a good occupancy rate and setting up your price too low means you will miss out on big bucks!
These days, many tools that can help you set your listing price (beyondpricing.com, everbooked.com); even Airbnb has “price tips”. However, we believe that they are not quite there yet as they cannot factor in all the specifics of your area, and competition. But you can still use them as a guide.
Throughout this article, we will cover some techniques to ensure you make the most return out of your property from short-term rental platforms, specifically on Airbnb.
Understand your market. Set up your base price
Within the same city there are numbers of “micro-markets”: for instance in Sydney, beach suburbs behave differently than central suburbs. It is crucial for you to understand where you can position yourself within this “micro-market”.
Search on Airbnb for similar listings in your neighbourhood: populate the number of guests and the room type (entire place, private room or shared room) and leave the dates blanks. This way you will get the maximum number of results.
You need to look at places that have similar size/amenities to yours. Try to compare up to 5 listings that have a high number of reviews and look at their calendar to see how they perform.
TIP: For listings comparable to yours, have a look at their calendar and go back to previous months to see how they performed. You can easily identify the ones that are listed permanently. Just count the number of vacant day for each month to calculate their occupancy rate.
Compiling similar listings and averaging the nightly rate should allow you to set your base price.
TIP: If you are using Airbnb for the first time, you may want to drop your price a little in order to attract people and get a few initial reviews. Dropping the price for the first month by 15 to 25% will guarantee a high occupancy rate and you’ll have few reviews under your belt which will be beneficial in the long term.
TIP: In the pricing section on Airbnb, your nightly price will always be your base price. You can then manually amend your calendar to increase the prices depending on seasonality, events or occupancy.
Path Your Listing -> Manage listing and Calendar -> Calendar
Within the Airbnb price settings section, you now have the ability to set up a weekend pricing (Friday and Saturday night). This is a great feature and you should use it. Don’t go too high though, we suggest you increase your weekend price by 10% to 20%. Anything above this will be off-putting for your future guests!
TIP: Offering lower weekly and monthly prices will attract longer stays which are also easier to manage.
Weekly Price: This price will apply to all reservations that are 7 nights or longer.
Surely long stays deserve a little discount, however we recommend not to go beyond a 20% discount compared to your nightly rate (e.g. if your nightly price is $200, your minimum weekly rate should be $1,120). If you do not wish to give a discount, just leave this field blank.
Monthly Price: This price will apply to all reservations that are 28 nights or longer. Again do not go too low or you will be missing out on good money. A 25-30% maximum discount is appropriate for a monthly price.
Adjust your price
Your goal is to maximise your occupancy rate; therefore you will need to fill the gaps in your calendar.
If you have 3 vacant days a week or two from now, it might be a good idea to start decreasing your nightly rate for these dates. Drop the price by $5 or $10 increments. Repeat this every day as Airbnb is rewarding people looking after their listing (see our previous article).
How low can you go? Well, you need to set yourself a minimum nightly price limit and stick to it: NEVER go below that threshold. At the end of the day you know that it takes time and effort to welcome guests so you should not sell off your place!
The Price is right!
Down the track, if you observe that your listing is fully booked for the next 30 days, chances are your price might be too low.
If your price is right you should achieve a 50% occupancy rate 30 to 45 days prior check-in date. The other 50% will be booked in the next coming weeks, be patient! We observe a high number of requests just one week prior to check-in.
In essence, there are 2 kinds of travelers: the ones planning their trips months in advance and the rest waiting for the last minute to book something.
Another good measuring point is that you should have 75% occupancy rate 2 to 4 weeks before check-in date. If you are above that, your nightly price is probably too low. Try to increase it and see how you go!
It is imperative to understand the special events that attract lots of people to your city (long weekends, New Year’s Eve, Mardi Gras, Sport and Religious events) in order to increase your price for these dates.
Airbnb offers the possibility to change the price for specific dates:
Go to: Your Listing -> Manage listing and Calendar -> Calendar
You can also add notes to your calendar which is helpful to remember upcoming events (Click on a date and “Add note”).
TIP: Always keep your base price in the pricing tab and adjust your calendar manually to increase your prices.
TIP: You can set a monthly price for a specific week or month if you want to have a higher price for summer months for example:
Go to: Your Listing -> Manage listing and Calendar -> Pricing -> custom weekly or monthly price
If you apply these techniques, we truly believe you will make the most of your listing!
If you need help, feel free to contact us. We will be happy to help you review your pricing strategy with no obligation to partner with Urbankeyz.