Dynamic pricing on Airbnb and other vacation rental sites is a popular but efficient technique for increasing your hosting earnings.
However, before introducing new pricing methods in your firm, it’s a good idea to review pertinent facts and statistics. And, while we’re on the subject of statistics, hosts and property managers that have implemented dynamic pricing indicate that their earnings have increased by 10% to 40%.
Are you prepared to improve your price and avoid losing money? Continue reading to learn how to set up dynamic Airbnb pricing for your listing.
What Is Airbnb Dynamic Pricing?
Dynamic pricing refers to the price for your short-term rental property that varies in real-time in response to market variations. These swings may be attributed to changes in demand and supply, seasonality, and local events.
Dynamic pricing encompasses more than just adjusting prices for high and low seasons. Maintaining dynamic pricing implies that prices are altered in response to even the smallest changes in the price-influencing elements.
What Is a Dynamic Pricing Tool for Airbnb?
Apart from vacation rental software, which is the most often used technology by hosts, there are other Proptech options worth examining. A dynamic pricing tool is a piece of software that assists hosts and property managers in automatically optimizing the prices of their listings.
You do not need to spend hours investigating market trends to determine the optimum price for your listing at the time. A dynamic pricing tool makes use of a sophisticated algorithm that examines the most critical market data points and automatically updates your prices once every 24 hours.
There are several dynamic pricing solutions available. The most often used are those that integrate with a variety of vacation rental software systems, such as Lodgable. For example, as a Lodgable user, you may use the integrated AirDNA pricing tools.
Why Using a Flat Pricing Strategy for a Short-Term Rental Business Is Not a Good Idea
When it comes to pricing, a set-and-forget-it strategy may seem to be the simplest to adopt. However, if you are serious about growing your company, this method will not get you very far. Let’s examine why flat pricing is not the ideal strategy for your vacation rental company.
1. Optimizing only for the purpose of maximizing occupancy rate
Assume John is an Airbnb host who seeks maximum occupancy. He costs significantly less than his rivals and has months of work scheduled in advance. John maintains a consistent pricing plan regardless of the season or day of the week and finds this technique to be straightforward and convenient.
When he totals his profits for the quarter, he discovers that his competition Mike earned a larger profit. Mike has a comparable home and had fewer visitors over the same period.
Mike made extra money as a result of his use of an Airbnb dynamic pricing service. Mike’s pricing should be increased in advance of an event he was unaware of.
2. Overpricing your rental during periods of decreased demand
John chooses to raise his prices to improve his earnings. It seems to be an excellent tactic at first, but he quickly notices that bookings are coming in more slowly.
Not only is a decline in demand harming his earnings, but his home also seems to be expensive to prospective visitors. This discourages people from booking, and they choose rivals’ listings over John’s.
3. Changing your price structure only based on seasonality
John does study his area’s low and high seasons. He establishes two distinct pricing structures for summer and winter. While he maintains a respectable occupancy rate, he nevertheless loses out on potential earnings.
The Fix: Obtaining a dynamic pricing tool to assist in making data-driven choices
Therefore, to maintain competitive pricing and maximize the income potential of your rental, you need to do more market research. However, hosts often lack the time and specialized skills necessary to do data analysis.
This is where the dynamic pricing feature of Airbnb comes into play. This study is performed for you by a dynamic pricing tool. It automatically updates your rates, ensuring that your pricing remains competitive and your listing does not lag.
What Are the Negative Consequences of Using Airbnb’s Pricing Tool (Smart Pricing)?
Airbnb Smart Pricing is a built-in function that dynamically adjusts the price of a listing to reflect market demand depending on parameters such as the kind and location of the listing, the season, and demand. Airbnb providers are welcome to use this function for free. However, according to some hosts, Airbnb Smart Pricing has a slew of disadvantages, including the following:
1. Occupancy is prioritized above host income
Because Airbnb earns a fee on bookings, the more reservations you have, the more profit Airbnb earns.
2. The tool is also in the visitors’ best interest
Airbnb attempts to attract more guests to its marketplace by providing discounted holiday rentals. As a result, price recommendations seem to be less than desirable.
3. Reduced nightly cost
You may unintentionally charge less than your home is worth. This will result in a revenue decline.
4. Lack of customization
When utilizing Airbnb Smart Pricing, you are unable to establish a basic price for your listing. Additionally, there is no way to override price rules provided by this program. Thus, you will be unable to provide discounts for last-minute reservations, for example.
Unlike Airbnb Smart Pricing, other price solutions use more advanced algorithms and include more data points to provide more precise pricing recommendations. Additionally, they allow for greater flexibility, allowing you to maintain control over your pricing.
What Are the Advantages of Dynamic Pricing?
As mentioned before, dynamic pricing tools provide suggestions for your nightly fee. However, this is not the only advantage available to you.
1. Save time on market data analysis
Because property management entails a great deal of multitasking, Airbnb hosts often lack the time necessary to collect data and alter their pricing in reaction to market variations. Nonetheless, it is critical to do so if you want to see your company grow and expand.
When you use a dynamic pricing solution, you save time and money by not having to do an analysis or pay a data scientist. A clever software solution will efficiently gather and analyze data.
2. Have your booking calendar’s pricing updated automatically.
When you have a pricing tool in place, you can alter your properties’ prices without having to log into each vacation rental site individually. Your revised prices will be instantly sent to your PMS or booking calendars using a tool.
3. Optimize your rate of occupancy
When your listing is priced appropriately, it will seem more inviting to visitors. We are all aware of what occurs when a host charges an exorbitant rate – their houses lie vacant.
However, if your rental is fully booked months in advance, this may indicate that your pricing is too low. Low prices may also attract unscrupulous visitors, which you would want to avoid.
By using a pricing tool, you can maintain consistency in your reservations while collecting bookings from your target visitors.
4. Increase your earning potential
Because dynamic pricing adjusts your prices in response to market conditions, you can be certain that your rental will stay competitive. You’ll be able to capitalize on unforeseen demand surges and local events in your area, resulting in increased revenue.
5. Boost your listing on Airbnb
Maintaining an up-to-date booking schedule is critical for your exposure to Airbnb. A current calendar is one of the ranking elements used by Airbnb. Because a pricing tool will alter your prices daily, Airbnb will elevate your listing in the search results.
6. Automate the control of pricing and other operational operations.
Numerous pricing features are built into vacation rental management software. This enables you to manage all of your listings in one location. Along with price management, you may automate a variety of everyday chores such as guest communication, cleaning, and staff management.
Increase Your Profitability with Lodgable
As much as having a flat price plan and manually controlling your pricing seems archaic and unproductive, the same is true for manually managing all areas of your hosting routine.
To achieve more than just price optimization, you need to use vacation rental software such as iGMS. Apart from managing your pricing through integrations with AirDNA, Lodgable enables you to automate a variety of other daily operations, including
• Managing multiple accounts and listings on the leading vacation rental platforms from a single dashboard
• Synchronizing reservations across multiple platforms to avoid double bookings
• Receiving payouts and generating invoices via a Stripe connection
• Creating and assigning cleaning tasks for you