airbnb pricing tips review by airdna.co

5 Reasons you will Lose Money using Airbnb Pricing Tips



Summer is here and Airbnb hosts around the world are scrambling to set the perfect pricing to maximize their revenue during this high-season. Just in time for the Summer rush, Airbnb launched a new “Pricing Tips” tool to help hosts better understand the travel demand in their area and the likelihood of getting booked at different price points on any day of the year.
After spending hundreds of hours tweaking my pricing over the past few years, I was thrilled to finally get some pricing help. Never again would I question how much money I was leaving on the table by not pricing my places correctly throughout the year. At least that is what I thought until I reviewed the actual Airbnb pricing suggestions.
The new Airbnb pricing tips tool reminds me a runway model; Beautiful, easy to navigate and fun to play with but, dig a little deeper and you quickly realize there is no substance behind the stunning exterior.
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Airbnb pricing tips review by Airdna.co

Here‚Äôs a little background on the property shown above. It‚Äôs a higher end one-bedroom apartment. It’s two days until the start of June 2015. The place has performed pretty well and has about 80% of the nights booked heading into the month with an average booked price of $300 per night. This is about $50 higher than my standard rate due to the increase in summer demand.

Here are 5 reason you could lose money using the Airbnb Pricing Tips

1) Airbnb doesn’t properly reduce prices for short vacancy gaps

Airbnb doesn’t properly reduce prices for 1 & 2 night vacancies. Not many travelers are searching for a single night stay and the additional cleaning fees don’t make vacation rentals a cost effective alternative to a hotel. It‚Äôs common knowledge that one night vacancies are the most difficult to fill, yet, the Airbnb pricing tool is suggesting I set my one night gap on June 21st to $350. ¬†The total cost of the stay would be $470 for the night. I’m sure a guest would rather stay in the 4-star hotel next door for that price.

2) Pricing suggestion are limited to three months in the future

Dynamic pricing is most helpful for determining the best “surge” pricing for large local events and holidays. These dates often get booked far in advance by smart travelers who are trying to score a great deal. Airbnb provides no guidance on how to price for these high-demand time periods until it‚Äôs too late. If you leave your pricing completely in the hands of Airbnb and don’t adjust pricing until three months out, your place will most likely get booked at your base nightly rate. You’ll completely miss out on these huge earning opportunities. To make sure you are appropriately adjusting your prices for all spikes in demand throughout the year view your areas daily demand with an AirDNA¬†City Intelligence Report.

3) Since when are Sunday nights in higher demand than Saturdays?

I’ve analyzed the daily rental demand in hundreds of cities and on average, revenue per available listing is 30% higher on Saturdays compared to Sundays. You’ll see that for my two day gap on June 6th and 7th, Airbnb suggests I charge over 50% more that Sunday night. They also suggest I charge $383, an exorbitant price given comparable properties in the area.

4) Airbnb Price Adjustments are static

Unlike demand, the Airbnb price changes are static – they don’t automatically change according to your preferences or updates in demand. A host must continually return to their listings each day to update their pricing manually. This removes one of the huge advantages that the existing dynamic pricing tools provide – automation. ¬†Specialty pricing services like Everbooked, and¬†PriceMethod¬†link to your Airbnb account and automatically change your pricing each day based on the most current intelligence. And, might I add, they both appear to have much smarter algorithms for determining the perfect pricing each day.

5) Pricing suggestions don’t take into account historical rental performance

I thought surely the Airbnb pricing recommendations would be better for a property that I’ve been renting on Airbnb for 2 years with over one hundred confirmed reservations. I was wrong, it was worse. Here are the pricing suggestion for another one of my properties.

airbnb prices

 

I was stunned to see that the new dynamic pricing engine suggested that I keep the SAME absurdly high price for nearly every day of the month. From what I can gather, the pricing algorithm is looking for similar properties that can accommodate the same number of guests – five. There are only 4 other properties in my area and my that can hosts exactly 5 people. It appears that with so few competing properties the prediction tool doesn’t have enough data so it just spits out the same recommendation for every day of the month.

I only had 75% occupancy at this apartment last month with pricing in the $199-$289 range. If the algorithm took that into effect surely they would not be suggesting I raise rates by 50%.

CONCLUSION:

The Airbnb Pricing Tips service should be added as another tool in your arsenal, but alone, it can’t be trusted to maximize the revenue of your vacation rental. To get a better understanding of the vacation rental market in your area and learn the best practices for improving the performance of your short-term rental property download an¬†AirDNA City Intelligence Report¬†today.

One thought on “5 Reasons you will Lose Money using Airbnb Pricing Tips

  1. deepak chopra says:

    not a welcome tool , unrealistic pricing , and not area wise in mumbai INDIA where property prices are on par with real estate in US AND UK

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