As a new Airbnb host, one of the hardest things you’ll do is determine your Airbnb pricing. That’s because determining your nightly rate is tricky, time-consuming, and filled with uncertainty. At the same time, your pricing on Airbnb is the single biggest factor impacting your income. And, when it comes to major holidays your first year hosting, the uncertainty and potential for lost revenue is HUGE. That’s why in this blog post I’ll walk you through the EXACT pricing strategy I used to gross $20,000 my first holiday season as an Airbnb host. Let’s jump in.
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What you need to know before determining your Airbnb holiday pricing
Optimizing your pricing on Airbnb is hard enough on a typical day. Am I too high? Too low? Are my unbooked nights going to stay unbooked? Could my booked nights have gone for a higher rate?
The truth is, you never truly know the answer to any of those questions! That’s why I highly recommend AirDNA–a low-cost tool where you can get tons of data on your Airbnb market and even nightly rate suggestions to make smart pricing decisions without all the uncertainty.
That said, no matter what your pricing strategy is, the holidays are particularly hard to predict. After all, they only come around once a year so you necessarily have very little data on them. At the same time, you can typically earn significantly higher rates around major holidays (Thanksgiving, Christmas, New Year’s, and 4th of July). But, how high is too high and how low is too low? Keep reading because that’s what this post will help you figure out.
First, let’s talk about what not to do
You could manually determine your nightly rate based on your own competitive research. But this strategy has two major downsides:
- It’s unreasonably time-consuming; and
- You’re working with limited information
To manually calculate your pricing on Airbnb, you’ll start by researching the nightly rate of comparable properties. So, you have to decide what counts as ‘comparable’ on location, amenities, property type, number of bedrooms, maximum occupancy, and so on.
Once you decide what fits the bill, you might scroll through pages and pages of Airbnb listings to find those properties. Doing so every time you want to update your nightly rate is unreasonably time-consuming and ineffective because you’re working with limited information.
When it comes to maximizing revenue on Airbnb, your occupancy rate and nightly rate are everything. But, no matter how much time you spend researching, you won’t find that information on your competitors without a third-party tool.
Learn more about why you shouldn’t manually calculate your Airbnb pricing.
After spending hours trying to manually calculate your pricing on Airbnb, you might be ready to give up and let an automated pricing tool do all the work.
When it comes to using automated pricing tools, you have two choices. You can use:
- A third-party pricing tool; or
- Airbnb’s built-in tool, Smart Pricing
Unfortunately, in my experience, no automated pricing tool works well enough for you to simply set it and forget it. With third-party pricing tools, you’ll probably get your absolute highest nightly rate. But that comes at the cost of probably not getting as many bookings as you could. And because these tools often don’t work well, you might end up wasting your time, feeling frustrated, and ultimately losing out on a meaningful amount of revenue.
With Airbnb Smart Pricing, your nightly rate might be so low that you never reach your full revenue potential. And since VRBO doesn’t have its own automated pricing tool, you’ll have to manually update your VRBO pricing.
For those reasons, I don’t think manually calculating your pricing OR relying solely on automated pricing tools will maximize your profitability. That’s where creating your own hybrid pricing strategy comes in.
How to Create Your Own Hybrid Pricing Strategy
With your own hybrid pricing strategy, you can lean into the strengths of all of the approaches above while minimizing their weaknesses. Here’s how to design your own hybrid strategy:
Open your calendar one month at a time, about 3-4 months out.
The exact timing depends on the area and your comfort level, but you probably don’t want to open up your calendar much more than 3-4 months in advance while you’re still getting a feel for the best price for your Airbnb.
Since you have a lot of time to get these dates booked, set them at the highest price you think your Airbnb will get booked at. To determine what your highest price is, use AirDNA’s Smart Rates feature.
Note: AirDNA itself is not an automated pricing tool. It’s a data-driven forecasting tool that allows you to see your overall projected revenue, occupancy rate, and suggested nightly rate. You can also see competitive data, seasonality, and many other data points that can inform your pricing strategy.
By manually plugging in the nightly rates you see in AirDNA, you will maintain much more control over your listing than if you were using an automated tool. If any rate seems too high or too low, you can adjust it to exactly what you think it should be. You can even adjust AirDNA’s pricing suggestions to low/medium/high depending on what you think is best for your Airbnb (no one knows your Airbnb better than you do!)
Monitor Your Pricing
Check back with AirDNA every two weeks or so. Tools like AirDNA are dynamic, so they regularly adjust their rates based on many factors. If the AirDNA suggested nightly rates have changed meaningfully, update your rates to reflect that.
As the dates get closer, decrease the nightly rate further (which is something you don’t always have the option to do with an automated pricing tool). Adjust AirDNA’s pricing suggestions to low/medium/high to instantly get a new prediction based on what you now think your Airbnb will bring in.
As a new Airbnb host, one of the hardest things you’ll do is determine your Airbnb pricing. That’s because determining your nightly rate is tricky, time-consuming, and filled with uncertainty. You now have the EXACT pricing strategy I used to gross $20,000 my first holiday season as an Airbnb host. Great work!
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