Airbnb Pricing Options

Taking a step back, let’s summarize your options for setting prices on your Airbnb listing:

• Manual pricing: This is the default option for Airbnb pricing. When you set prices manually, you type your nightly rates into Airbnb’s availability calendar. Maybe you have flat rates for a given day of week or month; manual pricing puts you in full control over the rates you sell. While manual pricing lets you retain control, it also takes a lot of time. If you want to adjust prices in response to demand or stay patterns, you need to log into Airbnb’s dashboard to do it.

• Airbnb Smart Pricing: If you want to offload the manual task of pricing your Airbnb listing, you can leverage Airbnb’s Smart Pricing tool to automatically adjust your rates up and down based on changes in supply and demand. Airbnb’s algorithm determines opportunities for your listing to get more reservations and adjusts your prices accordingly. However, you don’t fully hand over the keys to the castle; Airbnb allows hosts to set minimum and maximum rates, and you can override Airbnb’s Smart Pricing recommendation at any time.

• Dynamic Pricing Software: Like Airbnb Smart Pricing, a third-party dynamic pricing system looks at market supply and demand, in addition to your own historical and forward-looking data, to make pricing recommendations. The software automatically adjusts your rates not only on Airbnb, but also in your PMS (vacation rental software), so you can apply the rate recommendations to all of your booking channels. Dynamic pricing software comes with a slew of customization options, so you can carefully control minimum and maximum stay restrictions, compression dates, advance-purchase and last-minute discounting, and more.

Your overall Airbnb strategy can influence which pricing option makes the most sense for your listing. Are you a part-time host with just one listing? Then manually pricing might be totally fine. Are you an ambitious short-term rental entrepreneur who wants to maximize revenue and minimize manual data entry? Then a dynamic pricing system is the way to go.

Strategies for Pricing Your Airbnb

Whether you choose to apply a manual pricing strategy, Airbnb’s Smart Pricing tool, or third-party dynamic pricing software, your business objectives will dictate your approach to pricing. We’ll cover several different strategies that you can consider as you work toward your business goals. There’s no one-size-fits-all strategy here, so you’ll likely apply more than one of these strategies at the same time.

Maximizing Occupancy

If your #1 goal is to keep heads in your Airbnb’s beds for as many nights of the year as possible, then your rate strategy should work to achieve maximum occupancy. This means that you may want to avoid setting minimum length of stay restrictions or any other parameters that would dissuade guests from booking (for example, set your listing to ‘Instant Book’ instead of request-only). You may find it necessary to discount rates in advance to build a base of reservations, or you may discount rates as check-in dates approach to avoid vacancy. It’s worth noting that while a high-occupancy strategy can generate high revenues, it can also drive high costs due to frequent housekeeping and wear-and-tear on your furniture.

Maximizing Rate

If your #1 goal is to drive profit at your Airbnb, then your strategy should work to book reservations at the highest rates the market will bear. This means that, on some low-season dates, you may prefer to let your Airbnb sit empty rather than accept a reservation at a deeply discounted rate. This strategy works well for Airbnb listings in markets with peak seasons (like ski or beach area) or predictable high-demand dates (like Formula 1 or SXSW in Austin). To get a sense for the highest rates the market can bear, you can scope out your competitors, looking both on Airbnb and OTAs like Expedia and Booking.com, to see what rates they’re selling over those high-demand periods. While this strategy often means lower housekeeping and maintenance costs, because you’ll host fewer reservations than an occupancy-driven strategy, be mindful that this strategy only works if your Airbnb is in a prime location.

Long-Term Stay Strategy

For some Airbnb listings, the hassle of accommodating short stays might not be worth the revenue they produce. Instead, a long-term stay strategy might be more advantageous. Occupying the middle ground between a traditional landlord and a nightly rental, a long-term stay strategy targets travelers who want to book your Airbnb for a couple weeks to a couple months. On Airbnb you can set weekly and monthly discounts that will make your listing more compelling for these travelers. This strategy can work well for hosts who want less guest turnover and lower variable costs while still earning consistent revenue. Although long-term stays usually end up with lower average nightly rates than short stays, they often contribute to higher occupancy with lower costs, compared to accommodating a lot of consecutive short stays. 

Optimizing for Length of Stay

Nightly rates aren’t the only factor to consider when working on your pricing strategy; length-of-stay restrictions can make or break your business goals. In addition to setting nightly rates, your strategy should consider how long each reservation can be. For instance, if your market is a popular weekend destination, you don’t want to fill your calendar with one-night reservations on Friday nights, because those reservations would block the potential 3- or 4-night long-weekend stay. A strategy that optimizes for length of stay might include a 3-night minimum restriction for a Thursday night check-in and a 2-night minimum on Friday night. However, being too restrictive with minimum night stay requirements could compromise your visibility in the search results and potential for reservations, so it’s important to understand the dynamics of your market so you know whether those 4-night weekend stays you want are actually realistic.

Avoiding Orphan Nights

While thinking of minimum length of stay requirements, you’ll also want to be cognizant of avoiding orphan nights. Also known as gap nights, orphan nights occur when you have two reservations nearly back-to-back, but with one available night in the middle. If orphan nights fall on nights when you have minimum length of stay restrictions, it can become impossible to get a booking on that night.

Dynamic Pricing and Restrictions

If you want a truly balanced Airbnb pricing strategy, then a dynamic pricing strategy will enable you to maximize both occupancy and profit while making adjustments to restrictions and discounts in real-time. However, it’s nearly impossible to run a dynamic pricing strategy manually because prices are constantly changing. To implement a dynamic pricing strategy, you can let software do the heavy lifting for you. Dynamic pricing software like Beyond, PriceLabs, and Wheelhouse apply sophisticated algorithms that study your market and your listing’s own data to make rate changes in real-time. You can add inputs, like whether you are more rate- or occupancy-focused, and you can control restrictions and overrides.

Tools to Consider for Airbnb Pricing Strategy

Running a successful vacation rental business with high occupancy rates is no easy feat.  We all know that yours isn’t the only Airbnb property online and leveraging a dynamic pricing tool to help determine the perfect nightly price for your Airbnb business can be a huge competitive advantage that leading property managers are already using to encourage longer stays, tap into demand from local events, lower price on weekdays in leisure driven markets and so many other rental property strategies that can help leverage automation and real-time market data to ensure that your property is humming along and profitable.

Finding the Right Strategies for Your Property

There’s no perfect pricing strategy for an Airbnb listing, so it’s up to you to determine which strategies work best for your unique property. Are you in a market that sees sky-high demand on specific dates of the year? Or is your property better suited to accommodate long-term stays? Are you more focused on getting high occupancy or high rates? Do you need to comply with HOA or regulatory restrictions that require specific lengths of stay? All of these questions will guide you pricing toward strategies that make sense for your Airbnb listing.