Price is one of the most important features of your listing. It’s one of the top listing features that potential guests look to when selecting a listing. It is also one of the most complex features to get right. Setting a price too high we result in very few bookings, while setting it too low will leave money on the table.
On Airbnb, it is incredibly important to get your first booking shortly after activating your listing. The Airbnb algorithm gives high search ranking placement to new listings in order to give them a chance to get booked, but that ideal real-estate doesn’t last forever. If you can’t get booked within your first two weeks, you will quickly drop down into the abyss of never booked listings (page 10+ of the search rankings).
When setting your price per night, there are X important factors you should consider:
- The costs of hosting and managing your listing
- The size and quality of your listing and amenities
- The going rate of listings in your area
- Your Hosting Costs
Before you go about setting your price per night, it is crucial that you have a firm understanding of your listing economics. You want to have a clear picture of the minimum revenue you need to drive from your listing per month to break even. That number is your “floor.”
- The size and quality of your listing
Quality can mean a lot of things and we don’t think Airbnb has fully figured out consistent quality just yet. But when it comes to price, there are certain drivers that will justify a higher price. This includes things like:
Entire Home or Private Room: Entire homes fetch a higher price than private rooms since the guest(s) have the listing to themselves.
Listing Capacity: The more guests you can fit in your listing, the more you can charge for the place. However, you don’t want to squeeze in too many bodies as it will reduce quality. You want to be sure that each guest will have a quality place to rest. Otherwise, your reviews will suffer.
Number of Rooms and & Beds: When guests travel as a group, no one really wants to be the person sleeping in the living room on a couch. Having a higher ratio of real beds and private rooms to guest capacity is important. For example, if you have a home that can fit eight guests into 4 rooms, each with a queen bed, your listing is well balanced.
Listing Location: If your listing is in one of the hip neighborhoods in your town, you will be able to charge a higher price since guests tend to want to stay where the fun happens.
Business Travel Ready: Business Travel Ready listings can be filtered for in Airbnb search. These listings have a certain list of specific amenities that business travelers expect. The list includes items like having a hair dryer, iron, 24-hour check-in, and other features.
Climate Control: Not all listings have air conditioning or central heating. If your listing is in an area where the temperature can vary wildly, climate control is a premium feature and guests will filter for it.
Extras: Do you have laundry on premises that the guests will have access to? That warrants consideration. Other popular amenities that warrant a higher listing price include free parking, refreshments, a pool or hot tub on the property, and even having a television with Netflix.
In a nutshell, if your listing is loaded with all the comforts of home, you want to make sure you’re getting your money’s worth for it.
- Listings in Your Area
In this example, I am setting up a listing in Austin, Texas. The basics of my listings are:
- Entire Home Listing
- Three Bedrooms
- Three Real Beds (not a couch bed or futon)
- 2.5 Bathrooms
- Location is near Downtown Austin
I first want to get a ballpark of what similar listings in my area are being listed for by experienced hosts. I need to perform a search, including adding some filters.
Step 1: Perform an undated search for the market where you are listing your home indicating the number of guests you are willing to host. For my listing, I searched for 6 guests in Austin Texas. It is important that this initial search is undated since it will return all listings, not just the available ones. Chances are, the best listings have been booked during any given date range, but you still need to know what they go for on average.
Step 2 – Drill Down with Your Map: Once you have your high-level results, drill down a bit more into the area where your listing will be located. You need to know what listings in your specific region are charging since they are setting the average market rate.
Step 3 – Analyze the Range: Based on your results above, get an understanding of the range of prices for listings similar to yours. In my Austin example, prices per night range from a low of $100 to a high $475 per night. But, the average price is $204 while the median is only $181.
Step 4 – Apply a Date Range to your Search: You now have an idea what listings are charging per night for general open dates on their calendars. I would look at those rates as the average throughout the year (fact check this. May actually be their lowest rates). However, you need to know the rates experienced hosts will be charging around the time you plan to activate. My plan is to activate my listing in August, so I am going to choose dates in September (people book in the future). Specifically, I searched for a Wednesday to Sunday booking in mid-September.
After applying my date range, you will see that prices have increased significantly. Austin is popular in the summer (after all, that’s why I am launching a listing there). The lowest price in my search is $244 while the highest is over $900! The new average for an experienced host is $467 while the median is price is $416.
Step 5 – Picking a Price: I now know what the experienced competition is charging in my neighborhood. If I want to get my listing booked, I need to price competitively while understanding that my listing is new. If I price the same as a Superhost with 100 reviews, there is no incentive for a guest to book my home. This is where I need to undercut the other supply in order to knab a couple of bookings.
Take the median price ($416 in my case) and multiply it by a factor of 0.80x. This multiplication will kick out a price that is 80% of the price charge by the middle priced home in your area. Essentially, you’ve just priced yourself lower than much of the neighborhood without pricing yourself egregiously low. Based on that rate, I am going to list my home at $333 per night.
Step 6 – Calendar Control: Long term, you want to charge more than this rate