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6 Airbnb Pricing Strategies you need to implement now to get more revenue
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6 Airbnb Pricing Strategies You Need to Implement Now to Get More Revenue

One of the top questions I get regularly from hosts is, “how can I fill my Airbnb calendar? My bookings are low!” If you’re a host struggling with low bookings, you might wonder, what am I doing wrong and how can I fill this thing with happy, paying guests? There are a number of factors that come into play when filling your Airbnb calendar. One of the most important is your Airbnb pricing strategies.

Think of these six strategies as the go-to tactics you implement when you’re hurting for reservations. The ideal scenario would be to avoid getting to this point in the first place by implementing ways to fill your calendar ahead of time. The first strategy I want to share with you is actually about shifting your mindset; you need to embrace this mindset shift in order for all of this to make sense. .

1.Mindset

6 Airbnb Pricing Strategies you need to implement now to get more revenue

If you’ve ever watched Shark Tank, one theme you might observe is that, often, the sharks invest in the entrepreneur—more so than the business itself. That’s because the sharks understand that mindset, work ethic, and persistence are critical to the success of a business. In fact, the founders of Airbnb were called cockroaches because they had a mindset that wouldn’t let their business die. Thank goodness.

When it comes to your business as an Airbnb host, mindset is the #1 thing that will make or break your business. And I want you to be successful so we’re going to start here.

The first mindset shift I want you to make is that your goal shouldn’t be to fill your calendar, it should be to bring in more revenue. Thus the focus on Airbnb pricing strategies. Having a full calendar and bringing in revenue are two different things. For example, you can price your listing at $5 a night and your calendar will be full… but you won’t be making enough money. Remind yourself that you’re in this to make money, not to fill a calendar. Yes, it’s true—occupancy is a good KPI to how much money you’ll make, but, I’d be very interested in hearing the response from your landlord or mortgage lender if you tried to pay them with your occupancy rate figures. You’ve got to focus on revenue.

One very self-destructive response I hear from hosts (when I ask them to drop their pricing) is that they wouldn’t drop it below x-amount because they know their property is worth more than that. While I agree that a host should never price their listing below their minimum price threshold, the minimum price must be set by data—not by how much a host feels they deserve.

This mindset can be very difficult to accept but it’s imperative. You’ve got to know that you don’t dictate your Airbnb strategies. The “invisible hand” of the market does. That said, you can always charge double and you might get someone whose is willing to pay that inflated price, but what we’re going for here is a reliable pricing strategy that you can use to predict profits each month.

For example, let’s say your nightly cost is $50. If you allow a night to go unreserved, you’ve just paid $50 for an empty space. So, even though you may believe your place is worth $90 per night, if you can get it booked for even $35, you’re still bringing in some money, which is better than $0.

Obviously, the goal is to get your $90 per night, but, that’s probably not going to happen if we’re talking about a vacancy for tonight. So, to avoid a loss, sell nights that are tough to fill at as close to cost as possible.

Think about the math… If you book 15 of your nights at $90 but refuse to sell a night for less than $90, you’ll earn $1,350. If you were to lower the remaining 15 nights to $35 you’d earn an additional $525 or 38% more revenue!

This is what the big box retailers do, you probably know it as the clearance section. This is inventory they tried to sell at a profit, but it didn’t sell. So now they’re selling it at cost, so as not to lose money. This is a great strategy to replicate in order to fill your calendar and make more revenue.

To summarize the mindset section here, you’ve got to just realize that the way things should be and the way things are, are sometimes two different realities. I want you to play in the reality that will make you profitable!

“Part of something is better than 100% of nothing!”

2. Know your nightly cost

6 Airbnb Pricing Strategies you need to implement now to get more revenue

Once you’ve accepted the mindset that something is better than nothing, the very first thing I want you to do is add up all your monthly fixed expenses for the month (rent/mortgage, utilities, internet, etc) and divide by 30. That’s your nightly cost. So let’s say, all in, your nightly cost is $50. That means every night you need to bring in $50, just to break even. I know you’re not in the Airbnb business to just break even, so obviously we’re going for more than $50/night.  The key here is to know your nightly cost number.

Think of a night on your calendar as perishable inventory. It’s as perishable as the fruit at the grocery store or the fish at a restaurant. If you don’t sell that night, it will disappear into the past and it will be a $50 loss you cannot recoup. A vacant night essentially eats at the profits of the other nights of the month.

3. Be objective about your listing

6 Airbnb Pricing Strategies you need to implement now to get more revenue

As a business owner, it’s sometimes difficult to take emotion out of the equation. I understand completely. You spent a lot of time preparing your listing, buying furniture, setting it up, making small repairs, staging it, taking photos, and perfecting the listing on Airbnb.com. You’ve poured yourself into this property and you’re nurturing it like a newborn baby.

You’ve got to take your ego and what you want out of the equation when pricing your listing. Someone who was selling their home once told me they raised the selling price of their home by $50k. Curious, I asked why. They told me they raised the price because they had credit card debt and a car note they needed to pay off. Now, it’s probably obvious to you that a buyer wouldn’t be interested in overpaying for a house just to pay down the seller’s debt, but I see hosts overpricing their listings all the time for similarly arbitrary reasons.

You must realize that the market sets the price—not you. Try to be as objective as possible when comparing your listing to the other listings in your market. Trust me, I never like charging the minimum price, but if that’s what it takes to get my inventory off the shelf (aka getting tonight’s vacancy or an orphan night booked), then I swallow the medicine and do what it takes to bring in the revenue.

If you’re struggling with this concept because of an emotional connection to your property, my advice to you is to go back to your “why”. Go back to the reason why you became a host in the first place. Are you doing this because you’re saving for retirement? Because you want financial freedom? Because you need to pay down debt? Whatever the reason, take your ego out of the equation and refer back to your primary goal; put all the thoughts that aren’t serving you aside and be objective about your listing.

4. Compare your listing to the competition

6 Airbnb Pricing Strategies you need to implement now to get more revenue

The 4th aid to getting Airbnb pricing strategies right is to compare your listing to the competition—the nearby listings. You’ve got to price your listing competitively without leaving money on the table.

Here are the things to consider when looking at each competitive listing:

    • Photo quality: Are the photos well lit, do they give you an accurate sense of the space?
    • Reviews: How many reviews are there? What did guests like about the listing? What did they complain about?
    • Flexibility: How flexible is the host? Do they allow early check ins/late check outs?
    • Host: How long has the host been hosting? This is a good indicator of how much experience they have
    • Amenities offered: Does the guest go above and beyond with the amenities? Did they offer something extra special? Do you see a trend with the amenities offered?
    • Security deposit: How high/low is the security deposit?
    • Cancellation policy: Do they have a strict or moderate policy?
  • Decor: What type of furniture and decorations are they using? Do you notice any trends in the style of decor?

Focus on listings that have the most 5-star reviews and figure out what you can do to add as much value (or more) in your listing to stay competitive. The key here is to do your research to figure out how you can improve your listing to stay on top of the search results.

5. Implement a dynamic pricing tool

6 Airbnb Pricing Strategies you need to implement now to get more revenue

Once you know your nightly cost and what your listing is competing against, you’ve got to know that if you set a flat rate for every night of the year, you’ll leave a LOT of money on the table. Yes, even if you make weekends higher.

There are a number of factors to consider that affect the nightly pricing:

    • Competitive pricing (luckily for you, the competition is probably not using a dynamic pricing tool )
    • Your listing’s occupancy rate
    • The occupancy rates of nearby competitive listings
    • Seasonality
    • Special events
    • Holidays
    • Weather
  • Day of the week

Like I said earlier, your goal is to bring in money. If the superbowl is in town and you leave your pricing at the same rate as any given Tuesday, you’ll leave tons of money on the table. If there’s a big storm and you leave pricing the same rate as last Tuesday, you’re going to have a vacancy and you will be paying your nightly cost.

You could spend a lot of time and energy researching all of the events that are happening in your area and manually change your nightly price, but that would be ridiculous, especially when there are tools out there that do this for you. The two pricing tools I recommend are  Wheelhouse and Beyond Pricing, they will do 95% of the work for you. They have more data than you could possibly crunch and will help you with your blind spots. You may know the top 2-5 events in your area that boost demand significantly, but you may not be aware of smaller events like a college ceremony or a spring parade that slightly boosts demand.

I‘ve used both of these tools with my listings and they have been a game changer in terms of revenue. For example, I noticed that Beyond Pricing had some of my nights considerably higher than the normal rate… This particular property is very close a university and I realized that there were some awards ceremonies happening those nights that were attracting out of town guests. I could have missed out on this revenue if it wasn’t for this tool. One of the cool things about these pricing automation tools is that they learn your listing. For example, they know that it’s not a good thing to have your calendar booked 60 days in advance. If they notice your listing is getting booked too quickly, they’ll raise your prices and if they see you’re not getting bookings, they’ll lower them. You can also set a minimum price threshold so you’re place isn’t booked by undesirable guests.

6. Know your minimum price threshold and consider your guest avatar

Now you know the importance of knowing your nightly cost. There is another important price you need to have, and that is your minimum price threshold. The minimum price threshold is the absolute lowest price you will book your place for. This differs from the nightly cost because your minimum threshold can be lower than your nightly cost. For example, if your nightly cost is $50 per night and you don’t get a booking you will miss out on $50. Let’s say you get a reservation with your minimum threshold of $30 (I’m using $30 as an example). This means you will essentially be losing $20 with that reservation. I know, this scenario sucks. Remember that mindset we talked about earlier?  This is where it comes into play. Would you rather lose $20 or $50? Which one is the lesser evil? Remember, part of something is better than 100% of nothing.

When should you dip down to your minimum threshold? You should only price your listing at the minimum threshold after 12pm the day of the occupancy (the day you want to get it booked). One very important note… you should never go below your minimum threshold price.

This leads me to guest avatars and how they relate to your minimum price threshold. You might be thinking… “But Nathan, you just said that if I lower my price I’ll get bookings and something is better than nothing…” And this is true… but there is something called the law of diminishing returns. This is the point at which the level of profits or benefits gained is less than the amount of money or energy invested. Meaning, it is likely that if your price is too low you will have a higher chance of hosting problematic guests that will either require too much of your energy to manage or will cause other problems because they won’t respect your property. Guests that demand a super low price point tend to be less responsible, require more customer service, and are more prone to breaking house rules.

The way I figured out my minimum price threshold was by incrementally lowering the price (from the nightly cost) by $5 on the nights that I needed to fill. So you’ll need to play with the numbers to determine your minimum price threshold for each of your listings. Once you know what it is, you’ll know that no amount lower than your minimum price threshold is worth the headaches that come along with the reservation.

This is why it’s so important to know who your guest avatar is. Not all guests are created equal. Some you’ll love hosting, others you’ll be counting the hours until they check-out. Let’s be honest here… If you’ve been hosting for more than a month you know what I’m talking about. A guest avatar is the ideal guest you’d like to have, also known as a persona. There are several ways you can attract your guest avatar… You can include language in your listing that they can relate to, you can use images that allow them to envision themselves in your space, and you can cater your listing with amenities they would enjoy. The takeaway here is that knowing your persona will allow you to determine your minimum price threshold.

In Closing

As I wrap up this blog post, I’d like to point out that 4 out of the 6 strategies I talked about have to do with price. It’s safe to assume that if you’re struggling with low bookings… your current pricing strategy is to blame. Having the right mindset (focusing on revenue) will make all of the difference when it comes to your bookings. Getting more bookings and filling up a calendar always seems to be a guessing game with hosts. I hear the same complaints all the time.. Hosts complain that it’s too “slow” and their “calendar is empty”. The bottom line is that if you implement these simple strategies you will see a shift in your revenue (and your bookings).  Set your ego and emotions aside and use your analytical side to strategize. You can also stay proactive by implementing strategies that will fill your Airbnb calendar ahead of time.

By looking at comparative listings you’re not only gaining knowledge of the competition, you’re really arming yourself with arsenal to be able to provide the best guest experience possible to your guests. I believe that if you flip the table around and look at the listing from the traveler’s perspective and focus on improving the guest experience, a natural outcome will be to attract more guests and more reservations. If you take a second look at the strategies I’ve taught you in this post, you’ll see they’re focused on improving the guest experience.

I’d like to finish this post with one of my favorite quotes:

Make your product easier to buy than your competition, or you will find your customers buying from them, not you.

-Mark Cuban

Thanks for reading!

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