Are you ready to start your Airbnb hosting journey but not sure how to price your rental perfectly? Well, setting the right price is crucial for the success of your short-term rental service. If you get it right, your property can make a difference in attracting guests and earning more, and you can be free from frustration.
But how do you strike the right balance between affordability and profitability? We have curated a step-by-step strategy to help you set the right price for your property. But before we start, you can check out some Airbnb management services in Melbourne to simplify the process.
Steps to Get Pricing Strategy Right
Before you start determining your property’s pricing, list all your offerings and unique features to set a competitive price. Let’s discuss the pricing strategies now.
1. Calculate Your Expenses
Whether you are new to hosting or an experienced professional, you should start with a clear understanding of your nightly costs. Ignoring this step can lead to either too high pricing, which can potentially scare off guests, or too low, leaving you barely breaking even. Include everything from amenities and taxes to your mortgage in your nightly costs. To calculate your nightly costs, all you have to do is add your monthly expenses and divide by 30.
Keep in mind that many hosts choose to add a cleaning fee on top of their nightly rates; you don’t have to include this in your nightly costs, as Airbnb warns about hidden cleaning fees.
2. Calculate Your Minimum Nightly Rate
Now that you know your nightly expenses, you’ll have a minimum rate to cover your costs and hopefully earn some profit. Your minimum nightly rate should always exceed your nightly costs and compensate you for your time and effort in managing your rental. But don’t pluck a number out of thin air. Market research is your ally here to ensure your pricing remains competitive.
3. Analyse Market Pricing of Similar Airbnb
Market research is your guiding star. Imagine you’re a guest searching for a property like yours. Use Airbnb’s search filters to find listings matching your property type, bed and bedroom count, amenities, location and more. The average nightly rate of these properties will be your benchmark for competitive pricing.
Remember that Airbnb recommends slightly lower initial prices for new listings. Consider a 30% strategic discount to attract your first guests. Also, don’t focus solely on the following week when doing your research. Look ahead for 2-3 months to avoid accidental benchmarking against last-minute deals. Check rates for both high and low seasons and adjust accordingly. Take the average price per night for each period to decide your pricing.
4. Adjust Your Pricing Based on Market Demand
Pricing isn’t set in stone. Airbnb rates fluctuate with market demand, and you should ride the waves of these changes. Dynamic pricing is the answer, which means adjusting your rates according to the market conditions. Airbnb offers options to set custom pricing for special dates.
Some demand indicators are seasonality, holidays, events, and weekends. Setting higher rates during high and lower rates during low seasons is a wise move. Don’t hesitate to raise your prices when local events create spikes in demand, and consider weekend surcharges (10-15% of your standard rate) to boost your earnings.
5. Setup LOS Pricing
Length of Stay (LOS) discounts can be your secret weapon. You can encourage customers to book longer stays by offering weekly and monthly discounts. This strategy also helps streamline operations and lower cleaning costs. For example, you only need to clean your property once after a week’s stay rather than multiple times for short bookings. Commonly, 10% for weekly and 20% for monthly discounts are good starting points.
Experiment with Airbnb’s Pricing Tool
Airbnb offers a smart pricing tool that automatically adjusts your rates based on market demand. The algorithm considers over 70 factors to align your pricing with your property’s popularity, booking history, and more. You can set a minimum nightly rate, retain control over pricing, and manually adjust rates when necessary.
The Bottom Line
Pricing your property accurately is a balance that requires a keen understanding of your costs, market research, and dynamic adjustments. With the aforementioned strategies, you will successfully maximise your revenue from your Airbnb listing. Experiment with your pricing strategy and find out what suits you best.