As a newbie in the vacation rental industry, you may not be aware of these common pricing mistakes that can end up costing you thousands of dollars.
The most common question asked by vacation rental hosts and property managers is what pricing mistakes can they avoid and maximize their vacation rental profits?
Below is a list of pricing mistakes that some Vrbo and Airbnb owners make and end up leaving money on the table.
1. Not automating your pricing is one of the common pricing mistakes:
Airbnb hosts are earning significantly more with Powerful automated Airbnb pricing tools. The algorithms used by these dynamic pricing services detect even the slightest of alterations in the market demand. They then price the vacation rental accordingly to increase their chances of getting booked at the best possible price for the host.
These services take into consideration a ton of factors including:
- Special events
- Weekday vs. weekend
- Booking window
- Prices of Hotels
- Prices of competitors
- Local occupancy rate and much more
An automated data-backed pricing solution will help you to avoid most of the mistakes that are mentioned below. So, it is no surprise that not having an automated pricing tool is at the top of this list.
2. Keeping the same price for weekends and weekdays
The most common short-term rental pricing mistake that owners make is still to have a single price for all days. There is no variation for the day of the week. Now we know that it is difficult to gather some of this information but if you look at your booking trend, it will give you an idea that Airbnb usually gets rented out more frequently during weekends and less frequently during weekdays.
During the low-demand season, you will see that the weekdays are not getting booked that often. You can reduce your pricing for weekdays during low-demand seasons to attract more bookings.
You can charge significantly higher prices for your Airbnbs during special events or local festivals in your vicinity. People are willing to pay more for their accommodation during such periods. Not changing prices when there is a higher demand in the market is another big mistake that can cost you potential revenue in the long run.
3. Pricing too high too early in the business
If you are new in the market, you can’t charge as much as your competition because you want those initial bookings that will leave you good reviews. Without the credibility of reviews left by the Airbnb community, you will find it hard to capture the initial bookings if you have priced yourself the same as the rest of the rental units. These units are majorly operated by established hosts with several reviews and good credibility. Avoid this mistake by offering your rental at a price below the standard market price.
4. Pricing is too low for too long is another addition to the list of common pricing mistakes
Your mistake can be not raising your prices after you have established your credibility in the community. Once you have accumulated some good reviews on Airbnb, it is time to raise your rates to match the market price.
You will know it is time to raise your charges when you will start receiving 100% occupancy for the next 2-3 months. Being booked that far out in advance means that your unit is priced too low and you are missing out on profits.
You can start by gradually raising your prices until you reach 70-90% occupancy 2-4 weeks in advance but are only 50% booked 8-10 weeks out. You will eventually find your sweet spot and know your base price.
5. Not changing pricing according to different seasons
Analyze pricing for seasons and evaluate your competition. This will help you understand how is the demand in the market and how is it pricing itself. Then adjust your pricing accordingly. However, this doesn’t mean your job is done. These factors change very often. Not staying updated with the market trends and changing your pricing strategy accordingly is one of the most common pricing mistakes.
What if you rightly priced your house but now you are close to your booking date – wouldn’t you rather discount the nightly rate for a guaranteed booking? Just because you have priced your rental once doesn’t mean that you should stop. Pricing your rental once and leaving it at that is the biggest mistake you can make. It is an ongoing process that you continue to do until you make sure you get bookings for your property at the right price.
6. Not considering special events in advance and selling out too early:
As you can imagine, renters tend to book early for high-demand days (the proactive non-procrastinators!). It is prudent to
- know what are the high-demand days in your area to increase rates early, and
- if it might be possible to get a longer booking during that time.
You can use PriceLabs Market Dashboards to find out the market trends in your areas including average occupancy, length of stay vs. far out booking trends, average market price, key future dates, etc. This will help you to set your pricing strategies accordingly to the ongoing market trends and optimize your revenue and occupancy.
As a general rule, if the booking is a few months in advance, you can assume that it is likely an important date. Therefore, increase your prices way ahead of your base price a few months out.
7. Conceding to a discount request:
Unless you have the book immediately enabled, often customers ask for a discount while making a booking. Again, keeping a tab on listings in the neighborhood and overlapping with any high-demand days can help you conclude whether a discount should be offered. Don’t let this be another one of the common pricing mistakes you are making.
8. Not syncing prices across channels:
It is important for property owners to not just use one channel like Airbnb but to sync their prices across various channels such as Vrbo, HomeAway, booking.com, TripAdvisor, etc. This allows them to maximize their revenue by increasing the chance of a renter finding their listing. Several property management systems offer this service.
If you have listed on multiple channels but haven’t synced your listings then you can get double-booked for the same dates. This will only lead to the embarrassment and loss of credibility caused due to cancellations.
The best Airbnb pricing strategy is to automate your pricing with a dynamic pricing tool like PriceLabs. It will automatically price your property based on the extensive market data that it receives on a daily basis and help you avoid most of the common pricing mistakes. You can also use the PriceLabs Market Dashboard to analyze the market performance based on various metrics such as occupancy rate, average booking rate, RevPar, Length of Stay vs Booking Window, and booking rate for various amenities, and much more.