6 Proven Steps to Master Your Airbnb Pricing Strategy

Updated : Dec 9, 2024

Are you leaving money on the table with your Airbnb pricing strategy? Or, worse, are you scaring away potential guests with rates that are too high?

Mastering your Airbnb pricing strategy isn’t just about setting a competitive nightly rate—it’s about balancing profitability and occupancy while adapting to market trends and guest behavior. Whether you’re a seasoned property manager or just starting, an optimized pricing strategy can be the key to maximizing your revenue. In this blog, we’ll unveil six proven steps to take control of your pricing, attract the right guests, and consistently outperform your competition.

Types of Airbnb Pricing Models

You can choose one of the following methods or combine them to get the best Airbnb pricing strategy for your property listed.

Airbnb Smart Pricing

Airbnb has its in-built “Smart Pricing” algorithms that calculate the price of your property based on various parameters. While this seems like an obvious choice, in theory, many hosts complain that it doesn’t work for them and cannot be trusted blindly. Thus, they have to resort to doing their research, which is our following approach here.

Pros:

• Ease of use: No manual effort is required, making it ideal for hosts who want a hands-off approach.
• Real-time updates: Airbnb adjusts your rates daily, ensuring they stay competitive.
• Integration: Since it’s a native Airbnb feature, you don’t need third-party tools.

Cons:

• Lower pricing: Many hosts report that Smart Pricing tends to undervalue their properties, leading to lower-than-expected earnings.
• Lack of control: You have limited customization options, and the algorithm may not align with your pricing goals.
• Blind trust: Some hosts find that relying on this feature alone can leave money on the table, as it doesn’t always consider niche factors or special events in your area.

Manual Pricing

As many hosts disagree with Airbnb pricing recommendations, the next step is to explore the market and research using the Airbnb website to determine the rental rates in the locality or use a market analytics tool like market dashboards. This research takes time, but you are in control of the pricing. If you are instead looking to automate your pricing strategy, many hosts choose rate automation, which is the next approach.

Pros:

• Complete control: You have full control over your pricing, allowing you to factor in special events, holidays, or high-demand periods that automated tools might miss.
• Personalized strategy: You can tailor your pricing to your property’s unique features and value proposition.

Cons:

• Time-consuming: Manual pricing requires significant research and regular updates, which can be burdensome for hosts with multiple properties.
• Risk of outdated pricing: Without the benefit of real-time data analysis, your rates might become uncompetitive if not adjusted regularly.

Pricing Automation Software

You can use specialized software products such as PriceLabs to apply your rate strategies daily. PriceLabs is a dynamic pricing tool for Airbnb used by thousands of hosts. PriceLabs analyzes several data points to identify price points for your listings. Further, your prices are automatically adjusted every 24 hours. There are several reasons why hosts choose PriceLabs over Airbnb Smart Pricing.

Pros:

• Data-driven adjustments: PriceLabs uses a sophisticated algorithm that factors in various market dynamics, providing highly accurate pricing suggestions.
• Time efficiency: Prices are automatically updated daily, so you don’t have to worry about manually adjusting rates.
• Customization options: Unlike Airbnb Smart Pricing, PriceLabs offers flexible controls that allow you to set minimum prices, adjust for seasonality, and fine-tune your pricing strategy.

Cons:

• Learning curve: The software offers many advanced features that might take time to learn and configure properly.

How Does Airbnb’s Smart Pricing Work?

Airbnb hosts can earn substantial income by renting out their properties. The right Airbnb pricing strategy is one of the key factors that determine the success of a rental. Setting the perfect price can be a complex task, but with the right guidance and tools, you can maximize your revenue and achieve your hosting goals. In this blog, we’ll explore the intricacies of Airbnb pricing strategies and provide you with valuable insights to help you optimize your listings.

Steps to Consider for Airbnb Pricing Strategy

1. Calculate Your Nightly Costs

One of the foundational steps in crafting an effective Airbnb pricing strategy is understanding your breakeven cost or bottom line. To set a fair and profitable price for your rental, you need to account for the costs incurred to operate your rental. This encompasses utilities, taxes, maintenance, and even your mortgage. To calculate your nightly break-even cost, total your monthly expenses and divide them by 30. 

Remember that many Airbnb hosts opt to add a cleaning fee on top of their nightly rates, so it’s important to exclude this fee from your nightly costs. For instance, if your monthly expenses amount to $2,500, your nightly cost would be approximately $83.

2. Determine Your Minimum Nightly Rate

Once you’ve calculated your nightly costs, the next step is to establish your minimum nightly rate. This figure should surpass your costs to ensure that you’re not only covering expenses but also generating a profit. While this may seem straightforward, it’s imperative to conduct market research to ensure your pricing is competitive. 

For instance, if your nightly costs are $83, you may set your minimum nightly rate at $100 or slightly higher. However, this figure should reflect the uniqueness of your property, its amenities, and its location.

3. Market Research on Similar Airbnb Prices

To determine the ideal pricing for your Airbnb, you must explore Airbnb listings in your area that offer similar value and features to your property while considering property type, number of beds, bedrooms, amenities, facilities, and location. 

PriceLabs’ Market Dashboards allows property managers to find all this information in a simple-to-navigate tool, saving managers hours of labor.

The average nightly rate of these similar properties will serve as a benchmark for your pricing strategy. Remember that Airbnb suggests slightly lower prices for new listings to garner initial reviews and rankings. So, if you’re new to Airbnb, ensure your initial rates are competitive, as this will benefit your listing immediately and in the long run. 

When benchmarking, make sure to look at your competitor’s pricing over a broader range of time to ensure you understand the full scope of high and low seasons in your market.

4. Adapt Your Rates According to Market Demand

Airbnb prices are subject to fluctuation based on market demand, which necessitates the adjustment of your rates. Be mindful of high and low seasons in your destination, tailoring your pricing strategy accordingly. 

For instance, during the high season, consider setting higher rates to maximize profits while offering lower rates in the low season to boost occupancy. Furthermore, elevate your prices during holidays and local events that generate more demand than usual. If you’ve determined that your market often has higher demand on weekends, make sure to protect those valuable dates with higher rates.

5. Embrace Length of Stay (LOS) Discounts

Implementing LOS discounts in your pricing strategy is an excellent approach to attract longer bookings. By offering discounts for weekly or monthly stays (typically around 10% for weekly and 20% for monthly), you encourage guests to consider extended stays. 

This not only makes your property stand out but also reduces operational costs since cleaning may only be required once for longer stays. When setting these discounts, consider what other property managers in your area are doing and adjust accordingly. This information is easily accessible in PriceLabs Market Dashboards. 

6. Stay Competitive with Dynamic pricing Tools like PriceLabs

Property managers should embrace dynamic pricing tools like PriceLabs to unlock the full revenue potential of their rental properties. These tools employ sophisticated algorithms and data-driven insights to fine-tune pricing strategies, ensuring that rates are optimized for fluctuating market demand. Additionally, PriceLabs is fully customizable, allowing property owners and managers to have as much (or as little) control over their strategy as they wish.

By continuously analyzing factors such as booking windows, seasonal variations, local events, and competitor pricing, dynamic pricing tools like PriceLabs can adapt rates in real time, thus attracting more bookings and higher occupancy. 

7. Streamline Your Pricing with Automation

Property managers should streamline their pricing with automation to efficiently manage a growing portfolio and maximize revenue. This automation eliminates the need for time-consuming manual research and adjustments, allowing property managers to focus on other areas that can improve revenue, such as strategic decisions, outstanding guest experience, communication, and operations. 

By automating pricing with tools like PriceLabs, property managers can ensure their rates are always competitive and tailored to market conditions, leading to increased occupancy and revenue. Additionally, automation provides real-time insights and minimizes the risk of human error during data entry, resulting in more efficient and profitable property management.

8. Monitor How Your Listings Are Performing

Monitoring the performance of your listings regularly is a critical aspect of any effective Airbnb pricing strategy. By keeping a close eye on how your listings are performing, you can quickly identify trends, assess the impact of pricing adjustments, and make informed decisions to maximize your revenue. 

Regular performance monitoring helps you recognize which properties are thriving and which might need attention. It also helps you determine which pricing strategy is working for you. PriceLabs provides an extensive array of performance metrics, with over 40 different indicators to help you assess how your listings are performing. These metrics help you pinpoint underperforming listings, allowing you to take proactive steps to boost their performance and overall profitability.

Six Proven Airbnb Pricing Strategies for Success

1. Maximum Occupancy Strategy

Maximizing your property’s occupancy is a key factor in boosting your revenue, but it requires a fine balance between competitive pricing and profitability. A well-executed Maximum Occupancy Strategy ensures that you fill every available night on your calendar by adjusting prices to attract guests while keeping profitability intact.

To implement this strategy effectively, you need to monitor the market closely, particularly competing listings in your area, to ensure your pricing remains attractive. However, doing this manually can be time-consuming and prone to error, which is where a dynamic pricing tool like PriceLabs comes in handy.

How to Implement This Strategy with PriceLabs?

1. Dynamic Pricing: PriceLabs adjusts your rates daily based on local demand, competitor pricing, seasonality, and market trends. This keeps your prices competitive while optimizing for occupancy, which is crucial in high-demand areas.
   For example, The Blue Kite, a property management company managing over 200 listings, saw a 20% increase in occupancy in its first month after switching to PriceLabs. This was largely due to the tool’s ability to automatically adjust rates in response to changing market conditions, freeing the team from manual updates.
2. Length-of-Stay Rules: PriceLabs also allows you to customize length-of-stay (LOS) discounts. You can ensure your calendar is efficiently filled by setting minimum and maximum stay durations. For instance, offering a slight discount for longer stays during low-demand periods can prevent gaps between bookings, ultimately maximizing occupancy.
3. Portfolio Occupancy-Based Adjustments: Another key feature that PriceLabs offers is Portfolio Occupancy-Based Adjustments, which helps property managers like The Blue Kite manage large portfolios efficiently. Automating rate adjustments across properties based on their current occupancy levels ensures that under-booked properties receive the attention they need to fill up.

2. “Earn  the Maximum Rate” Pricing Strategy

This strategy focuses on identifying high-demand periods and capitalizing on them to maximize profits. It’s all about charging premium prices during peak times. 

You can significantly increase your revenue by setting higher rates during summer or during local festivals. While your property’s nightly cost might be $150, during these peak times, you can rent it for $300 per night or even more.

How to Implement This Strategy with PriceLabs?

• Market Dashboards: PriceLabs’ Market Dashboards allow property managers to track price and occupancy trends, making it easy to spot high-demand periods. With these insights, you can increase your rates during peak demand times to maximize revenue. For example, Hoomy, managing 1200+ properties, used PriceLabs to optimize pricing during periods of increased demand. By leveraging the Market Dashboards, they could adjust rates based on real-time demand fluctuations, ensuring they maximized revenue during peak seasons in regions like Vendée and Brittany. This allowed them to capture the maximum possible rate for their properties during high-demand times, such as summer or local events.
• Custom Seasonal Profiles: PriceLabs’ custom seasonal profiles allow property managers to set automated rate increases during high-demand periods, reducing the need for constant manual updates and ensuring premium pricing is applied at the right times.

Hoomy utilized custom seasonal profiles to adjust its pricing automatically based on seasonality. For instance, it was able to set higher rates during summer in its coastal properties, capitalizing on the influx of tourists and maximizing its profitability without manually adjusting rates.

3. Optimal  Minimum Stay Strategy

The right minimum stay strategy is about maximizing the length of bookings, especially during peak seasons. For instance, during a popular festival weekend, instead of allowing one-night stays, you aim for week-long bookings. 

How to Implement This Strategy with PriceLabs?

• MinStay Recommendation Engine: PriceLabs’ MinStay Recommendation Engine helps property managers set the right minimum stay requirements based on market trends and demand. By analyzing data, it recommends the optimal minimum stay settings, ensuring you’re encouraging longer and more profitable bookings.

For example, Nord Collection, managing 100+ listings, used PriceLabs to adjust their minimum stay settings. Initially, they allowed for 1- to 2-night bookings, which incurred high costs and blocked longer, more profitable bookings. Adjusting their settings with PriceLabs increased their average stay from 3.1 nights to 4.3 nights—an almost 40% improvement. Despite fewer bookings, they saw over a 10% revenue increase by focusing on longer stays.

• Dynamic Minimum Stay Rules: PriceLabs allows you to set dynamic minimum stay rules for different booking windows. For example, you can require longer stays (e.g., 4-7 nights) for bookings made far in advance while allowing shorter stays as the booking date approaches.

Nord Collection set a 4-night minimum stay for bookings far in advance, gradually reducing it to 3 nights closer to the booking date, and finally allowing 1-night stays for last-minute bookings. This strategy ensured they captured longer stays when possible but filled gaps with shorter stays as needed.

• Orphan Day Discount: PriceLabs also offers an “orphan day” setting, which allows property managers to accept shorter bookings for small gaps between reservations. This is one of the many pricing customizations that PriceLabs offers. Orphan day discounts minimize unbooked nights while maintaining longer minimum stays for larger booking windows.

Nord Collection used the orphan day discount to fill gaps in their calendar left by longer bookings. This feature allowed them to maintain high occupancy without sacrificing the benefits of longer stays.

4. Gap Nights Strategy

Gap nights or orphan days are the unbookable periods between two long, desirable bookings. These gaps can significantly impact your revenue if not managed correctly. With PriceLabs’ orphan day customizations, you can automatically adjust your minimum stay requirements to maximize booked nights. 

For instance, if you have a five-night minimum stay requirement, PriceLabs will reduce it for a short period to allow bookings that fall within the orphan gaps. This boosts your monthly revenue, preventing valuable nights from going unbooked.

5. Long-term Rental Pricing Strategy for Airbnb

Mid-term and long-term rentals can be a stress-free way to generate income from your property. Rather than focusing on short-term bookings, you rent your property for extended durations. You can list rates for weekly or monthly stays. 

While long-term rentals may generate less profit per night, they require less effort in finding frequent guests. PriceLabs can assist in managing long-term rentals by providing data-driven pricing recommendations. If, for example, you own a condominium in a bustling city, you can opt for mid-term or long-term rentals when relocating for work. PriceLabs ensures your rental rates are competitive, attracting tenants while reducing your management efforts.

6. Dynamic Pricing Strategy

The dynamic pricing strategy combines several strategies to achieve high fill rates and maximize profits. With PriceLabs’ Dynamic Pricing Solutions, you can customize settings and automate pricing strategies. With the new Hyper Local Pulse (HLP) introduced by PriceLabs, you can have a more refined airbnb pricing strategy. 

How to Implement This Strategy with PriceLabs?

• Hyper Local Pulse (HLP): PriceLabs introduced Hyper Local Pulse (HLP) to provide a more granular approach to dynamic pricing. HLP leverages hyper-local data, ensuring your pricing accurately reflects the unique factors influencing demand in your specific location, such as local events, holidays, or even competitor activities. 

As the founder of revPARTY, Jordan Locke uses PriceLabs to manage 100+ listings and tailors dynamic pricing strategies to achieve consistent results across his clients’ portfolios. By tapping into HLP, Jordan can fine-tune pricing across individual listings based on localized factors. This ensures that prices reflect demand fluctuations caused by events like festivals, conventions, or other high-traffic periods.

• Occupancy-Based Adjustments: PriceLabs also allows property managers to set occupancy-based rules, meaning prices will increase or decrease depending on the property’s booking pace and occupancy levels.

In his case study, Jordan emphasized how smooth the booking curves of his clients’ properties have been since using PriceLabs. By adjusting prices based on occupancy, his clients could optimize fill rates without losing revenue on underpriced stays. As occupancy increased, PriceLabs dynamically raised prices to capitalize on the remaining available nights.

• Competitor-Based Adjustments: With PriceLabs, managers can automate price adjustments based on competitor pricing data, ensuring you stay competitive without manually monitoring the competition. For example, during the pandemic, Jordan utilized PriceLabs’ Market Dashboards to help clients navigate pricing and adjust dynamically. He compared market data across competitors and used PriceLabs to ensure his clients’ listings remained competitive while optimizing revenue, particularly during the COVID-19 recovery.

Conclusion:

Optimizing your Airbnb pricing strategy is not a one-size-fits-all endeavor. To thrive in a competitive short-term rental market, hosts must adapt their pricing approaches to various factors, including property type, location, and seasonality. With the aid of PriceLabs, you can automate your pricing while benefiting from data-driven insights. By embracing the right pricing strategy, you can start your journey to maximizing your Airbnb revenue and taking your hosting business to the next level. Your success as an Airbnb host awaits—begin your pricing transformation today. 

About PriceLabs

PriceLabs is a revenue management solution for the short-term rental and hospitality industry, founded in 2014 and headquartered in Chicago, IL. Our platform helps individual hosts and hospitality professionals optimize pricing and revenue management, adapting to changing market trends and occupancy levels.

With dynamic Pricing, automation rules, and customizations, we manage Pricing and minimum-stay restrictions for any portfolio size, with prices automatically uploaded to preferred channels.

Every day, we price over 275,000+ listings globally across 125+ countries, offering world-class tools like the Base Price Help and Minimum Stay Recommendation Engine. Choose PriceLabs to increase revenue and streamline Pricing and revenue management. Sign up for a free trial at pricelabs.co today.

Frequently Asked Questions

What are Airbnb pricing strategy examples?

Airbnb pricing strategy examples include the “Maximum Occupancy Strategy,” which focuses on ensuring full booking calendars by offering competitive rates. In contrast, the “Get the Maximum Rate” Pricing Strategy aims to maximize profits during high-demand periods, capitalizing on peak seasons and local events. The “Right Minimum Stay Strategy” involves attracting longer bookings during peak times to increase revenue, whereas the “Gap Nights Strategy” addresses unbookable periods, strategically managing short gaps between longer bookings. Property managers may also opt for a “Long-term Rentals Pricing Strategy” for extended stays, simplifying operations, or a “Dynamic Pricing Strategy” that combines various approaches to maximize occupancy and profits, adapting to market dynamics.

What is an Airbnb pricing calculator?

An Airbnb pricing calculator is a tool that helps hosts set competitive and revenue-maximizing prices for their Airbnb listings by considering factors such as location, demand, and competitor rates. It can be an automated feature provided by Airbnb, known as “Smart Pricing,” or a third-party dynamic pricing tool like PriceLabs, which offers more advanced pricing optimization capabilities for hosts.