Finding the Perfect Price for a Short-Term Rental
Listing a property on Airbnb can be confusing for first-time users. Property owners, both new and experienced, may struggle to set the perfect price in order to maximize their profits. Charging more than competitors for the same quality of property may scare potential guests away, while at the same time, it’s important not to undervalue a property. To uncover the true value of a property there are several factors that should be taken into account, such as the current state of the short-term market, fees and expenses, market fluctuation, and competition.
The short-term vacation rental market is constantly fluctuating, so it’s important to keep updated on current trends and opportunities to maximize bookings and revenues. When listing a property, factors such as the zip code, season, and competition all contribute towards finding the optimal price. Having a pricing strategy is crucial in achieving a high return on investment (ROI), and the following steps can help in creating that efficient strategy. Here’s a quick rundown on gauging how much to charge for Airbnb listings.
Research the Location
Understanding the geographical area of a property is key in determining the price for a property. For example, listing a beach house in the Hamptons will have a significantly different pricing strategy compared to a beach home on the shore of New Jersey. Remember to assess surrounding attractions like beaches, conference centers, and national landmarks that may affect the price of a listing.
After noting places of interest in the property’s area, the next step is to research competitors that have similar property types in the same location. For example, property managers looking to compare a four bedroom, two bath beach house should look compare prices with properties of the same size, age, and location. Using granular-level data from AllTheRooms helps property managers conduct side-by-side comparisons with other properties and develop smart pricing techniques.
Monitor Over a Timeframe
When researching competitors, it’s essential to monitor them over a standardized timeframe. Properties are removed from the search results once booked on Airbnb, and so to make a fair evaluation of the competition, aim to assess competitors across two or three months. During this period, observations should include booking prices, availability, as well as reviews and specific amenities that attract guests.
When noting competitors’ Airbnb average price, be aware of the dates in which the properties are listed. Summer and winter tend to have different price points based on specific search areas. For example, beach homes on the east coast are more likely to have higher prices leading up to the summer months due to demand.
Once suitable competitors have been selected, use the Airbnb calendar to evaluate pricing strategies. The Airbnb calendar is an important tool because it offers insights into future prices for certain listings. The calendar can also indicate how prices may vary depending on the listing period. A short-term rental listed in the middle of October during the week is going to have significantly different prices than when listed on the 4th of July weekend.
Fees and Expenses
Before setting a listing price, consider how expenses like maintenance and extra features compare to the income the rental will provide. Fees are also a big component of a listing’s prices on Airbnb: Airbnb takes a 3% service fee for each booked listing. Airbnb recommends that all properties provide clean sheets, a tidy environment in the property, and additional locks if some rooms are off limits. If a listing becomes popular on Airbnb, additional cleaning fees should be considered in the price. Other common expenses that may be included in the overall price can be:
– Central heating
– A pool/jacuzzi/sauna
– An entertainment system
– Parking space
Airbnb Dynamic Pricing
Airbnb’s dynamic pricing tool is another way to determine the optimal nightly price for a property. The tool works by comparing a property’s current price to other listings and then suggesting appropriate price adjustments for the future. That said, while Airbnb is generally a trusted source, the tool is not always accurate or beneficial. The dynamic pricing helps indicate what the price could be, but further research should be carried in addition to the suggested price.
Setting the Price
Once all the researched has been compiled and the property owner is confident they have all the information necessary, it’s time to set a price. Since Airbnb can be very competitive, it’s recommended that undercutting the competition is reasonable if a property is new on the market. Once positive reviews have been left and the property has gained sufficient traction, the price can then be justifiably raised.
For the tools to establish a profitable pricing strategy and reach your revenue goals, AllTheRooms Analytics provides insightful reporting on any vacation rental market. Contact us if you have questions about our services.