Average Airbnb Prices By City: How Much Should You Charge For Your Airbnb?
Deciding what to charge for your Airbnb is a decision that will have a massive impact on how successful you are in the short-term rental market.
Many fall into the trap of charging too high a price and find they receive minimal bookings. On the other end of the scale, many Airbnb hosts leave a lot of money on the table charging a lower price than they could have, particularly during peak season or around dates of popular local events.
There are many other variables to take into account as well; what type of property do you have? what city and neighborhood is your listing in? how many reviews does your listing have? are you an Airbnb superhost? These and other questions need answering before you can find that perfect price.
So what’s the best strategy to find the best possible price? Here at AllTheRooms Analytics, we’ve put together this guide which takes a look at the data for 8 cities across the world and then we dive into the various pricing strategies that are available to Airbnb hosts to maximize profit.
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Average Airbnb Prices By City
The first task all hosts should undertake when trying to work out how much to charge for their Airbnb is to take a look at what their local market is like. Below are the average prices for all properties in a selection of 8 cities around the world.
Looking at Airbnb prices in this way gives you a baseline, although you can’t draw too many conclusions from it as these prices include every short-term rental in the market for that city – so you’re looking at the average price for every property (from penthouse to studio apartments), in every area in each city. However, with AllTheRooms Analytics’ Vacation Rental IQ product, our clients can receive tailored information for their specific property type. So rather than just “Average Price of an Airbnb in San Francisco” a host could receive data on the “Average Daily Rate of a Two-Bedroom Apartment in the Mission District of San Francisco”, amongst other insights.
How Much Should You Charge For Your Airbnb?
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 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 an apartment in Jersey City. 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 to compare prices with properties of the same size 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 coasts 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 is going to have significantly different prices than 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, 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 out in addition to the suggested price.
Setting the Price
Once all the research 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 a listing has a few positive reviews and it has gained sufficient traction, the price can then be justifiably raised.
For the tools to establish a profitable pricing strategy to reach your revenue goals, AllTheRooms Analytics provides insightful reporting on any vacation rental market. Contact us if you have any questions about our services.
What is ADR?
Average Daily Rate, often shortened to ADR, is one of the most important metrics used in the hotel industry and the vacation rental marketplace. ADR is one of the key performance indicators that informs hosts how much revenue is earned per room over a select time period.
As a factor of total revenue and occupancy rates, ADR tells property managers how profitable a particular accommodation is while allowing them to make side-by-side comparisons with nearby competitors. A high ADR represents a good litmus test in determining how well a property has performed in the past, as well as its outlook for the future.
How to calculate ADR
Calculating ADR is simple: take the total revenue generated, and divide it by the number of nights booked for a controlled period of time.
For example, let’s calculate the seasonal ADR for a three-bedroom beach house in Miami that produces a monthly revenue of $5,000. In this instance, if the property were booked 100% of the time, ADR would be calculated by dividing $5,000 by the total number of days in the month. As shown in the chart, the property would generate an average daily rate hovering around $165.
As most property managers know, an occupancy rate of 100% isn’t always realistic. In fact, an occupancy rate of 70% is generally considered excellent, regardless of the time or location. As occupancy rates naturally fluctuate due to intermittent bookings and maintenance needs, so too does the ADR.
The second chart changes the occupancy rate variable and shows how much the ADR must increase in order to produce the same monthly revenue. As we can see, the fewer nights an accommodation is booked, the more expensive its ADR needs to be.
How to increase ADR (Without Necessarily Charging More)
Increasing a property’s average daily rate is far more involved than simply boosting prices. Without a savvy management strategy that takes all factors into account, hosts risk a drop-off in the number of rooms sold and a decrease in the rooms’ revenue earned. Here are some tips on how to navigate a smart ADR management plan.
Optimize pricing: Seasonality, big-ticket events, and weekly fluctuations should all be taken into account when strategizing an ADR plan. Consider using dynamic pricing strategies that increase and decrease in accordance with peak seasons, weekends, and incoming events.
Keep an eye on competitors: Using unique data from AllTheRooms, hosts can actively monitor — and predict — how competitors tend to target their ADRs. This way, everyone from corporate hotel managers to single-property Airbnb hosts can stay one step ahead of the competition.
Use a property management software: Long gone are the days of manually managing properties across multiple third-party providers. Sign up for a property management software that consolidates your bookings, calendars, and payments in one user-friendly platform. This kind of software will also help advertise bookings across dozens of the internet’s top sites without having to worry about getting overbooked.
Offer incentives: Discounts for extended stays, upcharges on items like bikes, and complimentary gifts like coffee and snacks upon arrival are surefire ways to increase ADRs and keep guests coming back.
Host like a local: In today’s vacation rental marketplace, guests’ tastes are shifting away from the cookie-cutter experiences of hotels to accommodations that are personalized, tailored, and curated by an in-the-know local. Hosts who market their accommodations as local experiences with information on tours, nearby restaurants, laundry services, and other thoughtful tips tend to outperform those who don’t.
Encourage reviews: If the real estate mantra is “location, location, location,” the vacation rental mantra is “reviews, reviews, reviews.” Encouraging guests to leave positive reviews (often by leaving positive reviews of the guests) casts listings in a positive light and allows hosts to charge more.
The Bottom Line
Determining a property’s ADR is essential to creating competitive pricing strategies that maximize revenue. While the raw number is not entirely telling — it doesn’t take into account room cancellations or day-by-day spikes — it’s one of the tools necessary in building a sound vacation rental management strategy.
AllTheRooms Analytics helps property managers understand vacation rental landscapes with quantitative analysis, in-depth reports, and easily-digestible takeaways. Because we aggregate and catalog every room on the planet, our scope and data extend far beyond the competitors. To learn more about how our data can help you make informed decisions about property management, contact us.
Automatic Pricing For Vacation Rentals: Does It Work?
One of the most challenging aspects of effectively running a rental property is understanding how to price it. When the price is right, your rental is much more likely to get booked and generate more revenue — the ultimate goal of investing in a rental property. You’d think that having one standard nightly rate would work just fine, but this couldn’t be further from the truth.
Things to Consider When Setting Rental Prices
There are tons of factors to take into consideration when pricing vacation rentals. Things like long-term vs short-term rental properties, the neighborhood, high season vs low season, and local events happening at the time should be factored into the pricing model. Saying that pricing your unit is a mind-boggling endeavor is an understatement. If you choose to do it on your own, setting nightly rates is a job in itself.
Luckily, there’s a solution. More and more property owners and rental property managers are turning to automatic pricing to set their nightly rates. There’s no question that automatic pricing tools for setting nightly, weekly, and monthly rates on listing sites come in handy. But the real question is, does it work?
Common Mistakes Made When Pricing Vacation Rentals
Before determining if automatic rental pricing will work for you, it’s important to understand the common pricing mistakes when setting your rental rates. If these are mistakes that you have been known to make, automatic pricing might be able to help you.
Here are 5 of the most common errors when it comes to pricing a rental property on your own:
- Valuing the property based on personal opinion
- Comparing your rental to the wrong properties
- Focusing on short-term rental goals and not the long-term ones
- Failure to use a dynamic pricing model (one that changes based on what renters are willing to pay)
- Straying away from your specific property market value
The best way to avoid these mistakes is to understand that pricing your property is a balancing act. In other words, you should set the price as high as possible without running the risk of turning off your potential guests. You need to find that balance, that sweet spot when it comes to your property’s nightly rate.
How Automatic Pricing Works
There are a variety of automated pricing tools on the market, all generally working in the same way. Take Airbnb’s pricing tool as an example. USA Today says that “the concept is simple — take into account market conditions such as season and availability of other Airbnb rentals in the area along with other factors in order to determine pricing…”
To put things simply, an automatic pricing tool does all of the work in setting your nightly rates by considering all of the important factors to create the ideal rate. It does this by using a series of algorithms to take into account things like time of year, special events in the area, and price comparisons to properties similar to yours.
The Benefits of Using an Automatic Pricing System
No matter if you’re renting out your Airbnb beach property or managing hundreds of rentals in Florida, an automatic pricing system will determine the best possible price for your rental at that specific time. Airbnb, VRBO, or home-sharing — it doesn’t matter; with automatic pricing, you know that your rental is set to the optimal price.
With the right price, your property is much more likely to stay booked and keep a high occupancy rate, but this is not the only perk. When you invest in an automated system, you’ll save loads of time. You won’t have to constantly log into the property listing site to set each week’s prices. This can actually be very time consuming when done on your own, so you’re better off leaving it to the “robots”.
Are There Any Disadvantages to Automatic Pricing?
The main disadvantage of using an automated pricing system is that the nightly rate might be lower than you would set yourself, perhaps even significantly lower. It’s important to remember that there’s a reason for this lower rate. Sure, you won’t be getting as much per night, but the automated pricing tool chooses the price based on the best overall outcome.
Let’s put it in terms of solid numbers to give a clearer picture. Imagine that an automated pricing tool sets the rate at $70 per night during a slow month. You yourself would set it at $100, but with a lower rate, the rental is more likely to stay booked and keep a higher occupancy rate overall. With a rate of $70 a night, your rental stays busy with 85% occupancy. At $100, the occupancy is only 50%.
When you do the math, you’ll be getting about $1,750 per month with the $70 rate and only $1,500 when the rate is set at $100. The automatic pricer thinks about the best rate that will keep your place booked, but it’s not necessarily the price you would like to see.
What’s the Final Verdict on Automatic Pricing? Does it Work?
If you’re still on the fence about whether to automate pricing or not, it’s time to make a decision. Automatic pricing for vacation rental properties is 100% a good idea, and yes, it does work.
Try to let go of the fact that the nightly rate might not be what you were hoping for. Of course, there is a point where a rate is just too low and not even worth a booking. To avoid extremely low rates from being set by the automated system, you can use a price baseline to set a base value for your property.
It might be hard to admit that a computer can do the job better than you, but it is often the case for setting vacation rental prices. As long as you choose a proper automated pricing system for your specific type of vacation rental, the optimal price will always be set to keep it booked — and keep the rental income rolling in.
The Problem With Weekly Pricing For Vacation Rentals
Understanding how to price a vacation rental home for optimal income shouldn’t be that difficult, right? Contrary to popular belief, this is one aspect of vacation rental management that many rental owners and property managers struggle with the most. No matter how well everything else falls into place, understanding vacation rental pricing can feel like trying to conquer rocket science. To make things a bit more crystalized, we examined the downsides of weekly pricing for vacation rentals.
Factors that Determine a Rental Property’s Nightly Rate
Developing a pricing strategy depends on many things, including whether it is low or high season for tourism. Generally speaking, when an area is experiencing a high demand for short term rentals, nightly rates will go up. However, there is so much more to consider than just the rental demand and time of year.
Consider Available Amenities
As guests browse vacation rental booking sites, the first thing they do is head to the top of the listing site homepage to add filters based on the amenities offered. This allows them to filter out the undesirable rental property candidates early on, saving them time by weeding out the “definitely not” vacation rentals.
Offering amenities like onsite parking, A/C, fast internet, and even a hot tub is the best way to get the potential guest’s attention. It is also the best way to earn a higher rental income since it allows property owners to increase the nightly rate.
Consider the Cost of Running the Rental
Successful rental properties require many moving parts to work together, and most of these moving parts cost money. To keep property operations going, rental property investment is necessary. Nowhere in the world is it possible to find a property owner who doesn’t spend a dime on rental operational costs.
Property owners have to pay for services like housekeeping and products like toiletries. They also have mortgages, maintenance costs, and property management payments. All in all, there is no point in charging a rock bottom price if it doesn’t even cover the cost of keeping a rental business afloat.
Consider Comparable Rentals
The next step for property managers and owners handling rental real estate is to compare the property to similar ones in the area. This provides a lot of insight into what fellow rental owners are charging for similar properties. Using an automated pricing tool will consider comparable property rates, meaning less work for rental owners.
Consider What’s Happening in the Area
Always consider what’s happening in the area and upcoming local events before you price your vacation rental. For example, when major conventions hit Sin City, the price of rentals in Las Vegas skyrocket. No matter if it’s a convention in Las Vegas or Canada Day in Toronto, it’s always a good idea to increase the nightly rate when tourists are flocking to the area.
Nightly Pricing vs Weekly Pricing
Pricing a property based on a nightly rate is becoming the norm for vacation rental owners around the world. There is another option, though, and that is to price a property based on a weekly rate. This means that as a potential guest browses for vacation rentals, they will be charged based on a weekly rate rather than paying per night.
The weekly pricing model works for some property owners, especially those that are catering to family vacationers. Families tend to book their vacations for a full week, especially in family-friendly destinations. For rental owners who fall into the “family-friendly” property category, weekly pricing could work just fine.
During the high season when weekly vacation bookings are common, pricing a property based on a weekly rate will likely lead to a good amount of bookings. However, it is not recommended for rental owners and managers to always offer weekly rates. There is one major issue with it…What happens when a potential guest or family is only in town for five days, three days, or just one night?
That guest could stumble across your property, find it perfect in every way, but then see that it is only possible to rent for a full week. That guest will be forced to look into an alternative property, meaning you’ll lose out on the booking and the money that comes along with it.
Why Opt for Nightly Rates vs Weekly Pricing for Vacation Rentals
The scenario above is one of the main reasons to opt for nightly pricing instead of a weekly pricing model. Even if a rental owner does find weekly pricing for vacation rentals to be successful, there’s a good chance the property is losing out on potential bookings.
It makes sense to require a two-night booking minimum for certain reasons, but it does not make sense to cater to only weeklong stays. The most successful rental properties of today market to all guests, no matter if they wish to stay for two nights or two weeks. Of course, a host could always manually offer a discounted pricing structure once a guest does stay for a week or longer.
Keep in mind there is more work involved with a higher guest turnover rate. There will be a greater need for cleaning services, inventory like toilet paper and coffee grounds, and a solid channel manager. This increase in work is greatly made up for by the potential for a much higher rental income.
Why Opt for Dynamic Pricing vs Fixed Pricing
The Vacation Rental Management Blog has a lot to say about dynamic pricing: “If you want to stay as competitive as possible, a dynamic pricing tool would allow you to automate the research process and make comp sets – and the window they afford into the ever-changing pricing landscape of your market – a regular part of your day-to-day business decisions.”
Property owners hoping to stay ahead of the game and out book their competition should be utilizing a dynamic pricing model. Not only that, they should focus on offering nightly rather than weeklong rates.
How To Optimize Your Airbnb Pricing Strategy
Airbnb is a staple platform within the sharing economy that links vacation rental owners with eager potential guests. If you own a vacation rental business, it may be intimidating to set a pricing strategy in such an expansive and dynamic market. But have no fear; mapping out an effective and profitable pricing strategy is all about knowing your Airbnb property value and taking advantage of the features offered on the Airbnb platform. Here are some helpful tips on how to optimize your Airbnb pricing strategy to get the most out of your Airbnb listing.
Determine Your Market Value
The first step: know your market and how you measure up to competitors.
Before you determine the right prices for your Airbnb properties, you need to get an idea of the competition around you. This includes the prices of vacation rentals in your area, specifically the ones that are most like yours in size and location. You can utilize Airbnb’s property search feature to track the rental homes in your area. Make sure to compare your properties to other properties with legitimate reviews; you want to price your properties in relation to experienced hosts who charge at full market price, not beginner hosts who charge way below market price to attract their first guests (this will undervalue your place). You also want to review their calendars to see how successfully they are booking guests, determine their busiest times, and assess how their minimum stay rules affect their booking schedule. These are all factors to consider when sizing up the competition.
Your market value also depends on what your listing has to offer. You can optimize your listing by offering amenities, local flare, and 24/7 guest communication. Other factors to consider are a security deposit, cleaning fees, service fees, cancellation policy, and the number of (and quality of) reviews.
A common mistake first-time hosts and owners make is determining a rate and sticking with it, forever. You want your pricing strategy to be as dynamic as the rental market itself. Peak seasons come and go. Special occasions and events happen. Weekends are generally busier than weekdays. You want to stay on top of traveler trends in order to make sure your property value consistently matches the fluctuating level of demand. Automating your pricing strategy takes care of this for you. Allow guests to Instant Book your place without worrying that the price doesn’t match the current level of demand. Automated pricing services (like Wheelhouse, Beyond Pricing, and Keybee) detect changes in demand and adjust your prices to match the highs and lows. AllTheRooms Analytics also offers data-enabled insights around how to price your properties.
If you have more than one property, it might be a good idea to invest in property management services in order to keep tabs on all of your properties and prices in one place.
Know Airbnb Pricing Options
Airbnb offers certain pricing options. Determine which one will work best for you. Here are some of the most common and profitable options:
- Price Per Night: this pricing strategy is a simple way to charge your maximum price per night. This applies to both short-term and long-term rentals. It’s flexible and straightforward. You can sync all bookings into one calendar to manage price-per-night rental periods.
- Length of Stay: this is another popular pricing strategy. Airbnb hosts can set up the specific length of stay requirements that unlock discounts. These discounts will be automatically factored into the price at the check-out stage on the Airbnb site and app.
Know Your Rank
Your Airbnb ranking is how high in the search results you appear. Airbnb SEO tools take into consideration the number of key search words that appear in your Airbnb listing, as well as other factors like location and relevance. You can determine your rank by going into incognito mode and searching for your listing or Airbnb profile. Incognito mode helps you see what potential guests would see if they were to search on Airbnb or on other search engines. You want to increase Airbnb visibility by expertly following the tips listed so far: know your market and price your properties according to local trends. You don’t want your listing to be too far down in the search results. Guests don’t want to sift through pages and pages of rentals.
Charge Reasonable Extra Fees
Don’t shy away from charging extra fees. Nearly every Airbnb host charges standard extra fees, especially during peak travel months. Typical extra fees include a cleaning fee, service fee, and extra guest fee. Extra fees translate to added value for guests. For example, a cleaning fee indicates your home will be regularly taken care of; a security fee indicates your home is protected. Guests will often come to expect “hidden” fees at check-out, so don’t worry about scaring potential bookers away.
Make sure you charge reasonable extra fees that match the quality of service they cover. You don’t want to surprise your guests with disproportionate extra fees nor oversell the extra services you’re offering. When priced accurately, charging extra fees is a great way to boost your income per guest booking.
Offer Competitive Discounts & Promotions
Offering competitive discounts is a simple way to attract savvy travelers looking for the best value booking. Automated pricing tools allow Airbnb hosts to set up certain discounts for guests. You can set discounts for certain lengths of stay, times of the year, holidays, or for whenever you think you need to add a little extra flair to your listing. Discounts will automatically be factored in at check-out.
Another great way to advertise discounts or promotions is through social media. You can launch social media campaigns to offer giveaways or host competitions in order to increase social media engagement and attract more guests. The best thing about social media is the direct communication it offers. Social media platforms are a great place to flex your impressive response rate by getting in touch with people directly and in real-time.
Undercut the competition by offering special discounts and make your place a can’t-miss opportunity.