Pricing Strategy: Ways To Maximize Your Profits on Airbnb
By Vanessa
How you price your Airbnb listing has a significant impact on your overall profit. We will talk about how to use this strategy to maximize your rental profits.
Airbnb Pricing
Airbnb pricing isn’t just based on the nightly rate you set as a host. Airbnb adds on several fees in addition to that:
• Airbnb service fee: The guest service fee charged by Airbnb—helps them offer 24/7 customer support. Airbnb charges 3% to hosts and 14% to guests
• Cleaning fee: Most hosts charge this fee to cover the cost of cleaning their space. This is to be determined by the host and goes directly to the host
• Extra guest fee: This is another fee determined by the host. For each guest beyond a specific number, a fee can be applied.
• Security deposit: Certain reservations may require a security deposit, which can be requested by the host or Airbnb
• Value added tax (VAT, JCT, and GST) is the surcharge applied to hotel prices for guests who live in certain countries.
• Local taxes: Taxes are charged based on where the host’s listing is located. State and city taxes are automatically charged to the guest for certain cities. In other locations, the taxes need to be charged by the host.
Tips to make your Airbnb pricing strategy more effective
If you are a newbie or have just recently entered the market and don’t yet have reviews to show for yourself – we recommend that you price your listing slightly lower than everyone else’s. This will get your listing ranked higher in Airbnb’s search results. In addition to this, Airbnb gives new listings a boost in the search results to get more visibility when they first launch. Combining this boost and a slightly lower price will attract people to give your home a chance, get a review on your page, and get the momentum going with your listing.
Airbnb also offers a New Listing Promotion option which provides 20% discounts for the first three bookings. This is a great way to start collecting reviews and getting some bookings!
After accumulating some 5-star reviews, you are now ready to optimize your pricing strategy. Here are four tips that will help maximize your profits.
1. Use a dynamic pricing tool
Constant monitoring and optimizing of the rates can be hard to stay on top of because the demand for listings changes seasonally, on weekends, or in response to local events.
A dynamic pricing tool will be your best friend to help you improve your Airbnb pricing strategy. Often times these tools generate significantly more revenue than their cost, and we’ve found using a pricing tool essential to maximizing the profits of a short-term vacation rental. Our favorite tool (PriceLabs) takes all of the above into consideration when deciding on the pricing of your home. It also allows for a ton of customization options (e.g. Discounted pricing during gap nights to fill the calendar) that give greater control of pricing without the stress constantly manually adjusting everything.
2. Make sure to adjust your prices accordingly for the season or local events
Different seasons and special events in the area can affect your nightly rate. A pricing tool will help with this, but it’s essential to keep track of what’s happening in your area that might affect your price. Not being aware of significant local events can cause hosts to leave a lot of money on the table.
3. Give promos and discounts
With Airbnb, you can create custom promotions and length-of-stay discount options. Discounts might even lead to a boost in your search rankings. A typical length of stay discount that hosts use is for stays longer than a week. This encourages people looking to book longer stays to look at your listing.
4. Drive up demand for your property
The best way to drive demand for your listing is by great marketing. Here are a few ways to properly market a property:
• Create a following on Instagram or other social media
• Build a direct booking website and use SEO to optimize your website
• Connect with local businesses and travel agents to promote your site with them
• Create an email list of previous guests and send out marketing newsletters
Doing these things consistently will help make your property more popular and in-demand, leading to higher prices and more bookings.
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