When it comes to pricing your short-term rental, the instinct to adjust rates for more bookings can be tempting. However, we strongly advise against making any pricing changes until your sales funnel is effectively optimized. A poorly structured sales funnel not only leads to lost revenue but also increases wear and tear on your property, ultimately impacting your bottom line.
Finding the Right Balance
Striking the right balance between income and occupancy is crucial. While lower rates may achieve full occupancy, they don’t necessarily equate to maximum revenue. For example, consider two properties in the same area: one is directly on the water, while the other is ten streets back. The waterfront property can command a premium price due to its prime location, attracting guests willing to pay more for that experience. Conversely, the property further back may need to lower its rates to compete, potentially achieving 100% occupancy but at the cost of profitability. If you’ve been adjusting prices but still struggling with results, it may be worth reviewing why your Airbnb might not be performing as expected. A strategic approach is essential to ensure you’re not sacrificing long-term profitability for short-term occupancy gains.
Avoiding Single Pricing Strategies
We recommend avoiding single pricing models and arbitrary guesses for peak season rates. This often leads to missed opportunities to capitalize on high-demand periods. Instead, consider adopting dynamic pricing, which adjusts rates based on neighbourhood data and market trends. This approach allows you to remain competitive while maximizing potential earnings, ensuring that you’re not undervaluing your property compared to others.
The Limitations of Dynamic Pricing
While many hosts and property managers leverage dynamic pricing and find it beneficial, there’s a significant limitation: this approach often overlooks the unique characteristics of your property or its specific theme. This is a perfect example: For example, consider two properties in the same area: one is directly on the water, while the other is ten streets back. For instance, a property with a stunning view or luxurious amenities may not be adequately valued if it is priced the same as a standard listing in a similar neighbourhood. As a result, it may not accurately reflect your property’s true value in comparison to similar listings in your area, leading to lost revenue opportunities.
Introducing Predictive Pricing
In addition to dynamic pricing, predictive pricing offers another layer of sophistication to your pricing strategy. This advanced software, which integrates seamlessly with platforms like Airbnb, analyses various factors specific to your property to assess your likelihood of booking. Unlike dynamic pricing, which typically starts with higher rates and lowers them as the booking date approaches, predictive pricing provides valuable insights into:
- Price Maintenance or Increases: It can indicate whether you can maintain your current price or even raise it based on demand and occupancy forecasts.
- Booking Likelihood: Predictive pricing can inform you if there’s a low chance of booking on certain days, helping you avoid pricing too high and deterring potential guests.
- Market Competitiveness: This tool assesses whether your rates are aligned with market expectations, ensuring that you’re neither too expensive nor undervalued. For example, it might suggest that your waterfront property can maintain a higher price due to its unique features, while advising you to adjust the rates for the back property based on demand trends.
Moving Forward
Before making any pricing adjustments, focus on refining your sales funnel to capture potential guests effectively. Once your funnel is optimized, you can implement a comprehensive pricing strategy that incorporates dynamic and predictive pricing to maximize revenue while accurately reflecting your property’s value.
