In order to have a successful Airbnb listing, you’ll need to have an effective pricing strategy in place.
By carefully planning your strategy, your Airbnb listing can bring in a higher income than ever before; allowing you to create suitable pricing that works best for you and your guests.
There’s a lot to take into consideration when creating the perfect pricing strategy for your property. Let’s take a look at what steps you need to take below:
#1 Understanding Your Finances
Starting an Airbnb or short-term rental may have just been a way for you to earn some extra money, or maybe you have monthly overheads on a property that need to be paid. Either way, you should treat your rental accommodation as a business – because it is.
In business, the worst thing that can happen is for you to be at a financial loss. You should work out your monthly and yearly costs for running your rental before estimating any prices for your listing. Take into consideration any costs for renovation and maintenance of your space, including your overheads too.
When you have worked out your overheads for the month or the year, work out your break-even point; where the cost of production (renovation, upkeep and bills) is even to the revenue (income).
It’s important that you work out how much you would need to receive per night or per rental to secure your finances. For example:
Your mortgage = £1,000 per month (12,000 per year)
Bills (water, gas, electric, council tax, internet etc.) = Approx. £400 per month (£4,800 per month)
Your renovation = £2,000
Total = £18,800
You will need to secure an income of £18,800 per year as a minimum to cover your costs for that year – this is your break-even point.
Next, divide your totaled yearly amount (£18,800) by how many nights/weeks/months you can rent your space out (example: 52 weeks) and that will help to give you your minimum price tag.
Example: £18,800 divided by 52 weeks = £346.15 per week.
With the example above, you would need to rent your space out for a minimum of £346.15 per week in order to hit your break-even point.
Business isn’t just about getting your money back; why put all that effort into something if you’re not going to maximise your income?
#2 Your Local Competition and Area
When putting together a successful pricing strategy, you’ll need to conduct some research of your own by analyzing the competition – other Airbnb’s in your area and general surroundings.
In order to understand the ideal pricing for your Airbnb, take a look at similar properties being offered on Airbnb and focus on your properties features. For example, if you have:
- Four bedrooms
- Two Bathrooms
- A large garden
Then, you should take a look at which properties in your area offer similar amenities to get a good idea of what the standard prices are. Your prices will vary greatly depending on what your property has to offer a guest.
Try to find properties as similar to yours as possible, a shabby four-bedroom house will price differently to a four-bedroom boutique styled house even if they’re in the same area.
Consider your target guest too when looking at local listings, make sure to take into account who your competitors Airbnb cater for, as this will help you with your strategy.
For example, if you are a pet or disability friendly property, you should look to see if you have a unique listing in your area as that will allow you to increase your prices purely because you have less competition.
Unfortunately, if you skip this research stage and/or price your Airbnb too high considering the location, you could miss out on bookings and overall income. The same applies if you undervalue your Airbnb, your property is missing its true potential and your profits could suffer.
Checking your local competition is a must for success.
#3 Fluctuate your Prices
To become a landlord with a good pricing strategy, you need to rent your space out at different prices throughout the year.
Based on your location and target audience, you will have specific peak seasons and days. For example, if your Airbnb was located in Snowden, Wales or London, England – your peak times would vary slightly from each other.
If your peak seasons are: June, July and August, then this should be your most profitable time. However, in the months such as February, March and April, you may notice you don’t get many bookings or that your competitors have lowered their prices, you should lower your prices too, in order to remain competitive.
This rule applies for weekdays and weekends too, typically, weekdays are less likely to be booked out so, consider decreasing your prices to allow your listing to seem extra tempting to flexible bookers.
Be sure to keep in mind, public holidays, school holidays and special events in your area; you could potentially charge more for these specific dates. Be on top of when and why guests are looking for accommodation in your area.
#4 Offer Extra Services
You should offer guests a great stay and go above and beyond their expectations, but at what cost? Sometimes, you should charge extra on top for additional services.
Your guests will likely be happy to pay for additional services if it’s of good value to them. They may need an extra bed, or an extra person added to their booking; you should charge a small fairly priced fee.
However, if you are hiring professional cleaners, or restocking toiletries before their stay, you should ensure that the price is covered in the rental price, not as an extra charge.
Not charging for additional services is one of the ways that landlords can lose potential income on their rental.
Be strategic with your costs and allow your guests to feel that they are receiving what they initially paid for, if they want extra services – they should expect to pay an extra fee. Make sure to be fair with your extra costs.
Read now: 7 Ways to Make More Money on Your Airbnb
#5 Discounts for longer stays
When hosting on Airbnb, the platform is primarily used for short-term rentals, however, it works well for longer rentals too. Having longer rentals means that you don’t have to handle the changeover of guests, as well as, not having to pay for regular cleaning.
Your pricing strategy should reflect this. If your costs are reduced, it would be beneficial for you to reduce your price for lengthy stays.
By offering weekly and monthly discounts, you can attract longer term renters, helping you stay booked up for longer and more income, not to mention – it’ll be less hassle all around.
#6 Charge more for Short Stays
With short-term stays, they’re not always cost effective, particularly for only 1 or 2 nights. At your standard nightly rate, it wouldn’t make sense to host if your costs outweighed your revenue. You could be paying a lot for cleaning and managing your short-term guests booking.
Is it really worth it?
Two ways to avoid losing money and dealing with the inconvenience of short bookings is to:
- Charge more per night
- Set minimum stays (+/- 2 days)
- Charge more per night
Increasing your prices for the first few nights for your short-stay guests will ensure that your costs have been met and the booking is worth your time. This strategy can also persuade guests to increase their duration for their stay and ultimately allow them to feel that they’re getting good value for their money.
- Setting minimum stays
If there is an event near your rental space, such as, a festival, your Airbnb may only be rented out for 1 night. Loosing you a lot of potential income. By setting up minimum durations of how short a guest stays can be, may help you to stay booked for longer and ensure your income.
We recommend making your minimum stay a minimum of two nights, to keep your listing appealing.
#7 Use A Strategy Mastermind
When it comes to setting your prices, there’s a fine line between too much or too little on your price tag. How are you supposed to know whether or not you’re optimising your properties income? It can be really confusing and daunting when you’re not sure of what’s right or wrong.
Consider hiring a professional pricing strategist to get the most out of your rental. A lot of Airbnb hosts choose to seek help from a reliable rental management company to help create their perfect pricing strategy.
Read now: Benefits of Employing a Residential Management Company This Summer
Speak to one of our pricing strategy specialists here, at Keey. We help you ensure that you’re getting the best out of your property’s potential.