We spend a lot of time talking about how to vary your Airbnb prices based on demand and all kinds of factors. When Beyond Pricing launched over a year ago, all the buzz was about a “surge pricing” tool for Airbnb.
What we found, however, was that an even more chronic problem is that people often chronically under or over-price their place. One of the biggest problems is the fallacy of “comps” or comparable properties. Many people simply look at what their neighbors are charging. The problem with this is two-fold:
1. Your neighbor might be a Motel 6 while you’re a Marriott
Hotels are much more of a commodity so it’s easy for them to compare themselves to each other. They also have a standardized rating system called the Mobil Star Rating (read more about that here), which is where the term “Four-Star Hotel” comes from. Airbnbs and vacation rentals, however, don’t have a standardized quality rating. It’s much harder to compare yourself against your neighbor.
2. Your neighbor might not know what they’re doing when it comes to pricing
Copying your neighbor’s prices is like copying off one of your classmate’s tests. It can work, but you should never copy off of a D-student! Copying neighbors who are chronically under-priced or over-priced can leave you in as bad of shape as they are in. If you’re going to copy, make sure you copy off of an A-student / listing.
So the question remains: how do I figure out if my place is a Marriott or Motel 6?
First, let’s look at the wide range of prices that you can find for apartments with the same number of bedrooms in the same neighborhood.
Here’s an example of private rooms in Williamsburg in Brooklyn.
As you can see, there’s a big difference in prices. We even filtered for listings that have 3 or more reviews and were actively receiving bookings, to make sure the data was clean.
In trying to figure out where your places lies on that spectrum, you still want to start by looking at nearby listings. However, you want to pick listings that:
a. Are of the same quality If you have all new appliances, a loft, and a spotless place, look for others like that. If your place is older, well-lived-in, and maybe a bit cluttered, it’s better to look for those kinds of places.
b. Are receiving bookings over the next few months You can view their calendars and just make sure they are actually getting bookings at the prices they list. You can also look at whether or not they have any reviews, as well as when their last review was.
Once you’ve done this, you will have a ballpark idea of where you sit on that spectrum of prices.
But how do you really dial-in on what your true average nightly rate or “Base Price” should be?
The key to this is looking at how quickly you book up.
This is tricky and different in every market for every different type of listings.
Luckily, there are some great tools out there including Beyond Pricing that can help you.
Once you’ve set an average base price using the techniques above, you can easily monitor whether you are overbooked and underpriced, or underbooked and overpriced. When you’re just right, you know you’ve found the right Base Price.