What to do if Airbnb’s Smart Pricing is too high/low

Figuring out how to calculate Airbnb prices is an essential part of being an Airbnb host. If you price your short-term rental (STR) too high, you risk turning away potential customers and getting no bookings. On the other hand, if you price it too low, you won’t be able to recoup expenses from operating and maintaining your property.

While you can always choose to monitor and adjust prices manually, hosts also have the option of using automated dynamic pricing tools such as Airbnb’s Smart Pricing feature to make the hosting process easier.

Learn more about dynamic pricing for Airbnb, its pros and cons, and what tools are currently available in the market below.

What is dynamic pricing for Airbnb?

Dynamic pricing for Airbnb is a revenue optimisation strategy that automatically adjusts STR prices based on demand-based factors such as property type, location, and seasonality. Rather than just using one static price throughout the year, dynamic pricing will automatically update rates based on current and predicted trends to keep your STR competitive in the market and help you earn more.

What is Airbnb’s Smart Pricing?

One example of a dynamic pricing tool is Airbnb’s Smart Pricing, a free feature built into the Airbnb platform. If hosts choose to enable Smart Pricing, it will automatically update a listing’s prices based on Airbnb’s pricing algorithm.

Airbnb’s Smart Pricing can be especially useful for first-time Airbnb hosts who have limited market data available, or for hosts struggling with low occupancy rates — switching this feature on can help them figure out if they’re pricing their STR incorrectly, without incurring any additional costs. 

How to enable Airbnb Smart Pricing:

1. Click Calendar and select the listing calendar you want to change
2. Click Pricing
3. Under Base price, click Smart Pricing
4. Enter a minimum and maximum price
5. Click Save

How does Airbnb’s Smart Pricing work​?

Once you enable Airbnb Smart Pricing, your property’s nightly rate will be automatically-calculated based on various internal datapoints, such as:

1. Property type: Amenities and number of rooms, relative to similar STRs in the area
2. Market demand: Adjusts prices based on the high/low season for your location.
3. Rating and availability: How many views your property has, how many calendar days it's available, and reviews from previous guests.

Is Airbnb’s Smart Pricing good?

Despite its many positives, it’s worth noting that Airbnb’s Smart Pricing isn’t infallible. Many hosts have brought up concerns about pricing being too high or too low, as well as these limitations: 

1. Incompatibility with weekend pricing: You’ll need to disable Smart Pricing if you want to set specific prices for weekend stays.
2. Potential conflicts with discounts: If you’ve enabled discounts, Smart Pricing may cause nightly rates to dip below the minimum price that you’ve set for your property. 
3. Guest-centric pricing: Prices can lean on the lower end of your preferred range to get quicker bookings.
4. Does not include data from other channels: Airbnb will refer only to its own data when it calculates your nightly rate, without referencing external data.
5. Does not consider market-wide dynamics for different types of guests: Smart Pricing does not differentiate pricing based on guest demographics —  for example, business travellers vs. vacationers or family-friendly properties vs. solo-travel accommodations. Hosts must manually adjust pricing based on expected guest segments, which Airbnb may not fully capture.
6. No local knowledge of events: You will need to manually increase pricing when local events take place in your area, as Smart Pricing cannot automatically do it for you.
7. Pricing does not push through to other channels: If your listing is available on other STR hosting platforms, you’ll need to manually update the prices for those listings.

If you’re finding that the prices set by Airbnb’s Smart Pricing are too high or too low, consider taking these actions:

1. Update your minimum and maximum prices: Adjust your minimum and maximum prices to a range you’re more comfortable with.
2. Manual override on specific dates: Disable Smart Pricing on specific dates and set prices manually, especially during peak season or during local events.
3. Enable custom rule-sets: If you’re working with professional hosting tools or an Airbnb manager, they will be able to customise pricing and availability based on specific rules.

Need some help figuring out how to price your STR? We can help. Get in touch with us for tips on how you can maximise your earnings.

How does Hometime set pricing?

Just like Airbnb, Hometime also uses dynamic pricing strategies to determine the right price for your STR property and help you earn more. 

Before enabling dynamic pricing, we first set a base price for your property using internal and external data points regarding similar properties in the area. This is updated periodically based on its performance (past, current, and future) and any long-term changes in the market.

Once the base price is determined, dynamic pricing is then applied, taking the following into account:

1. Seasonality: Pricing increases during peak season and decreases during off-peak seasons, especially for properties in highly seasonal markets like the Northern Territory and Northern Queensland.
2. Day of week: Prices trend higher on weekends due to greater demand, while it trends lower on weekdays due to less demand and to fill in any booking gaps.
3. Booking lead time: Hometime changes pricing depending on how far ahead or how last-minute a customer makes their booking.
4. Holiday and event pricing: Our pricing algorithm is more responsive during  holidays and events to capitalise on these brief peak periods.
5. Booking pace: Pricing updates in line with real-time booking pace, or the number of bookings currently being made for a listing. We increase the price when booking pace is high and decrease it when booking pace is low.
6. Market customisations: Hometime’s dynamic pricing algorithms are not applied uniformly across all markets — how much each of the aforementioned pricing factors affect a property’s prices will vary depending on its location.
7. Manual pricing override: Our in-house pricing experts may also manually adjust pricing and minimum night settings for your property to maximise revenue.

Here's an example of what your nightly rate might look like (assuming a base price of 100 AUD) after it's adjusted for seasonality, with up to a 32% increase during peak seasons and a 30% decrease during off-peak seasons:

Take a look at this video from Dale and Abdullah from Hometime's Revenue Management team to learn how our dynamic pricing algorithm works:

Airbnb Smart Pricing vs Hometime dynamic pricing

Maximise Airbnb revenue with management services from Hometime

Managing your STR property’s pricing and optimising its revenue is always possible, but many Airbnb owners find that working with professional Airbnb managers makes a difference. Hometime brings extensive market knowledge and sophisticated pricing tools to help optimise your property's performance and maximise your returns.

If you’d like to find out how you can earn more with Hometime’s revenue optimisation services, get in touch with us.