Many real estate investors use Airbnb to generate monthly cash flow. But what’s the right price for your property? Charging too much or too little creates problems no Airbnber needs.
Good news – you can set the perfect Airbnb price with the Mashvisor Airbnb pricing strategy below. In addition, you’ll learn step-by-step instructions on how to price your Airbnb.
1. Review Property Location
Your first step to the ideal Airbnb pricing model is to consider where the property is located. The location dictates demand, which influences the price.
Is your Airbnb situated near popular tourist attractions? Some popular destinations include state parks, museums, water parks, and amusement parks.
For example, an Airbnb a mile off the Las Vegas Strip would likely have a higher daily rate than a condo 20 miles away.
When Airbnb is near year-round attractions, a higher price makes sense for most of the year.
But if the property is in a city with seasonal tourist activity, property demand varies. So your Airbnb business strategy must reflect that.
Let’s use San Antonio, Texas, as an example. San Antonio is home to the famed Riverwalk and Alamo in the heart of the city. These are the top tourist attractions in Alamo City, but demand fluctuates.
US News and World Reports say the best times for tourists to visit San Antonio are from November to April. This is when rates are lower. But more visitors flock to popular South Texas tourist spots in the summer. So your Airbnb pricing strategy will need tweaking based on the time of year.
Also, think about setting a higher price for weekends. That’s when more people hit the road. Most Airbnb veterans use Airbnb weekend pricing that’s about 10% higher than the weekday rate. This is a simple tip that can add 10% or more to your monthly cash flow.
2. Think About About Amenities And Property Type
The next step is to review the type of Airbnb property and its amenities. If your Airbnb is the basics – a bed, kitchen, bathroom – your price will be lower. But if the property has a massive hot tub, deck, and a view, this bumps up the price.
Another primary consideration is the property type. A small condominium for the budget-conscious traveler will have a budget price. But a luxurious five-bedroom home appeals to the higher-end client.
Remember to charge less for a smaller home with shared communal spaces.
And that brings us to your competitors. What are they up to?
3. Consider Your Competition
Your Airbnb guest will check your price vs. the competition. So think about what other property owners charge. If you want travelers to click on your site most of the time, then you need to offer more benefits for a lower price.
Review your nearby Airbnb competition as part of your Airbnb pricing strategy. If you set a higher price with fewer property benefits, you’ll have more vacancies than you want. But if you put it the same or lower, your bookings will rise.
Also, check how many competitors you have within one or two miles of the property location. Is the area is teeming with Airbnbs in your price range? You might consider using the maximum fill rate or balanced Airbnb pricing method. But if your side of town has few Airbnbers, you may opt for the maximum nightly rate strategy.
Keep in mind that you can use Mashvior’s property finder tool to dig for profitable investments in any market across the US. Your task is made easy thanks to the ability to filter results based on the following criteria:
- Property Type
- Optimal Rental Strategy
- Return on Investment
- Listing Price
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4. Describe Your Ideal Guest
The type of guest is also essential to consider in your Airbnb pricing strategy. Does the property have luxury amenities that appeal to wealthy clients? Then set the price at the maximum rate. This shows you offer guests an extravagant vacation spot with plenty of pampering.
If the home is for more thrifty travelers, such as students, the nightly price should reflect that.
Next, think more about visitor groups that might love what you offer. For example, does the property appeal to young families with small children? Let’s say it has a swing set and trampoline in the backyard.
Or does it have a large master bedroom with a fireplace and hot tub? It could be what a honeymooning couple wants.
Different groups of Airbnb visitors will have different expectations of your accommodations. So, you should tailor your property and vacation rental pricing strategy with this in mind. The nightly prices can shift based on the type of guest you want.
5. Estimate Property Expenses
Your goal is to maximize your return on investment. This means pricing the property to beat competitors. And it also means having a price that is more than the expenses.
Before you arrive at a nightly rate, add up the expenses for managing the property. Double-check that the nightly rate is enough to pay for all expenses while leaving a profit.
Some expenses to consider in your analysis include:
- Service fees
- Cleaning costs to keep the property immaculate for new guests
- Maintenance and repair costs
- Restocking bathroom, kitchen, and other supplies
If you’re starting with Airbnb, feel free to talk to other Airbnb owners and investors. That will help get a handle on what your monthly expenses will be.
6. Use Property Analysis
There are many variables when establishing your Airbnb pricing strategy. But don’t worry – there are plenty of helpful tools to make the pricing process simpler.
For example, try the Airbnb property calculator. This tool offers real estate investors a comprehensive rental strategy comparison. It helps you determine the strategy that generates the most revenue for the property. The comparison shows you the difference in:
- Rental income
- Cash flow
- Cash on Cash (CoC) return
- Capitalization rate
- Occupancy rate
- Monthly expenses
7. Establish Length Of Stay (LOS) Pricing
Another cool part of Airbnb’s platform: You can offer weekly or even monthly discounts by setting up LOS pricing.
It’s vital to have a LOS discount as part of your Airbnb pricing strategy. LOS pricing is a fantastic way to encourage guests to consider a more extended stay. Plus, your listing will appeal to guests already searching for a place for a more extended visit.
You might think it doesn’t make sense to drop the price for a long-term stay.
But think about it: Your property will stand out from others, and it increases your occupancy rate. And you have less cleaning and administrative work with a longer-term guest.
How much discount should you offer for a monthly guest? It helps to perform some additional local research to find out what other owners are up to. A rule of thumb is to offer a 10-20% discount for a weekly or monthly stay, but the number could be higher or lower in your town.
8. Remember The Cleaning Fee
It’s essential to include a reasonable cleaning fee for your Airbnb rental property. The cleaning fee is for each stay and is a separate charge on the client’s Airbnb billing statement.
Many Airbnb real estate investors use the fee to pay for home maintenance, maid services, and washing bed linens. But the savvy Airbnb investors also can boost their monthly income with the cleaning fee.
If you want to increase your return on investment, try three or four cleaning fees over one month. Then, review how many guests booked your property.
And think about what the cleaning fee says to your guests. For example, a $25 cleaning fee might encourage them to keep things tidy. But if you set the price at $100, the guests may feel free to leave the home dirtier than they found it.
No doubt about it – setting a proper cleaning free is essential to your Airbnb pricing strategy.
9. Understand the Airbnb Platform
You can perform all the Airbnb pricing strategy research outlined in this blog. But if you don’t understand how to use the Airbnb platform, you’re leaving cash on the table.
But no worries – it’s simpler to grasp the platform’s basics. One of the most critical aspects is how to set the property’s nightly rate. Here’s how to do it:
- Go to Your Listings and choose the property you want to add a price to
- Click Pricing
- Click edit, which is by Nightly price
- Provide the nightly price and click Save
Airbnb also has valuable tools to help you establish a market price for your listing.
For instance, the platform will suggest a starting price. But most experienced Airbnb users say you shouldn’t rely on this number.
Another option is the Airbnb Smart Pricing tool. It allows you to automate your property’s pricing according to supply and demand, amenities, and property type. This tool also considers local attractions and events, property reviews, and more.
But some property owners maintain the suggested prices are too low. So you’re always best off by performing your own Airbnb pricing strategy to get the most revenue.
Also, we mentioned automating pricing above. This is desirable because adjusting your prices every day takes too much time. It’s especially true if you own several Airbnbs.
Automation streamlines your business to increase cash flow.
10. Understand the Minimum Price Threshold
You should understand by now how important setting your nightly cost is. But you also need to set your minimum price threshold. This is the bottom line number you will book your property for.
It’s different from the nightly cost because the minimum price threshold can be lower. For instance, if your 2-bedroom home’s nightly cost is $250 and you don’t get a booking, that’s a loss of $250.
But let’s say you get a booking with the minimum threshold of $175. This isn’t ideal, but think about it: Would you rather lose $250 or $75? The smart Airbnber knows that part of something always beats 100% of zero!
How to know when you should drop to your minimum threshold? Some experts recommend using the minimum threshold afternoon on the day you want to book. But don’t ever go under the minimum threshold.
The reason is the law of diminishing returns. This is when the benefit you receive is less than the time and money invested. In real estate investing, the law of diminishing returns works like this:
If you set your Airbnb price too low, you’re asking for trouble. You may have guests that damage the walls, smoke, and burn the carpeting. Naturally, you’ll spend time and money fixing the damage.
Unfortunately, guests who want the lowest possible price are often messier. They also tend to be less responsible and considerate. So, you rented your Airbnb, but you got a headache in return.
There reaches a point when it’s best to have the property vacant. That’s how the minimum threshold helps you.
On a related note, you should consider the potential guest’s avatar. One Airbnb guest isn’t the same as another. You will love hosting certain people and want them to come back. And others, you may wish to never to come back. If you have been an Airbnber for a few months, you understand!
There are proven ways you can attract the ideal guest. For example, use language in the property description they’ll understand. A family with small children will respond to a description that mentions child-friendly amenities. Add high-resolution images of the rooms so they can imagine themselves there.
The bottom line here is knowing the guest’s avatar will help you set your minimum price threshold.
Conclusion
Now you know how to set your Airbnb’s price. Still looking for help?
Mashvisor offers Airbnb investment owners an impressive assortment of tools to find properties. It also helps you price them correctly and much more.
Rely on Mashvisor to assist you with gathering the required Airbnb data and setting your Airbnb pricing strategy. Give us a try today!