RAISE YOUR PRICES
Let’s talk about 4 good reasons to raise your prices. We’re going to talk about why most of you should be raising your prices indiscriminately across all your properties across the board. There are some good reasons why. First, let's give you the four reason. Then I’m going to tell you how to track, and finally what you should base your prices off of as like a baseline before raising or lowering your prices.
SEO Advantage
Reason number one to raise your prices more than normal your listing is new this is an SEO advantage. If your listing is new, you have three months that you're going to be more visible than anybody else just because your listings new. This gives you the opportunity to charge more money you're going to get more view. This means more bookings right? The way you look at this is like look at it look at it like a funnel.
For every 100 views if you get two bookings it's a two percent conversion. If your rates are higher you might only get a one point five or one percent conversion but if you're going to get 50% more views or 100 percent more views for the first three months then you're fine with half the conversion and higher margins.
Also, remember now people's reviews say how much they paid for the listing you want your reviews to say you've charged more money right that's good so listing new to this leads into the next one because when your listings new you also get a twenty percent off for new customers coupon so you should charge more money when you have a coupon this is another conversion rate thing so when someone sees that get this special discount.
Let’s look at Kohl's. They have the same model. They mark everything up just to mark it down forty percent off. The sale price is actually their their target price anyway. If you have a coupon raise your rates more so that way the coupon brings you down towards your target rate makes sense you're still going to collect the same amount of money but you'll get a higher conversion percentage because people want the coupon life is good that's how that works.
A third reason to raise your rates is when your calendar is open. This is because you're going to be more visible in searches. This is another SEO consideration: the more dates you have available the more valuable your property is because the more types of guests you can accommodate. You accommodate a three-month long stay or a one-month long stay two-week long stay. The moment you have a three-day booking one weekend in the middle of your calendar, it ruins your ability to have that month-long stay.
A fourth reason to raise your rates is if you plan on doing a long-term discount. I do this all the time I jack my nightly rates up really high just so that way I can offer 50 or 60 percent off for the month. Yes, I still get single night bookings at these rates. I never thought people would pay a single night booking for so I’m making really good money on my single nights and then 50-60 percent off on the month-long reservations. This gives me more long-term stays which gives me less churn. This in turn gives me less operations load when there are less guests to attend to in and out. Guest turnover is the bulk of working in Airbnb business. It takes time to check in and check out, do the cleaning and the turnover. If you have a longer term stays it's just better for your business.
How you should set your price
How should you set your price? Every city is different and this this is the part where you're going to have to take a few philosophies away from this section. I’m going to give you two main ones that I use.
First, let's look at four-star hotels. They have a certain nightly price and I want you to base your competitivestrategy against four-star hotels and nightly prices. If your unit can occupy two guests, compare it with a king suite at a four-star hotel. Try to measure your prices based off of theirs for your bookings that are further into the future. When it gets closer to the date of arrival you want to take aggressive action on these listings to make sure that they get fully booked. If you have more occupancy than a hotel it might seem hard to do this,but there's a solution.
Take a double suite, for example, one that has two queen beds that can occupy four people. Find out what the nightly rate is for that double suite and divide that by four that is your weighted nightly rate per occupant at your competitor hotel. Do this at few local hotels that are most relevant to your area and get that weighted nightly per occupant cost. Then take how many occupants your listing can take multiply your occupant number by that number so if a hotel is $180 a night for a double suite then that's $45 per person. Your ten person listing should be able to charge four hundred and fifty dollars a night.
These listings will get booked more in the future. The bigger the property, the farther out your big bookings will come. Six weeks, eight weeks, ten weeks from now you'll get those groups at ten twelve or fifteen now.When it's a month from now three weeks from now there will be less large groups and more small groups traveling so you want to start to scale your listings prices down closer towards a competitive rate for a group of two or three or four. Those are the sizes of the groups that are going to book on shorter notice. That $450 a night listing for ten occupants will become a hundred dollars a night or $135 a night a week out. Or ten days out, you might even go as low as sixty to eighty dollars a night day of for that property that you know can get $450a night for. Does this sound crazy?
The other way to base your prices get on Airbnb, do some research in your local area, and find out what other people are listing for. Try to find the more expensive listings that are on instant book. Then go into their calendar and check availability when you go to click their calendar, the grayed out dates will indicate wherethe listing is unavailable and you will be able to see dates where the listing is available. You might be thinkingthink that those grayed out dates might be because they decided just not to list their property those few days.You can actually tell which hosts are actively listing their property full time their listing and which hosts listing part time.
When you look around your area look for the hosts that you can tell that this is a full time Airbnb listing. That way it's on instant book the only days are ever grayed out are days that are booked. Take a look at those and the ones that are getting bookings and that are the most expensive. That's the rate you want to start looking at to set your prices. If you perform well then slowly raise your prices.
Restaurant example – slowly raising prices
Restaurants use the same technique described aboev. If their chairs are always full then they're not charging enough for their food. In a restaurant, if you have 50 tables and 50 of them are full of guests.
Fullly booked
50 tables booked (50 tables available)
x
4 plates per table
x
$15 per plate
= $3,000 total
Another scenario
48 tables booked (50 tables available)
x
4 plates per table
x
$17 per plate ($2 increase per plate)
= $3,264 (+$264)
In the second scenario, you lost $120 on the eight plates that didn't eat but then you got an extra $384 on the plates that did.
The next step is to slowly raise your rates until you don't have a hundred percent occupancy you. You should continue to evaluate and raise your rates some more until you're around 94 percent occupancy. The best way to do that is to get your big bookings far out and you slowly lower your rates further and further in and you will get about 90 to 95 percent occupancy.
If you manage your rates properly there are two additional resources available for you to better understandhow you should set your rates. The first one is called Air DNA and the second is called Wheelhouse.
AirDNA
Air DNA will give you a graphic representation of what you should charge. The graph is based on percentiles: what the lower 25% charge is what the median is with upper 25% charges and also what those occupancies are. You cannot tell which a listing is also at the top of its occupancy and the top of its percentile for a listed price. Air DNA will give you some valuable insights on your area.
Prices: $19/month, $39/month, $99/month
Prices vary depending on market size
While AirDNA provides valuable information, I think this is actually not a good resource for hosts that are totally new to Airbnb. You really have to understand the Airbnb platform so you can fully understand theinformation that AirDNA provides. You’re provided with analytics, and if you don't understand the Airbnb it's going to give you some information that you won't have the appropriate context.
Wheelhouse
https://www.usewheelhouse.com/
Pricing varies
Another pricing resource is wheelhouse. They charge you 1% to automate your pricing strategy. They alsohave a free portion of the software if you choose not to automate your services through wheelhouse. With the free services you can load your profiles up they still keep your data, which helps them. They'll give you pricingrecommendations based on their analytics and their algorithm. You can then manually change your prices based on their recommendations.
The big takeaway here is raise your prices! When I do consulting calls with Airbnb hosts, I consistently find that the hosts I talk to are charging way too little. This is the conversation I have in response to learning of the low pricing.
1. We talk about your pricing and restructure it.
You'd be surprised how many hosts I talk to that are selling themselves short. The reason they are doing thisbecause they are looking at their costs. The actual costs of your Airbnb business can be broken down into categories: rent or my mortgage, utilities, furnishings, guest supplies, cleaning expenses, etc. You can determine a good estimate of your fixed costs.
Once you have your fixed costs, you can decide that you want your revenue to be a specific factor of your costs. For example, you might want to double or triple what your costs are and you might set that as a goal. You might know 70% occupancy is required to hit a certain target, so you just calculate how much per night to charge in order to hit the target you want.
What you’re doing is kind of like reverse engineering your price based on your income goals. There's nothing wrong with that, but you're definitely not maximizing profit. Business is about maximizing your profit not just hitting your little income goals. Remember, you're not an Airbnb host anymore you are a business owner. Run your Aibnb property like a business. Make a lot of money. That's why we're here: to build a better life not just cover our rent.
