Whether you are the manager of a sole income generating Airbnb property, or you have hundreds of Airbnb properties under your rental portfolio, there is a common question that plagues all Airbnb rental property managers: “How much should I charge for my Airbnb rental property?”
The answer to this question will depend heavily on your specific rental property. The size of your property, local market, amenities, number of guests it accommodates, and plenty of other factors come into consideration when choosing the right nightly rate for your specific property. However, there are a few ways you can price your rental property to ensure you are staying competitive within the market, all while ensuring the costs of owning your property are covered and maximizing your potential for direct bookings.
The easiest way to price your Airbnb property is to find similar properties in your area, and base your pricing model off these properties. This ensures you are offering a fair price for your property type in your area, so long as you have assessed your property correctly.
A couple of things to take into consideration when it comes to your property and using a market-based pricing model:
If you list a full apartment in Manhattan that sleeps 4 people, and also has a washer, TV, and a kitchen, we can see the general range of these properties in this area is around $300-600 (with a few anomalies on the low and high ends).
The apartments listed on the high-end of this range have a few extra amenities, and quality furniture to supplement. The low end properties have only these amenities, and the general appearance leaves a lot to be desired. If your property features a few extra amenities and quality furniture, you could assume that a fair price for your property is $450-$500.
While market-based pricing is a great pricing model to ensure you are staying competitive, it fails to address a critical question: “How can I be sure my costs are covered?” Enter the cost-based pricing model for your Airbnb rental property.
Cost based pricing ensures that the price you are listing your property at is at minimum equal to the total costs of your rental property. This is calculated by adding up the total monthly cost of your rental property and dividing that sum by 30 (the average days in a month).
Costs you should include in your total are:
Let’s say you have a monthly mortgage payment of $900, your gas bill is $140, your electric bill is $170, your water bill is $70, and your cable/internet bill is $130. For this example, we will say our cleaning fees are added on as a separate cost, and are not included in the total cost. Here is how we calculate our minimum nightly rate:
Formula: Total Monthly Costs/30
900+140+170+$70+130 = $1410 Total Monthly Cost
$1410/30= $47 minimum nightly rate
Using our example costs, the minimum nightly rate we could charge is $47 per night. Remember, this is just to breakeven on your total costs. To turn a profit, you will need to charge more than the breakeven price!
If you are a vacation/short term rental property manager with hundreds of rental properties under your supervision, keeping track of your listing prices and changing them manually can be a next to impossible task. Luckily, there are several options available that provide you with the ability to automate your pricing based on seasonality, market conditions, and other factors that affect your listing prices.
Airbnb offers their own automated pricing tool, which they call smart pricing. This tool uses the current market conditions and compares them to listings that are similar to yours, generating an automated price for your Airbnb listing.
There are mixed reviews on Airbnb’s smart pricing tool, but the general consensus among users is that the tool prices your Airbnb listings too low. There is wide speculation that the reasoning behind the low pricing is to remain competitive with hotels, who Airbnb shares the short term rental market with.
There are a wide variety of third party automated Airbnb pricing tools available, each with their own pricing algorithms and features. Many of these pricing tools integrate seamlessly with your vacation rental management software, allowing you to view all of your essential property management metrics in one place.
These third party pricing tools take hours of work off the plate for rental property managers, and most consider them essential for efficient channel management. Some of the most recommended third party automated pricing tools include:
Beyond Pricing offers automated Airbnb pricing, and promises that the pricing is updated nightly to adapt to demand changes. The tool also allows you to see an estimated model of your listing price for a whole year, and offers market insight as to why the price has changed. You can find reviews for Beyond pricing here.
Wheelhouse is similar to beyond pricing, with a few slight alterations. Their estimated future listing price model only goes six months out, but the platform is heavily customizable and allows for a great deal of manual options to meet your specific management needs. You can find reviews for Wheelhouse here.
Pricelabs is another great automated pricing tool, and claims to be the most user friendly on the market. This tool offers the same market data analysis as the other tools, but also mentions that the pricing model takes local events into consideration. You can find reviews for Pricelabs here.
Disclaimer: We do not recommend or give preference to any certain automated pricing tool over another. Read the reviews, evaluate the pros and cons, and determine the best fit for your rental property management needs when choosing an automated pricing tool.
If you want to price your airbnb property manually, you should use a healthy mixture of both the market-based and cost-based pricing models. First, use the cost-based pricing model to figure out the bare minimum you can charge per night and not lose money. Now you have a number in your head that you know you should never dip below (unless for discounts or last-minute offerings).
Then, you can use the market-based pricing model to assess your property based on location, property type, amenities and quality, to determine an accurate price range for your Airbnb rental property. This range gives you an idea of how much profit you can make per month off your property, assuming you are booked every night of the month. Using both models allows you to look at the whole picture of your property, and adjust the price accordingly.
If you are a property manager supervising many Airbnb properties at once, a third party automated pricing tool may be your best option. Automating your pricing can save you a significant amount of time, allowing you more free time to manage your properties. Scan the features associated with each pricing tool, read reviews, and determine the right pricing tool for your rental property needs. Based on the reviews from Airbnb’s smart pricing users, this pricing tool is not recommended.