Airbnb dynamic pricing is a game-changer in the short-term rental world, but many hosts and property managers still find it confusing. What exactly is it, and how can it help you boost your rates, fill up your calendar, and maximize profits? In this guide, we’ll demystify dynamic pricing, break down why it's essential for success, and explore the top tools available to help you stay ahead of the competition.
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What is Airbnb dynamic pricing?
Dynamic pricing is the best Airbnb pricing strategy for boosting the performance of a short-term rental property. This refers to a pricing strategy that assigns different daily rates for each night based on the current and forward-looking demand in the local market as well as the supply of similar listings. In this way, Airbnb dynamic pricing is opposed to static pricing, where a STR is listed for the same price every day.
The need for dynamic pricing is based on the fact that the Airbnb industry is ever-changing, with multiple factors at play at all times. The vacation rental market is seasonal, and demand from guests varies widely from one month to another and from one day to another.
The main factors driving seasonality in Airbnb demand include:
- Seasons of the year: First and foremost, most of the top short-term rental markets experience seasonal demand. For instance, beach resorts are popular in the summer, while ski destinations get booked in the winter. Only large metro cities tend to experience relatively uniform tourist activities year-round.
- Days of the week: Vacation destinations get more tourists over the weekend, while popular business hubs welcome more visitors during weekdays.
- School vacations: Generally speaking, the summer vacation, winter break, and spring break witness more travel activities, especially from families with children.
- Holidays: People tend to travel more and look for vacation rentals during holiday seasons, such as Christmas, New Year, Easter, 4th of July, Thanksgiving, and others.
- Local events: Finally, major local events such as the Super Bowl, U.S. Open, concerts, and conferences cause a temporary spike in searches on Airbnb.
Airbnb hosts and managers need to be aware of the peak season and the slow season in their market and build their dynamic pricing strategy around it.
Why is dynamic pricing important?
Applying an Airbnb dynamic pricing strategy is crucial because it allows you to maximize the revenue that your short-term rental generates. By adjusting daily rates according to changes in demand from guests, you can strike the optimal balance between nightly prices and Airbnb occupancy rate.
If your daily rates are too high, you won't be getting many bookings, and this will lead to low income. In case your rates are unreasonably high in the low season, you might even end up with zero income. Meanwhile, if your prices are too low, you will get plenty of reservations but leave money on the table by not charging higher rates.
Let's take a look at an example to make things clearer.
As an Airbnb host, you have set the base price of your beachfront listing at $200/night, and that's the rate that you charge throughout the year. In the summer, your property is occupied 90% of the time, so you make $5,400/month. However, due to the top location and the strong demand, you could easily charge $260/night in the summer months and still have your listing booked for 90% of the time, earning $7,020/month. This means that you are losing $1,620/month in the summer by not pricing your Airbnb dynamically.
However, in the winter months, you have a 20% occupancy rate, so your revenue is $1,200/month. If you lower your rate to $150, you'll be able to double the occupancy rate to 40%, leading to an income of $1,800/month. So, in the winter months, you're losing $600/month by not offering a lower nightly price.
This example illustrates the financial benefits of implementing dynamic pricing to your Airbnb listing. It's also important to keep in mind that Airbnb search results work in a way that prioritizes competitively priced listings in order to provide guests with more value. So, setting up daily rates that are aligned with demand in the area and with the rates of competitors helps your listing rank higher, get more exposure, and bring more bookings.
Does Airbnb have dynamic pricing tools?
In 2015, Airbnb launched Airbnb Smart Pricing, the platform's proprietary dynamic pricing tool. This tool is available to all hosts and is optional. Hosts can choose whether to have it switched on for automatic dynamic pricing or turned off for delivering the rates set up by the host. Moreover, it's absolutely free to use.
The Smart Pricing tool recommends dynamic daily rates and directly pushes them to the listing. The algorithm uses hundreds of factors to calculate the optimal price and adjust it on your listing. The main factors that Airbnb incorporates include:
- Listing details including the property type, the location, the available amenities, and the number and quality of guest reviews
- Guest search activity in the area including how many users are looking for rentals in the local market for specific dates
- Local bookings including the reservations of listings with comparable features and amenities
The Airbnb dynamic pricing tool takes into consideration the base, minimum, and maximum rates set up by the host and does not go outside the preferred range.
The most important advantages of Smart Pricing over third-party dynamic pricing tools is that it uses Airbnb's own data and an Airbnb-built algorithm to calculate the recommended daily rates. This means that its suggestions are based on the most accurate source of STR data in terms of competitors' rates, bookings, and occupancies.
However, hosts and property managers who have used Airbnb Smart Pricing complain that the algorithm pushes unnecessarily low prices in an attempt to maximize occupancy without considering the negative impact on overall earnings. Thus, many STR operators opt for third-party options that prioritize overall revenue rather than just occupancy.
How dynamic pricing works on Vrbo
As the second most popular platform for vacation rental hosts, Vrbo doesn't have a built-in dynamic pricing tool in the same way that Airbnb does. Instead, Vrbo allows hosts to customize their pricing strategy including:
- Base rate
- Customized rates by day of the week
- Weekly discounts
- Monthly discounts
In early 2024, Vrbo introduced a new feature, Rates Automation, which is meant to act as a dynamic pricing tool. The feature has not been widely advertised by the platform, but it's been a subject of discussion by users of the BiggerPockets forum. According to comments there, currently Vrbo Rates Automation is available to only a few thousand Vrbo hosts, but the idea is that it will eventually be accessible to everyone listing on the website. Despite the limited availability, hosts are already complaining about the poor functionality of the tool and recommend working out your own dynamic pricing strategy instead.
How dynamic pricing works on Booking.com
Meanwhile, Booking.com offers Genius Dynamic Pricing, a dynamic pricing tool available to Genius partners.
To join the Genius program, a property needs to:
- Be open and bookable on the platform
- Have at least three guest reviews
- Have a review score of at least 7.5
Genius Dynamic Pricing is powered by a machine-learning algorithm that adjusts discounts based on specific business needs. The algorithm automatically switches off discounts when the listing is expected to meet the occupancy targets set up by the host. Alternatively, discounts get turned on and are increased when the property seems to be falling behind on occupancy targets.
In comparison with Airbnb Smart Pricing and third-party tools, Booking.com Genius Dynamic Pricing is less sophisticated and more clunky. It doesn't adjust prices based on competitors' and guests' behavior and dynamics in the market, focusing exclusively on the occupancy targets of the host. As such, the tool overprioritizes occupancy instead of emphasizing optimal revenue.
Using dynamic pricing software
As the built-in dynamic pricing tools of the three largest and most popular short-term rental websites suffer from major flaws, many hosts and property managers resort to the use of third-party software. STR pricing tools connect with listings on Airbnb, Vrbo, Booking.com, and other listing platforms to recommend optimal rates and automatically push them on the relevant website. They collect vacation rental data from Airbnb and other platforms and apply their own calculations to come up with the best price for each rental night.
The main advantage of third-party Airbnb dynamic pricing tools is that they generally aim to maximize income rather than occupancy, which makes them more efficient than Airbnb Smart Pricing and Booking.com Genius Dynamic Pricing.
On the flip side, using dynamic pricing software often has a monthly subscription fee, is subject to technical problems, and is not always as reliable as promised.
The best dynamic pricing tools for Airbnb
Choosing the right Airbnb pricing tools should be based on solid research and multiple factors to ensure optimal results. After all, the success of your entire Airbnb endeavor depends on how good and relevant your nightly prices are.
In our selection of the best dynamic pricing software for vacation rental properties, we focused on the following factors:
- Short-term rental data sources
- Focus on revenue optimization rather than occupancy maximization
- Direct integration with Airbnb and other booking channels
- Subscription cost
- Customer reviews
- Value for money
Based on these criteria, the best Airbnb dynamic pricing tools for hosts and property managers include the following.
1. Wheelhouse
Wheelhouse is the top dynamic pricing software available to Airbnb hosts and managers. This is the only tool on the market that allows you to choose between:
- Data-driven pricing strategy
- Rules-based pricing strategy
- Hybrid pricing strategy that benefits from both data and rules to optimize rates
This flexibility allows hosts to customize and refine their short-term rental pricing approach to the specific needs and considerations of their market and property for optimal results. Our Wheelhouse review shows that the platform collects and analyzes data from 21 million listings on all major OTAs on a daily basis to recommend the most relevant nightly prices. Users report an average boost in revenue of 21% as the software concentrates on maximizing income (rather than occupancy) which matters the most to owners.
In terms of cost, Wheelhouse customers can choose between a commission-based model (equivalent to 1% of revenue for a minimum of $2.99/month) and a flat fee of $19.99/listing/month. Both plans benefit from discounts for multiple listings.
The most important pros of Wheelhouse include:
- Only dynamic pricing software that offers a hybrid/mixed strategy
- Superior customization options
- Data from Airbnb, Vrbo, and other OTAs
- Focus on booking revenue
- Additional features to boost revenue
- Sizable increase in income
- Ease of use
- Flexible and affordable cost
Some cons of Wheelhouse to keep in mind comprise:
- Lack of direct integration with Airbnb and Vrbo (done via a third-party PMS)
- Different costs for access to different products
2. Beyond
Beyond is another popular Airbnb dynamic pricing tool that aims to help hosts and property managers make more money from their vacation rentals. The Beyond dynamic pricing tool analyzes billions of short-term rental data points every day to price listings competitively. What makes Beyond different from competitors is the incorporation of real-time consumer demand data into the pricing algorithm. In this way, the tool is able to boost nightly revenue by as much as 40%.
Beyond focuses on the following factors when estimating demand and automating pricing:
- Seasonality
- Search demand
- Local demand
- Days of the week
Meanwhile, users retain as much control over their pricing strategy as they want by being able to adjust:
- Base price
- Minimum price
- Extra guest fees
- Price overrides
- Minimum stay
- Changeover days
Access to the Beyond dynamic pricing tool costs 1% of bookings, with higher cost for access to more revenue management tools.
The main pros of Beyond are:
- Dynamic pricing for Airbnb, Vrbo, Booking.com, Escapia, and other booking channels
- Custom options
- Scalability
Major cons of Beyond include:
- Some functional limitations compared to alternatives
- No discounts for large portfolios
3. PriceLabs
Our PriceLabs review positions them as another Airbnb dynamic pricing tool that's used by both individual hosts and professional property managers. The PriceLabs dynamic pricing algorithm follows five steps:
- Data collection from Airbnb, Vrbo, and Booking.com
- Hyper-local market demand analysis
- Integration with listing's historical performance and upcoming booking data
- Custom recommendations for each night in the calendar
- Daily syncs with booking platforms and PMSs
PriceLabs has built its proprietary algorithm, called Hyper Local Pulse (HLP), that uses hyper local data and insights to recommend prices that aim to increase revenue.
The cost of PriceLabs Airbnb dynamic pricing starts at $19.99/month or 1% of booking revenue.
Some key pros of PriceLabs to take into consideration include:
- Integration with Airbnb, Vrbo, and 110+ Airbnb management software tools
- Revenue optimization
- Hyper local data usage
The most considerable cons of PriceLabs are:
- Complex dashboard and usability, especially for beginners
- Suboptimal proposed daily rates, as reported by customers
4. AirDNA Smart Rates
AirDNA also has its own dynamic pricing tool, called Smart Rates. Similar to competitors, AirDNA Smart Rates automates Airbnb dynamic pricing to help hosts and property managers boost earnings.
Our AirDNA review shows that users can choose between a more aggressive strategy that maximizes daily rates, a more conservative approach that optimizes occupancy, and a balanced model that goes in-between. The factors that the AirDNA algorithm takes into consideration when recommending nightly prices include:
- Day and seasonal trends
- Market demand
- Lead time insights
The cost of the AirDNA dynamic pricing tool starts at $125/month when billed monthly for up to five listings, which can make it significantly more expensive than other options. The reason for this is that dynamic pricing comes along with a wide range of other features which hosts might need or not need.
The most significant pros of AirDNA Smart Rates are:
- Access to numerous additional Airbnb data tools
- Flexibility to choose your preferred dynamic pricing strategy
- Data coming from Airbnb, Vrbo, and partner listings
The main cons of AirDNA Smart Rates are:
- Complicated interface
- Poor data quality in some markets, as reported by users
- Expensive AirDNA pricing
5. Mashvisor Dynamic Pricing
While it's better known for the tools that it offers for finding and analyzing vacation rental investment opportunities, Mashvisor also has an Airbnb dynamic pricing tool. The tool uses AI-powered technology that increases the earning potential of listings.
Our Mashvisor review reveals that dynamic prices are based on:
- Demand
- Seasonality
- Booking history
The smart calendar offered by Mashvisor allows customers to customize their pricing strategy, override suggested rates, and sync with the Airbnb calendar. Meanwhile, the company website does not specify the average boost in revenue that hosts and property managers have been able to achieve with their tool.
The cost of the Mashvisor Airbnb Dynamic Pricing tool starts at $9.99/property/month.
The most considerable pros of Mashvisor Airbnb Dynamic Pricing include:
- Access to Airbnb data and analytics for different purposes
- Focus on income optimization
- Somewhat flexible pricing strategy
Some major cons of Mashvisor Airbnb Dynamic Pricing comprise:
- Use of Airbnb data only
- Integration with Airbnb only
- Poor data quality in some locations, as reported in customer reviews
6. Guesty PriceOptimizer
Last on the list of our top Airbnb dynamic pricing tools is the Guesty PriceOptimizer. As a comprehensive PMS, Guesty offers the PriceOptimizer as an add-on tool to help hosts and property managers take the guesswork away from pricing their listings.
The Guesty PriceOptimizer aligns daily rates with:
- Market trends
- Local events
- Demand
Our detailed Guesty review reveals that customers can retain control over their short-term rental pricing strategy by setting up parameters and rules. They can choose seasonal minimum and maximum prices and other options to fine-tune their strategy.
In terms of cost, the PriceOptimizer comes as an add-on, so it's not included in the Guesty subscription plans, but it's not clear what the additional price is.
The main pros of Guesty are:
- Integration with multiple listing platforms and channel managers
- Part of a suite of STR management tools
- Emphasis on revenue
- Customizable pricing strategy
The most important cons of Guesty include:
- Unspecified algorithm
- Unclear cost
- Too many features for individual hosts
Bottom line
Setting up a dynamic pricing strategy for your Airbnb is the right way to maximize revenue by striking the best balance between daily rates and occupancy in line with seasonal changes and local trends. To automate the process, it's a smart move to use one of the best software tools available to hosts and property managers in order to save time and effort. Nevertheless, even with the top tools, keep an eye on your nightly prices as technology is prone to errors.
Airbnb hosts and property managers who are looking for the best way to optimize the management of their portfolio via data-driven decisions should check out Summer Forecast. Our short-term rental data and analytics offer an unmatched level of accuracy, helping you make smarter investment decisions for your portfolio.
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