Short term rental property hosts and managers know that dynamic pricing based on supply and demand is at the core of maximizing revenue and profitability. This strategy requires access to a reliable tool that allows vacation rental operators to automate the process of continuously analyzing guest behavior and competitor performance. Airbnb developed its own tool - Smart Pricing - to help vacation rental operators launch their own dynamic pricing strategy. But is Airbnb Smart Pricing worth it?
In brief: No, not really. According to customer reviews, Airbnb Smart Pricing overprioritizes optimizing occupancy rates while downplaying the importance of revenue maximization, which means many hosts found that they left money on the table. Keep reading to learn more about how this tool works and some alternatives.
What Is the Airbnb Smart Pricing Tool?
Airbnb introduced Smart Pricing in November 2015, a few years after the launch of its vacation rental platform. The tool is designed to help hosts set up automatic dynamic pricing for rentals listed on the website. Dynamic pricing refers to a vacation rental pricing strategy that constantly adjusts daily rates to take into consideration alterations in supply and demand in the local short term rental market to optimize results for hosts.
Airbnb explains that their tool aims to address changes in travel trends in the area by adjusting nightly rates based on demand. The tool looks at multiple factors related to the property, the market, and potential guests to recommend and set up rates that increase occupancy. Smart Pricing can be turned on and off at any point and for any listing, depending on the host's preferences.
Having said that, it's important to note that the Airbnb algorithm focuses on lowering rates in a way that maximizes the Airbnb occupancy rate and does not pay enough attention to the ultimate goal of owners to optimize revenue and profit. Since Airbnb income is the product of daily rates and occupancy rates, both of these values have to be optimized to enhance revenue.
Who the Airbnb Smart Pricing Tool Is Best For
Airbnb Smart Pricing can help different types of short term rental operators improve the performance of properties in their portfolio.
The types of users who can benefit the most from the Airbnb tool include:
- Beginner hosts with little knowledge of the local market and limited access to third-party data sources
- Part-time hosts who do not rely on Airbnb revenue to make a living
- Airbnb investors looking for passive income from their vacation rental(s)
- New short term rental property managers who are just getting started and operate on a limited budget
At the same time, this automatic pricing mechanism is not generally a good fit for:
- Hands-on investors who want to be in charge of their listing and maximizing revenue
- Full-time investors who make a living from their listings
- Experienced hosts who have in-depth knowledge of the local market
- Professional property managers who develop their own pricing strategies to optimize results for owners and themselves
- Hosts and managers who apply different discounts and promotions to bring the best possible performance for properties in their portfolio
All in all, Smart Pricing is a good option for those who don't have the expertise, time, and resources to conduct ongoing research on trends in the local market and do not want to use third-party tools for whatever reasons, whether cost or complexity. However, it is not the right choice for owners and managers who have access to more efficient solutions to apply dynamic pricing that focuses on revenue (and profit) rather than occupancy.
How Much Does the Airbnb Smart Pricing Tool Cost?
The Airbnb platform offers the automated dynamic pricing option for absolutely free as long as you have a host account. Smart Pricing is included in the Airbnb host fees that are typically equivalent to 3% of the booking revenue subtotal. It's important to note that turning Smart Pricing on or off does not change the fees that hosts need to pay to the platform, so it is free to use in this sense.
Airbnb does not impose any requirements for hosts to be eligible to activate the Smart Pricing option. It's available for all listings and to all hosts.
How the Airbnb Smart Pricing Tool Works
Hosts can choose when to turn Smart Pricing on and off, depending on how much control they want to have over their Airbnb pricing strategy.
The Smart Pricing tool algorithm takes into account numerous factors about the property, the location, and guests when making recommendations, such as:
- Listing details: Property type and size, location, amenities, guest reviews, and others
- Search activity: How many guests are searching for listings in the area for certain dates
- Bookings: How many listings are getting booked in the area with focus on similar property types with comparable amenities
Smart Pricing can be turned on and off whether you want to apply the dynamic pricing strategy suggested by Airbnb or your own plan. This is done by going to your Airbnb host account and selecting Calendar => Pricing => Base Price => Smart Pricing.
You can also set up the following values to ensure that the rates recommended by Airbnb are in line with your strategy:
- Base price
- Minimum price
- Maximum price
In addition, hosts and Airbnb managers can override the Smart Pricing rates for specific nights by setting custom prices for them. Discounts for weekly and monthly rentals as well as trip length automatically override Smart Pricing. Using weekend pricing, however, requires switching Smart Pricing off. In general, hosts should be careful when applying discounts together with the dynamic pricing tool to make sure that nightly prices don't go below their absolute minimum value.
One of the best features of Airbnb Smart Pricing is that it automatically pushes recommended prices to listings, so owners and managers don't need to update them on their properties.
Let's look at an example to fully understand how the Airbnb tool for Smart Pricing works. A host switches it on for their listing and sets up a minimum price of $120/night and a maximum price of $180/night. The Airbnb algorithm starts analyzing demand, searches, and bookings as well as competitors' prices in the local market. There is an upcoming concert in the area a month from now, so guests are looking for rentals. Smart Pricing automatically sets up the daily rates for the days before, during, and after the concert to $180 without the intervention of the host.
In other words, the tool assigns prices between the minimum and the maximum rates for each night when the listing is available for booking based on demand and guest behavior.
Airbnb Smart Pricing Tool Reviews
There are no customer reviews of Airbnb Smart Pricing on third-party review websites like Trustpilot and BBB. However, there are discussions of the product on various vacation rental and other online forums including:
Some hosts are happy with Smart Pricing and use it for the management of their short term rentals.
However, in their Smart Pricing reviews, the majority of hosts share negative experiences that eventually led many of them to permanently turn it off. The most common complaint is that the recommended rates are absurdly low, which makes users think that the algorithm does not actually use performance data at all.
Owners frequently report that Airbnb suggests rates that are barely a fraction of what they are usually able to rent their property for. Some of them recommend setting up strict minimums that you are comfortable with rather than relying on Airbnb to push whatever price it thinks makes sense for the listing. In general, hosts don't report performance boosts and revenue increases after switching to Airbnb Smart Pricing.
Airbnb Smart Pricing Pros and Cons
Using the dynamic pricing option provided by the Airbnb website comes with some important advantages and disadvantages that hosts and property managers need to consider carefully before deciding whether to use it.
The most important benefits of turning Smart Pricing on are:
- Automatic dynamic pricing to boost occupancy
- Algorithm based on Airbnb's own logic and data
- Free to use
- Ability to set a minimum and a maximum price
- No need to integrate third-party pricing tools
Meanwhile, the main drawbacks of the Airbnb Smart Pricing tool include:
- Recommended rates being frequently too low
- Revenue not being maximized
- No applicability for listings on Vrbo, Booking.com, and other platforms
Airbnb Smart Pricing Tool Alternatives
Airbnb Smart Pricing may help increase your occupancy rate if that's the primary problem your properties are facing. However, because of the focus on bookings rather than revenue, this is not necessarily one of the best Airbnb pricing tools for operators in the vacation rental industry.
Instead, Airbnb hosts and managers should consider the top Smart Pricing competitors listed below.
Wheelhouse vs Airbnb Smart Pricing Tool
Our Wheelhouse review found that it was one of the best dynamic pricing tool for hosts and managers with portfolios of different sizes, from a single property to 5,000+ listings. The tool is the first one to allow users to combine data-driven and rule-based approaches to truly optimize their Airbnb pricing strategy. The platform uses billions of data points to recommend the optimal prices for each time a listing is available for rent. In addition, hosts can set up multiple rules to finetune their strategy based on their expertise on the local market. The average increase in revenue that users who switch to the product report is 20.6%.
In addition, Wheelhouse offers a user-friendly platform and an intuitive UI that comes with zero learning curve. This means that owners and managers can get started in a matter of minutes. Importantly, unlike Airbnb Smart Pricing, Wheelhouse dynamic pricing can be used for listings on Airbnb, Booking.com, and Vrbo via third-party PMS integrations. The tool provides many other integrations with the best Airbnb management software products so that users can automate and streamline their entire management process.
As of posting this article, Wheelhouse allows hosts and managers to choose between a commission-based model and a flat fee for the cost of the dynamic pricing feature. The commission is set at 1% of booking revenue for a minimum of $2.99/month, with discounts available for 50+ listings. The flat rate is $19.99/listing per month for 1-9 rentals and $16.99/listing per month for 10-49 rentals, with further discounts available for 50+ listings.
Beyond vs Airbnb Smart Pricing Tool
Beyond, formerly Beyond Pricing, is one of the most popular Airbnb Smart Pricing alternatives. The tool is mostly recommended for its straightforwardness and simplicity, which generally makes it a good choice for new, small-scale hosts and vacation rental property managers. However, this comes with limited options to customize your pricing strategy.
Similar to other dynamic pricing tools, Beyond takes into consideration seasonality, guest searches, demand, and days of the week to recommend nightly rates for improved performance. Users can set up a minimum rate and a maximum rate but cannot choose between data-driven and rule-based techniques. Hosts report a boost in revenue of up to 40%, but the average increase is not provided.
As of posting this article, Beyond charges 1% of booking revenue for their dynamic pricing feature.
PriceLabs vs Airbnb Smart Pricing Tool
PriceLabs is another Airbnb Smart Pricing competitor that is significantly more sophisticated, yet also much more complicated to use than Beyond. This tool can be used by different types of hosts and property managers but is generally recommended for those with larger portfolios.
PriceLabs uses a proprietary algorithm called Hyper Local Pulse (HLP) to collect data from local comps and recommend pricing based on seasonality, days of the week, events, holidays, pacing, and lead time. Owners can choose the base rate, minimum price, maximum price, minimum stay, orphan day pricing, and other filters. According to PriceLabs, their dynamic pricing algorithm helps boost both occupancy rates and revenue, but they do not report the average increase in income.
As of posting this article, the PriceLabs dynamic pricing feature price starts at $19.99/month or 1% of booking.
Is Smart Pricing on Airbnb a Good Idea?
Airbnb's Smart Pricing tool enables hosts and property managers to automate their pricing to optimize occupancy rates. The tool can be easily toggled on and off, allowing flexibility based on individual needs. However, many users report that while Smart Pricing may increase bookings, it often does so by lowering prices too much, which can reduce overall revenue. For short-term rental operators, maximizing income—not just occupancy—is the ultimate goal. As a result, many hosts and managers may need to consider alternative dynamic pricing tools that better align with their financial objectives.
