Does dynamic pricing work?

Sean Bramble

Investor · United States · Member since 2020 · 202 posts · 285 votes

Maximizing revenue may mean a different type of guest is booking altogether, and you'll have to decide if it's worth it to you. Different types of guests book w/ shorter lead times and lower prices (and vice versa). I've noticed in my listing that our low season attracts more difficult guests bc our prices are lower ... but to me i'd rather attract a difficult guest instead of letting it sit vacant. Cost of doing business.

The only real way around this is to operate higher end listings that will garner a relatively high ADR even when you have to lower your prices to boost occupancy ... better quality listings attract a different consumer group altogether with a much higher willingness to pay.

Longwinded way of saying that it's not Pricelabs' fault ;)

2 Reply

Jason Regan

Investor · Leominster Ma · Member since 2019 · 305 posts · 162 votes

Dynamic pricing in my opinion is a must. My ADR is around 275 to 300 a night but on heavy nights like vacations and Xmas it can be as high as 500 a night. If I didn't have dynamic pricing to do it I would have to figure it all out myself. Also, It allows me to set different stay lengths and pricing based on how close its getting to the day that's not filled

Lisa LoeselBusiness Member

OP

Property Manager · Milwaukee, WI · Member since 2021 · 24 posts · 34 votes

@Andrew Steffens Thank you! It sounds like Beyond is worth a try if you are willing to pay the price. I haven't heard of RevMax, I will definitely look into that as well.

Short & Suite Home Stay Management

John UnderwoodPro Member

Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes

It works but it's not perfect. I don't see it charging enough for peak time and holidays.

I'm still good with the manual method.

2 Reply

Lisa LoeselBusiness Member

OP

Property Manager · Milwaukee, WI · Member since 2021 · 24 posts · 34 votes

@Sean Bramble I definitely agree it's a different kind of guest that is booking last minute and also at a lower rate, but I would expect a dynamic pricing tool to be pricing appropriately to actually get bookings. For some of my properties, my vacancy rate was abnormally high during the time I used Pricelabs on top of the less than desirable guests. I would maybe (and that's a big maybe) take the less desirable guests to maximize revenue, but it's tough to make the argument that you actually are maximizing revenue if your place is sitting empty when in past years it wouldn't have been. Could be the market changing, but I think that's less likely as one of my properties did so well.

Also, I would say I do technically operate higher end listings, at least for my area. My lowest price of the year on my least expensive property is $200/night up to $1800/night for my most expensive property in peak season with ADR ranging from $285 up to $650/night. The guest who had to be removed by the police paid $710 for one night. I would have thought that was a high enough price to deter that kind of behavior & in the past it has been. He booked less than a week in advance though, so it feels like that's definitely part of the problem.

Short & Suite Home Stay Management

Bruce WoodruffPro Member

Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes

We tried Pricelabs for a while last fall. Didn't care for it, and our bookings actually declined. Back to doing it myself.

Not saying anything is wrong with Pricelabs, it just wasn't for me....

Andrew SteffensBusiness Member

Tampa, FL · Member since 2022 · 4k+ posts · 3k+ votes

[email protected]813-563-0877

Quote from @Lisa Loesel:

@Andrew Steffens Thank you! It sounds like Beyond is worth a try if you are willing to pay the price. I haven't heard of RevMax, I will definitely look into that as well.

Yes it is potentially worth it for sure. We are going to RevMax because it is owned by Streamline which is out software provider. It is seemless and we gota good deal and it appears it will do everything we need it to

Vacation Rentals of Florida53 Reviews

Brian Barch

Member since 2022 · 272 posts · 253 votes

I could have asked OPs same question 2 months ago.

The prior owners of our cabin priced it the same price every day of the year. This led to being booked well out into the future, and a 79% occupancy in a market that averages 67%. It also keeps things simple and predictable. That said, we had to inherit a booking for thanksgiving at less than half the rate it should have booked at.

we have a PM that uses Pricelabs and checks it daily. The idea behind pricelabs is to maximize revenue, not occupancy. I think this can sometimes run counter to an STR owners intuition. A "desperate" guest will pay more than a planful one.

it’s hard for me to compare which strategy is better. Pricelabs netted me 2X+ per night on the days between Xmas and new years. But the booking lead time is perhaps 2-3 weeks, which is more anxiety inducing than having bookings come in 2-3 months ahead of time. Pricelabs strategy almost guarantees I won’t get a booking 3 months out, it prices the days so expensive, once again trying to book a desperate guest over a planful one.

my guess is pricelabs leads to more $? Sometimes I wrestle with the moral component……do I really want to gouge someone at $600/night on a holiday? Do I really want to penalize the planful people? I’m currently alienating any guests that leave my place happy and want to book the same dates for next year

Michael BaumPro Member

Olympia, WA · Member since 2016 · 8k+ posts · 7k+ votes

Hey @Lisa Loesel, I am one of the few that doesn't use dynamic pricing. I have a flat rate each day, every day. July 4th is the same as Feb 4th.

I have lowered my rates for winter once in a while with zero results. No one really wants to be on a lake in Idaho in the winter. You can watch the ice floe move back and forth in front of the house and the river otters goofing around but that is about it.

I am sure I could make a bit more but I personally hate booking a place with variable pricing. I never know what I am paying until the end. I think the families we cater to appreciate the flat rate so they can plan accordingly.

Regarding booking quickly way ahead of time, that is going to be dependent on location and popularity. Our place is very popular and there aren't a ton of choices so it gets booked up quickly. We are usually booked 80% by end of Feb. The rest fills in until we are solid through Oct.

We are getting bookings now for 2024. All my research says my pricing is pretty much spot on, maybe a little under market. I like to make it easy for a family of 5 to come and have fun on the lake without going broke. I am still hitting 23% CoC so I am happy all the way around.

Joseph Stoll

Member since 2019 · 9 posts · 5 votes

Quote from @Lisa Loesel:

Curious about others experience with pricing algorithms. I started Pricelabs in September & I've had some odd experiences & it's been hard to evaluate its efficacy.

I have been short term renting in an urban market for 10 years & have always relied on my market knowledge to set pricing. I recently tried Pricelabs as I am always willing to try something that could improve my revenue. This market is definitely changing making it hard to determine if certain results are due to market shift or the dynamic pricing. I know people are waiting longer to book, making for more last minute bookings than in the past. I also understand that is a basic concept behind the algorithm, i.e if you are fully booked 6 months out, your pricing is too low. But my experience since September has been that people that book at the last minute aren't great guests. No that's not always true, but I've had an abnormally high amount of issues since starting with Pricelabs. In 10 years & hosting thousands of stays, I had to call the police & have guests physically removed from the property for the first time in October. I've had to deal with guest issues I just haven't seen in the past. So, is that the market changing or is that the Pricelabs methodology attracting a different kind of guest?

During our shoulder season, bookings dwindled down to very low occupancy...in all but one of my properties. This one property had a pretty decent November & the best December I've ever had with that property. It is 6 blocks from my other properties, similar amenities, similar decor, the only difference is it's my first property so a lot more reviews than the others & it has a city view that the others don't have. So, does the algorithm work that much better for properties that have more reviews? If so, shouldn't the pricing adjust to reflect that to make sure the other properties are still getting bookings?

I pay close attention to my local market & consistently run searches to check my competition and their calendars. I don't feel like the vacancy I experienced was reflective of the market.

After such a slow October, November, December & staring down the barrel of a completely dead calendar for the next 3 months, I finally gave up on Pricelabs about a week ago & started manually adjusting my prices again & was able to book several stays over the next few weeks. I loosely used the Beyond pricing method (pricing up or down 5% daily based on current occupancy). Because that worked so well, I would consider trying Beyond, but not excited about spending more time, money & energy on this. I like the idea of pricing being automated & not leaving money on the table, but Pricelabs just didn't do what I expected/wanted it to.

Has anyone used both Pricelabs & Beyond and think one works better than the other? Also, anyone else in an urban market have a similar experience with Pricelabs? I have heard many hosts say it's amazing so I'm wondering if it doesn't work as well in an urban market vs a true vacation rental area?

Any feedback from other STR owners is appreciated!

I tried both of them, and found they are way more work than they're worth.

All these software programs rely on you manually inputting the base price first, so it can set the nightly rates. That's ridiculous in my opinion, it should automatically tell me what the optimal base rate is at all times, and set the nightly rates automatically.

I say know your market, know your competition, and manually set your rates accordingly.

Maybe in a few more years they'll be there, but right now I'd vote no.

Leslie Anne Morris

Real Estate Agent · Smoky Mountains, TN · Member since 2022 · 1k+ posts · 984 votes

I have ran both price labs and beyond side by side. Beyond greatly outperforms PL. Greater swings in revenue while PL is more static. They either leave money on the table or keep the property empty by not dipping low enough.

3 Reply

Lisa LoeselBusiness Member

OP

Property Manager · Milwaukee, WI · Member since 2021 · 24 posts · 34 votes

Quote from @Brian Barch:

I could have asked OPs same question 2 months ago.

The prior owners of our cabin priced it the same price every day of the year. This led to being booked well out into the future, and a 79% occupancy in a market that averages 67%. It also keeps things simple and predictable. That said, we had to inherit a booking for thanksgiving at less than half the rate it should have booked at.

we have a PM that uses Pricelabs and checks it daily. The idea behind pricelabs is to maximize revenue, not occupancy. I think this can sometimes run counter to an STR owners intuition. A "desperate" guest will pay more than a planful one.

it’s hard for me to compare which strategy is better. Pricelabs netted me 2X+ per night on the days between Xmas and new years. But the booking lead time is perhaps 2-3 weeks, which is more anxiety inducing than having bookings come in 2-3 months ahead of time. Pricelabs strategy almost guarantees I won’t get a booking 3 months out, it prices the days so expensive, once again trying to book a desperate guest over a planful one.

my guess is pricelabs leads to more $? Sometimes I wrestle with the moral component……do I really want to gouge someone at $600/night on a holiday? Do I really want to penalize the planful people? I’m currently alienating any guests that leave my place happy and want to book the same dates for next year

Yes! This is why I stuck with it for several months. When you are used to being booked out months in advance, it is incredibly uncomfortable to let your calendar stay open until the last minute. I know that booking out so far in advance means I'm priced too low, but it really feels warm & fuzzy to have a booked up calendar and honestly, I like those guests better. Planners seem to take better care of the property and are more respectful.

On one of my properties, I had 1 booking in November for 3 days. I didn't even cover my overhead for that month. In 10 years of doing this I have never had that bad of a month, not even during the Covid lockdown. I'm certain if I would have set the prices for that month back in September, it would have had more bookings. At 10% occupancy for the month, that's not maximizing my revenue & I'm annoyed that a property sat vacant for so many days. On the other hand, another property had a great December, mostly because I got a 14 day last minute booking over the Christmas holiday. Those days wouldn't have been available if I had set the prices because I would have set the prices lower & made sure it was booked. I just don't understand why it seems to be working for one property & not the others.

Short & Suite Home Stay Management

Lisa LoeselBusiness Member

OP

Property Manager · Milwaukee, WI · Member since 2021 · 24 posts · 34 votes

Quote from @Leslie Anne Morris:

I have ran both price labs and beyond side by side. Beyond greatly outperforms PL. Greater swings in revenue while PL is more static. They either leave money on the table or keep the property empty by not dipping low enough.

Thank you, this is exactly what I was looking for!

Short & Suite Home Stay Management

Jake CohenPro Member

Rental Property Investor · Denver, CO · Member since 2017 · 201 posts · 126 votes

@Lisa Loesel it is great that you gave Pricelabs a shot even though you have had success without it. I think a lot of people misunderstand how to use a dynamic pricing program. It is not set it and forget it. You have to tweak it to find what works for your market, property and guests. I have been using pricelabs for 6 years. I can’t imagine trying to manage pricing without it. Over the years I have added minimum night changes, % increases on certain days of the week, and seasonal profiles for my listings. I consistently stayed booked at higher rates with great guests. All of this takes effort and is on going. I tweak a lot less now than I did in the beginning but I review prices on a monthly basis at a minimum. Benchmark against your competitors and this can earn you significantly more revenue. Pricelabs has great training on how to use all of the additional features and it is worth your time to learn the ins and outs of the software. If you have any specific questions, happy to help.

Melissa Nash

Rental Property Investor · Orange County, CA · Member since 2016 · 740 posts · 529 votes

I personally love pricelabs because of so much it offers - its a waste if you set it and forget it. But you also need to know your market and the average booking time frame and then work with that data.

Most early bookers are looking for discounts and they are price shopping and looking for discounts. Last minute bookers usually willing to pay more because they didnt' plan ahead and now looking for last minute plans.

Also I know that one of my cabins books mostly last minute guests, I don't worry that I am not booked 30 days out at this property. I don't lower the price as you get closer, I actually have it set up to lower the min day stay but raise the price as you get closer and guess what??? I book everytime for higher than I would have if they booked farther out. So.....using this strategy I have it set up in pricelabs to require 5-6 night min if the book 3 mo + in advance. This helps me fill my calendar for longer stays for those planning ahead.

I also know that one of my cabins is suited for family reunions and takes a lot of planning ahead of time so I open that calendar up for 1 year bookings and charge a higher amount that far in advance bc I know people will pay for it to get it planned.

So, with all of this- you still need to know your client, your market, and their booking patterns. Pricelabs can help you guess, but you will see best results if you also use your own intuitions and strategies and together they work great!

Trent Reeve

Atlanta · Member since 2022 · 720 posts · 648 votes

Quote from @Andrew Steffens:

Hi Lisa!

We have been using Beyond Pricing for years, but are currently switching to RevMax. We are making the switch because Beyond refuses to give us a flat rate per listing as they want 1% of all revenue, which now at 70 units has gotten very expensive. However, their product is somewhere between good and great. It is not set it and forget it, but it does a solid job of semi automating prices. We still have to go through them weekly but it highlights the properties in need of attention versus those that do not. Im sorry I do not have experience with PriceLabs.

Pricelabs is a flat rate also. i agree, getting 1% of bookings is ludicrous. especially if they cancel the reservation and not stay, they dont refund you back

Trent Reeve

Atlanta · Member since 2022 · 720 posts · 648 votes

Quote from @Leslie Anne Morris:

I have ran both price labs and beyond side by side. Beyond greatly outperforms PL. Greater swings in revenue while PL is more static. They either leave money on the table or keep the property empty by not dipping low enough.

What was the impact on your costs? 1% vs flat fee

Levi BennettPro Member

Real Estate Broker · Charlotte, NC · Member since 2014 · 285 posts · 248 votes

Quote from @Lisa Loesel:

@Sean Bramble I definitely agree it's a different kind of guest that is booking last minute and also at a lower rate, but I would expect a dynamic pricing tool to be pricing appropriately to actually get bookings. For some of my properties, my vacancy rate was abnormally high during the time I used Pricelabs on top of the less than desirable guests. I would maybe (and that's a big maybe) take the less desirable guests to maximize revenue, but it's tough to make the argument that you actually are maximizing revenue if your place is sitting empty when in past years it wouldn't have been. Could be the market changing, but I think that's less likely as one of my properties did so well.

Also, I would say I do technically operate higher end listings, at least for my area. My lowest price of the year on my least expensive property is $200/night up to $1800/night for my most expensive property in peak season with ADR ranging from $285 up to $650/night. The guest who had to be removed by the police paid $710 for one night. I would have thought that was a high enough price to deter that kind of behavior & in the past it has been. He booked less than a week in advance though, so it feels like that's definitely part of the problem.

I'd be curious if you have updated your listings since the big algorithm change with Airbnb. MANY people have noticed a change, and most people on the short end of the stick didn't update their listings to reflect the new way that Airbnb was serving options to tenants on the app/website. This has created chaos with the algorithm management in all the 3rd party management because a big percentage of hosts never did anything but noticed a huge drop in bookings, but didn't change the prices. Obviously this affects Airbnb hosts more than any other platform, but if that is the primary platform, then I would guess this has something to do with some of the unpredictability.

My point here is that many drops in occupancy/revenue were related to the actual listing and the new algorithm that airbnb is using instead of price. People dipping lower to get bookings are often still frustrated. Meanwhile, people maximizing the algorithm change have RAISED prices and are still seeing more occupancy. So, it's not always about price in this case is my point, and there could be more going on here than just the 3rd party dynamic pricing software.

Leslie Anne Morris

Real Estate Agent · Smoky Mountains, TN · Member since 2022 · 1k+ posts · 984 votes

Quote from @Trent Reeve:

Quote from @Leslie Anne Morris:

I have ran both price labs and beyond side by side. Beyond greatly outperforms PL. Greater swings in revenue while PL is more static. They either leave money on the table or keep the property empty by not dipping low enough.

What was the impact on your costs? 1% vs flat fee

I had a free trial of PL, so there was no cost there. I think certain months it would potentially be break even depending on pricing structure.

Gerald Pitts

Lender · Asheville NC · Member since 2016 · 470 posts · 317 votes

Pricelabs is considered the best by a ton of STR operators I know. And I agree. But definitely dynamic pricing is the way to go. I don't see it as a matter of should I use the pricing tool so much as which tool should I use? Unless you just want to spend your time manually figuring out pricing, and hoping you got it right. To me, life is too short.

Jay ThomasPro Member

Real Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 716 votes

[email protected]832-889-5607

Dynamic pricing is also extremely useful for Real Estate, allowing homeowners to set prices depending on the demand of the property. For example, during peak season rental rates can be increased to take advantage of higher demand and occupancy, while during slower times they can be decreased to attract more people. This helps to ensure that Real Estate owners are making the most out of their investments and getting a return on their money. Furthermore, dynamic pricing allows Real Estate owners to remain competitive in the market without needing to manually adjust pricing each time there is a change in demand. All in all, dynamic pricing provides Real Estate owners with an easy way to optimize their profits without having to do too much work. It's a great tool to have!

Lisa LoeselBusiness Member

OP

Property Manager · Milwaukee, WI · Member since 2021 · 24 posts · 34 votes

Quote from @Melissa Nash:

I personally love pricelabs because of so much it offers - its a waste if you set it and forget it. But you also need to know your market and the average booking time frame and then work with that data.

Most early bookers are looking for discounts and they are price shopping and looking for discounts. Last minute bookers usually willing to pay more because they didnt' plan ahead and now looking for last minute plans.

Also I know that one of my cabins books mostly last minute guests, I don't worry that I am not booked 30 days out at this property. I don't lower the price as you get closer, I actually have it set up to lower the min day stay but raise the price as you get closer and guess what??? I book everytime for higher than I would have if they booked farther out. So.....using this strategy I have it set up in pricelabs to require 5-6 night min if the book 3 mo + in advance. This helps me fill my calendar for longer stays for those planning ahead.

I also know that one of my cabins is suited for family reunions and takes a lot of planning ahead of time so I open that calendar up for 1 year bookings and charge a higher amount that far in advance bc I know people will pay for it to get it planned.

So, with all of this- you still need to know your client, your market, and their booking patterns. Pricelabs can help you guess, but you will see best results if you also use your own intuitions and strategies and together they work great!

Thanks for the feedback! I definitely thought it was a little more automated & was trying to trust the algorithm. It's clear that some intervention is needed. It makes sense that it's a tool to help you price better, not do it for you.

Short & Suite Home Stay Management