How to correctly price a short term rental?

Question

I recently purchased a STR and wondered how are you all pricing yours? What formula or methods are there to use? Any advice would be appreciated. Brand new to investing and this is my first property.

Mike Grudzien · Answer

I have worked with over 800 new Hosts in the last 4 years as a "SuperHost Ambassador", an independent contractor position paid by Airbnb.
Here's what I sent to my new Hosts:

"Pricing is key and worth doing some homework. Airbnb price suggestions tend to run on the low side. Some of the national data sites have pricing suggestions that run both high and low. I have a solution that I do myself once a year.
Here's one of my best tips: go on Airbnb as a TRAVELER, in Traveler mode. Search for properties in your area as if you wanted to find a place like yours. Bingo: you will get to see all your competitors, their pictures, their amenities, their descriptions and their PRICING. You will quickly see how you compare in all those categories. And you can determine the sweet spot for pricing your place based on comparable properties that are your competition."

John Underwood · Answer

Vrbo has a free built in pricing tool. I use it and like it.

I also check my competition and and I look at demand which is also built into Vrbo. They have great Analytic tools.

I manually check sone of my neighbors pricing, I look at events, I check all holiday weekends. I like to be on the high side or just above sone of my local competition during the peak season. I also adjust my minimum night stay to longer stays during the peak season.

During the off season I try and be at the lower part of the price graph and lower my minimum night stay to 2 days.

After a few years I pretty much know what pricing should be based on time of year or holiday weekends, but I still check the Vrbo demand charts and some of my nearby competition to make sure.

Michael Baum · Answer

Hey @Matt Settle, so I use the Enemy Method. It is basically looking at any and all nearby STRs in your area and comparing nightly rate, occupancy and amenities.

I look at places any of my target demographic would look at. We have a 2700sqft lake house that sleeps 10-12. 4/3. So I would look at 3/3 or 3/2 and even 5/4 and the like.

Not a 1/1 or 2/2 that sleeps 6. Use that date to come up with a competitive rate based on your available amenities.

Lauren Kormylo · Answer

I recommend PriceLabs for dynamic pricing.  After some research of my competitors, I tweak PriceLabs' pricing for high season, and lower it quite a bit for the off season because they are just too high and I wasn't getting any bookings.  I've never used Lodgify, so can't say anything about them.  But I definitely recommend dynamic pricing.  I will never be able to know all of the conventions, local events, and even weather that will drive demand and higher prices, but these pricing platforms can see it and respond.   But as Ryan says, it's not totally set-it-and-forget-it, you've got to put in some work too.

Ryan Moyer · Answer

The first thing you need to do is answer a question.

Are you a casual host or a professional trying to run a business and maximize revenue?

If just casual, and you're just looking for the easiest way to casually run your property on the side without putting too much into it, things like Airbnb/VRBO smart pricing or lodgify dynamic pricing are fine.

Most people on this forum are very casual, so that's fine for them.

If you're serious, you're just ****ing away money by doing this.

Airbnb/VRBO smart pricing is not a serious option. Airbnb/VRBO only make money when people book on their platform. Hence, their motivation is to get people to book on their platform. What is the best way to do that? To be the cheapest platform for the guests.

Their motives are not aligned with yours. They price to maxmize occupancy, not revenue.

To be frank, Airbnb/VRBO smart pricing have dragged down ADRs for the entire industry and any hosts using them are contributing to this. So everyone makes less money thanks to them.

If you're serious, and you care about actual revenue/returns and not vanity metrics like occupancy, you need to be using something like Pricelabs.

And not just using Pricelabs. USING Pricelabs.

I would gander that 90%+ of hosts using Pricelabs just hook it up, set a base price (that they guess), maybe add some seasonal base prices, and think they're doing "revenue management".

If you haven't set up a true comp set (Pricelabs doesn't know the difference between you're tricked out 5br and your neighbors plain 5br, so why would you want their pricing to affect your calculations?) you're not doing real revenue management. If you don't know your booking lead time, or understand pacing, etc, then you're not doing real revenue management.

Listing optimization, revenue management, OTA dependency are the 3 big reasons why most STR operators are getting their ass kicked right now, and a few are still doing well. But they're work, and they take time, so casual hosts would rather just give up that money then spend time figuring out how to earn it.

Again, it comes down to your goals. If you're casual, you're fine, just plug in whatever random smart pricing and let it guess.

Dan H. · Answer

There is an old story:

General conducts a study during Korean War (which war is not important) to measure where each returning aircraft took damage (shot).   They measured many air craft over several months, wrote a report that documented where the most plains took damage to determine where to add extra armor.

The general is prowd of the study thinking it will save lives and is announcing the findings.   Some senior sergeants are having discussions as the general is presenting his findings.   The general is unhappy with the lack of respect and asks the sergeants what was so important to be discussing.

They are reluctant to say anything but the general is not accepting not being told so he pushes for an answer.  One of the sergeants says you took the measurements on the planes that returned.  The implication is that is not where the armor was needed.

It is not important if the story is true or not.

What is important is to recognize each OTA only provides results of available units.   My units are getting close to their previous highest occupancy (meaning virtually full occupancy).  Unless you look just as we open another month, you are unlikely to see our high occupancy units in your search results.

Same issue with the enemy method.  You see the available units, not the booked units.

Good luck

Trent Reeve · Answer

Pricelabs will give you the dynamic pricing, but also lets you set min-stay nights, lower prices as the date gets closer to gain stays before you have empty dates, and a lot of other features. Well worth looking it up on Youtube and seeing those features. I truly believe it pays for itself

David Cherkowsky · Answer

I build a comp set in pricelabs to inform my initial base price. I then monitor pacing metrics to update base and min prices once a week.

Highly recommend implementing a dynamic pricing software and a pricing strategy.

Andrew Steffens · Answer

Good info Mike! Airbnb pricing is definitely on the low side.  I manage about 60 rentals and use a more sophisticated set up but I have heard good things from small operators about PriceLabs.

Dana Kimball · Answer

Dynamic pricing tools like PriceLabs are table stakes at this point but they're only as good as how you set them up. I let PriceLabs run on autopilot when I started my first cabin and it was leaving money on the table in peak season and pricing way too high in the dead months. The tool doesn't know your market the way you do.

What made the biggest difference for me was treating my pricing like I used to manage hotel rates. I pull up my pacing report every Monday, compare what's booked versus the same time last year, and adjust my base price and minimums from there. My cabins near Asheville swing from $155 a night in January to $375 during leaf season in October, and without guardrails on both ends the tool will either undercut you when demand is high or sit there at $280 in February wondering why nobody's booking.

The comp set matters too. Don't just grab every listing in a 10 mile radius. Find the 8 or 10 properties that actually match yours in size, amenities, and quality. Watch what they charge on weekends versus weekdays. If they're at $250 on a Saturday in June and you're at $195, you're leaving money out there.

How to correctly price a short term rental?

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