Competing on Price is a Flawed Strategy

I have received an email from Airbnb notifying me of the number of views I have received, suggesting that my prices have resulted in lost bookings, and recommending that I lower my prices to attract more bookings.

This is flawed advice. Airbnb hosts should be encouraged to be price makers, not price takers. It is in the host's and Airbnb's interests to keep prices up, no lower them. I differentiate my property using non-price criteria. If I compete on price, then I end up supporting  a race to the bottom. I am not going to do that.

Airbnb should re-think this short-term, flawed price-based policy!

Gerry-And-Rashid0
Level 10
London, United Kingdom

@Peter36

 

AirBnB is interested in income. Therefore they want as many people as possible booking only on the AirBnB site, not searching for better prices elsewhere. Hence the price tips, etc

 

 

Actually, @Gerry-And-Rashid0, I think you're giving AirBnB at large too much credit for their apparent greed. The whacky advisories about how hosts should set their rates are really only coming from the 1 or 2 or 3 loose-cannon developers within AirBnB who, on any given day, happen to have checked in some code that affects and pushes out that sort of message. Based on my info from AirBnB insiders, AirBnB at large has little internal control of their code. Individual coders (I'm loath to call them "developers", as that lends too much credence to their quality) are constantly making willy-nilly modifications without any sort of overall planning.

 

But back to the original host's issue -- I fully agree that altering one's rates based on recommendations from AirBnB is the wrong way to go. Take their recommendations under advisement, yes; all input helps. But follow them blindly, no. As a host, one knows far more than AirBnB about the local conditions and the specific desirability of your own listing. I set my rates based on my "gut" and my history. Sometimes that ends up being lower than AirBnB's recommendations; usually it results in higher rates. The proof is in the pudding -- we're consistently 97% booked, 2-3 months in advance. (And we really, really cherish that one unbooked day per month!) Our guest ratings and reviews are all pure raves. When AirBnB suggests we drop our rates, they're usually wrong. And when they suggest we increase our rates, they're *always* wrong.

I base my pricing on data. I know my site views, and I calculate my booking rate. I target a monthly occupancy rate, and I calculate the 12-month moving average. I never lower my price, but I do increase my price when the occupancy rate is higher than my 50% - 60% target band.

For me, in my shared home, the occupancy rate is better performance indicator than the revenue. The revenue falls out of the KPI. I have successfully met my objective since I introduced it 9 months ago.

Dede, in my analysis, if you are booked more than 2 months in advance, then it indicates your price is too low. You are attracting too many bookings too early. If you were to nudge up your prices, you could monitor the forward bookings and keep it at no more than 2 months ahead.

Thank you I am new at this and your comments have helped me.  I recently raised my prices because I wasn't going to break even let alone make any money and have been wondering if I was correct in doing this.  I'll sit tight and see what happens.  Alice

Hi Alice, I also felt that it was unfair to be told that we missed bookings and to lower our prices.  I have just raised the nightly rate by a small amount and we have had non stop bookings.  This tells me that as hosts, we are the best judge of the worth of our accommodation and not everyone offers quality linen, breakfast etc.  Good luck and enjoy hosting. Cheryl

@Peter36 Thanks for your input, but I truly believe we're priced at the sweet spot for both maximizing income AND making our guests feel that they've gotten good value and had a good experience. We have, over the past year, increased our base rates by about 12%, and increased our special-event rates by over 50%. We also have our rates set higher than comparable listings in our area, which we can do because of our consistently high ratings, reviews, and 100% enthusiastic guests.

 

Our actual booking percentages tend to be 94-97% one month out, 85-97% two months out, and 30-60% three months out. We rarely open up dates more than 3.5 months out, with exceptions made for big special events, for which we double or triple or normal rates.

 

Lastly, I don't find much value in AirBnB's presentation of views vs bookings, especially since their last changes which made it even less informative. We get a ton of views, but the booking ratio is (non-worryingly) low because... most of the people are looking 10-30-60 days ahead, and find that we're already booked.

 

And lastly lastly (unless there's something even lastlier...) I've often experimented with still higher rates out three months ahead, but it has never attracted anyone at all. Like I say, I think we've found our sweet spot.

@Dede0

Hi Dede,

Will you reach out to us on this topic? 

 

I also think that AirBnB's price suggestions are always

founded on nothing but hot air. Each market, each season,

has too many unique elements. And with particularly nice guests, we

often feel like discounting or accepting nothing or exchanging favors

to make friends.

Mind you - we're certainly not as busy as you.

 

[Personal information hidden

 

Thanks,

@Dunny

Lizzie
Former Community Manager
Former Community Manager
London, United Kingdom

Hello @Dunny0,

 

I hope you are good. As you post is publicly visible, for safety reasons I have removed your personal information from your post above. To speak directly with another community member here, you might like to use the Direct Messaging feature, which you can find by hovering over the image next to their post and then click 'Send Message'. 

 

I hope this helps.

 

Lizzie


--------------------


Thank you for the last 7 years, find out more in my Personal Update.


Looking to contact our Support Team, for details...take a look at the Community Help Guides.

Hi Lizzie,

Well, that test worked.

The Admin staff, in this case yourself, do have instructions to contain discussions

within the boundaries of this online forum. That's fine - but of little importance.

The Great Matter in host lives right now is that the software is behaving unpredictably against 

host actions and settings. Obviously, you closely monitor these forums. The issue

is everywhere. This particular thread on price advice being misleading and false is

secondary, but also of concern.

 

Robin has been waiting for three days to get a repy from the executives. They know. You read these forums,

and tell them. He has shut down his listing!

 

Here's something else you can forward to those in a position to act - the difference between host payout and 

guest payin is an increase of 21%!! Those funds go to AirBnB. That is even more than the huge 20% that Booking.com

forces major hotels to pay, and has these hotel owners very upset. Someone ought to think about this seriously.

 

Have a nice day.

@Dunny0 You should be aware that Lizzie and the other moderators here don't necessarily work directly for AirBnB and don't have much (if any) input into AirBnB's decisions or practices. They work for the thrid-party company that operates the forums.

 

Also, while I'm as acutely aware as any other host about the difference between what guests pay versus what hosts are paid, I don't think the typical spread is the 21% you mentioned. Hosts pay a fixed 3% fee. From what I've observed by chatting with guests, they typically pay about 12%. Sometimes a bit more, sometimes a bit less.

Lilian20
Level 10
Argelès-sur-Mer, France

I agree with @Dede0 12% +3 % does not equal 21% 

 

So it's more like 15% and that's probably about what you would spend on google adwords, facebook ads or SEO if your listing was on your own website.

@Lilian20

 

Hi. On the 21%, Let me say I was surprised. First, I agree with you from our experience as a guest

(this is from three years and more ago). The guest ABB extra fees we were charges were what you say, or perhaps

a bit less (I remember 11%-12%, and once close to 14%, for a very short stay). The host side ABB fees have been fairly

constant for us and minimal. 3% sounds right. Okay so far. 

 

After a host or guest is used to these ratios, expects them and then accepts them, well and good.

For a first-time guest perhaps assuming that all fees are already included in a quoted price, there is a surprise.

Warranted or not, a surprise it is. Full disclosure: we suspected this situation, gave polite forewarning that there would be an extra

fuzzy ABB commission fee, and spoke warm pleasantries. Of course, after the reservation was complete, the honorable guest

inquired as why the rate that had been billed to her did not match the one we had quoted exactly as hosts. Well, we had to 

mildly explain that this is the industry standard from our experience as guests, but that much is out of our hands, we don't control the show, and not to worry we'll take care that they have a nice time in our fair city. End of story. Go water your camel.

 

End of story, but. But I had glanced at the different fees on our end as they came down the pike, just before pressing send on 

the offer. There they were: 232 for the  2-day rate (currency doesn't matter - privacy - call it the Mongolian tögrög) an extra 1000

Mongolian tögrög for cleaning equalled 242. ABB, bless them, snatched a sliver from us at only 7 Mongolian tögrög for the host fee.

What was the listed rate to be billed to the guest? 285 blooming Mongolian tögrög! I thought, ah, so, and had dinner. Pulling out the calculator for no reason, I put 285 over 235 to deliver a ratio. The 285 is 21.27% over and above the 235. Yes, I did the ratio that way for dramatic effect, but there it is. Now any person could play with simple arithmetric to deliver different figures. Let's have a look.

 

285 over 242 is 17.76% up. 242 over 235 is 2.978% trimmed. But turning things upside down, 242 over 285 is 84.9% (giving 15.1%

to the difference between 242 and 285). 235 over 285 is 82.45% (giving 17.55% to the difference). One could also play further:

43 (285-242) is only a fraction of 285. Let's try (and this moment I don't know what the answer will be).

Bingo. It is 15.08%. Does this matter. Meh. It's just business. It's what every bank, insurance company and advertiser does many times a day. Why? Because it works. It's the same reason that the genius of the early ABB software was to place this extra ABB commission fee in a smaller fonted scaled to a pale grey shade, and to reveal it after the guest prospect had emotionally committed to purchase,

lining it up in a tall list of digits. I fell for it the first time. Even the next! Talk about small hinges swinging big doors - that was the most important element driving the early growth of ABB over other platforms. You can decide the ethics of it for yourself. I look in the mirror, knowing I am a hypocrite at heart, also knowing that this is the way of the world. Will we take care of this guest well? You bet.

Before I forget, the 'piece de resistance' of these simple calculations is that the final figure is often deliverd

in the DIFFERENT currency of the guest from another nation, a result that the consumer has been conditioned 

to accept as including some currency transaction rate inclusive of exchange fee of 1-4%, sometimes more. 

Can the average consumer stay focused with all these mathematics swirling? No. How about veteran businesspeople? Yes.

Lovely, these guys. I want these guys on my team.

Robin4
Level 10
Mount Barker, Australia

@Dunny0 ....Duncan, hey mate, please don't pre-empt or make a comment on what I may, or may not do with my listing!

I have NOT shut it down, and have no intention of shutting it down.

I am quite happy to engage you in dialogue on any topic, but what ever I chose to do with my listing is up to me and not something that I really want publically discussed by others on the forum.

Cheers.....Rob