Airbnb Pricing Strategy: 5 Ways to Maximize Your Profits

Your Airbnb pricing strategy affects your vacation rental profits more than probably any other single factor. In this post, we’re going over some tips and best practices, to help you know how to price your Airbnb listings and maximize your profits.

How Does Airbnb Pricing Work?

Let’s quickly take a look at how Airbnb pricing works. The total price of an Airbnb booking is based on the nightly rate (which you set as the host), plus the following additional costs and fees (via Airbnb):

• Airbnb service fee: Guest service fee charged by Airbnb—this helps Airbnb run smoothly and offer 24/7 community support
• Cleaning fee: Fee charged by some hosts to cover the cost of cleaning their space
• Extra guest fee: Fee charged by some hosts for each guest beyond a set number
• Security deposit: Certain reservations may independently require a security deposit requested by the host or Airbnb—find out more about security deposits
• Value Added Tax (VAT, JCT, and GST): Tax charged to guests who live in certain countries—find out more about VAT
• Local taxes: Taxes charged based on the location of the host’s listing—find out more about local taxes

Most guests are aware there will be additional costs beyond just the nightly rate. So anything you can do to keep extra costs low should put a smile on their face, and make them more likely to book.

5 Tips to Improve Your Airbnb Pricing Strategy

If your listing is new and has no reviews, it’s worth considering pricing your listing lower than the competition to get your first few bookings. As a new listing, you’ll show up higher in Airbnb search, receive a special badge on your listing, and may even be featured in emails Airbnb sends to guests who are searching but haven’t booked yet.

Additionally, Airbnb offers a convenient New Listing Promotion option, which applies a 20% discount to your listing’s first 3 bookings (learn more here). This is a great way to start getting some bookings and get those 5 star reviews. (If you want to opt out or remove the New Listing Promotion, watch this video.)

Once you have some reviews and you’re ready to start optimizing your pricing strategy, here are 5 tips to help you maximize your profits.

1. Use an Airbnb Pricing Tool

Because the demand for your listing is constantly changing (due to seasons, weekends, local events, increased competition), it can be difficult to constantly monitor and try to optimize your rates.

A dynamic pricing tool helps tremendously in this area. Using a pricing tool is the single best thing you can do to improve your Airbnb pricing strategy. All the other tips in this post are only enhanced by the use of a pricing tool, which is designed to optimize your pricing and maximize your profits.

If you’re listing primarily on Airbnb, we recommend using Wheelhouse. You can read our full review of Wheelhouse or check out our list of the best Airbnb pricing tools.

2. Adjust Your Pricing for Seasons and Local Events

One of the most important factors for determining your Airbnb nightly rates are seasons and special events. For example, a property near a ski resort will probably have different rates during winter than during the summer. Especially if that ski resort is Sundance, and the Sundance Film Festival is going on, for instance.

Pay attention to big events like Comic Con or other conferences, conventions, concert, etc. happening in your area. Again, a pricing tool can help with this, but it’s a good idea to make sure you’re aware of what’s happening in your area that might affect your pricing.

3. Offer Promotions and Discounts

Airbnb allows you to create custom promotions, as well as length-of-stay and other discount. Using promotions might also cause a boost in your Aribnb search rankings. To create a length-of-stay discount (for weekly or monthly stays, etc.) follow these instructions.

To create a custom promotion in Airbnb:

1. Go to your listing’s calendar
2. Select Promotions
3. Choose your dates and set a discount of at least 10%

Airbnb recommends at least 7 consecutive nights, for the best chance of showing up in search results. If you offer multiple discounts, Airbnb will multiply them rather than add them (read this article for more information).

If you’re using Wheelhouse, you can create several different promotions and discounts, including a last-minute discount, so you only offer a special discount when an open night is about to expire. Experiment with different promotions to see what’s most effective for your listing.

4. Enable Airbnb’s Host-Only Fee Structure

Airbnb has a new option to use a host-only fee structure. In the past, there was only a split-fee structure, where the host is charged a 3-5% Host Fee, and the guest is charged a ~14% Service Fee. Using the host-only fee structure, your listing will include a ‘No service fee’ callout to let guests know they won’t be paying the usual service fee.

For software-connected hosts and hotels, the host-only fee is mandatory. It’s worth trying it out for your listing, as Airbnb reported a 17% increase in bookings for listings using the host-only fee structure. Read this article for more information about Airbnb’s different fee structure options.

One benefit of having your own direct booking website is that you can remove this service fee altogether. So you can keep the profits for yourself, or pass the savings on to your guests.

5. Increase the Demand for Your Property

Last but not least is increasing the demand for your property. This is basic economics, but it’s worth keeping in mind. If there’s more demand for your listing, the price will most likely go up. And the best way to increase demand for your listing is through great marketing. Here are a few ways you can begin to market your property:

• Start building a following on Instagram or other social media
• SEO optimize your own website
• Make connections and partnerships with local businesses
• Send out email marketing newsletters to past guests to encourage repeat bookings (you can collect guest emails with StayFi)

These are just a few of the ways you can start to increase the popularity and demand of your property, which naturally leads to more (and higher priced) booking. For more ideas on how to market your Airbnb, check out our Vacation Rental Marketing Guide.

And for more information on Airbnb pricing tools like Wheelhouse, check out our post on the best Airbnb pricing tools.

Written by The Floorspace Team

This article was written as a collaborative effort by multiple members of the Floorspace team. We're a group of internet marketers and designers, with a wide range of experience marketing and managing short-term rentals.