Airbnb Smart Pricing – Should You Use It?

Using a tool to optimize the pricing of your vacation rental property can help you keep up with dynamic price changes due to holidays, weekends, seasons, events, demand, and increased competition. By automating pricing, you won’t need to waste time monitoring the rate fluctuation, and you can employ a pricing strategy that will maximize your profits. 

Airbnb has its own pricing tool that hosts can use for free. But is Airbnb Smart Pricing the best solution for price optimization and revenue? This article will explain how Airbnb Smart Pricing works, what its pros and cons are, and reveal whether this pricing tool is the best option for hosts.

What Is Airbnb Smart Pricing?

Airbnb Smart Pricing is a built-in tool available to all Airbnb hosts. It analyzes data that affects demand and automatically updates your listing’s price accordingly. The goal of Smart Pricing is to increase occupancy of Airbnb properties, so the price will be adjusted in order to attract more guests.

How Does Airbnb Smart Pricing Work?

Airbnb’s Smart Pricing tool uses an algorithm to collect price tips from insights related to your property. The data that this tools factors into its algorithm include the following:

• Type of rental
• The popularity of your type of property (how many guests search for that type of rental)
• Demand in your area
• Listing amenities and features 
• The number of people who view your listing
• The number of and your rating in reviews
• Calendar availability

The Airbnb pricing tool processes this information and, based on its calculations, sets the price that should increase bookings. 

You do have some control over the process as you can set a minimum and maximum price per night. The tool is allowed to adjust the price only within those limits. 

Should You Use Airbnb Smart Pricing?

There’s no doubt that Smart Pricing can help you get more bookings, but is it the best tool you could use? Some hosts argue that the tool limits their income, and others swear by it, claiming that their net revenue has increased thanks to this feature.

Let’s review the pros and cons of using the Airbnb Smart Pricing tool before we make our judgment.

Pros

• It uses real-time metrics to generate the price.
• It can give you a competitive edge and make your listing stand out.
• You can choose a minimum and maximum price so it gives you some control over price fluctuation.
• You can turn the feature on and off, depending on your occupancy and your goals.

Cons

• It may set a lower price than you would normally be charging.
• Some claim that Airbnb focuses more on increasing the number of bookings rather than maximizing hosts’ revenue (since Airbnb earns a commission per booking).
• It doesn’t anticipate upcoming events (like festivals or sporting events), so it doesn’t adjust the price accordingly (allowing guests to book for a lower price far in advance, even though the price will be much higher closer to the date of the event).
• It doesn’t differentiate between low- and high-quality rentals, so it can set the same price for a new modern two-bedroom apartment as for a nearby rental that isn’t as nice.

What we can conclude from this Airbnb Smart Pricing review is that the tool is helpful, but Airbnb mostly focuses on increasing your occupancy and not on increasing your revenue.

If you want the benefits of pricing tools but you also want the emphasis to be on your earnings (not only on a fully booked calendar), consider the other pricing tools below. 

Alternatives to Airbnb Smart Pricing

These paid dynamic pricing tools also use smart pricing software to optimize the price, but since they need to prove their value to users, their primary concern is maximizing your profits and getting you the highest nightly rate possible. 

We’ve gone into detail about the best Airbnb pricing tools in this article, but here’s a summary of our top picks:

Best Pricing Tool Overall: Wheelhouse – It has a strong set of features, over 10 pricing adjustments, flexible pricing plan options, and excellent customer support. You can choose between paying 1% per booking or $19.99 per listing per month. The company claims that it can increase your revenue by 10-40%. If you want to know more, read our full Wheelhouse review. 

Best for Multi-Channel Optimization: Beyond – It offers smart industry insights, works well with a Property Management System (PMS), and only charges 1% on all bookings. We did a side-by-side comparison of Beyond and Wheelhouse for those who are interested in learning their similarities and differences. 

Best for Property Managers with Several Properties: PriceLabs – It comes with a monthly rate which could work best for managers of multiple properties (paying a fee per booking can be costly in that scenario). What stood out for us is that PriceLabs offers integrations with over 50 Property Management Systems. To learn more, check out our PriceLabs vs Beyond comparison. 

How to Turn Airbnb Smart Pricing On and Off

If you want to give Airbnb Smart Pricing a try, follow these steps to turn it on:

1. In your Airbnb account, go to Listings 
2. Click on the listing for which you want to enable this feature
3. Select Pricing and Availability and click on Pricing
4. Next to the Nightly Price, select the option Edit
5. Use the selector to enable Smart Pricing
6. Enter a minimum and maximum price
7. Click Save

To turn off smart pricing, follow the same steps, but when you get to step five, instead of using the selector to enable Smart Pricing, simply disable it. Bear in mind that when you disable the feature, the pricing for your pending and confirmed bookings won’t change. 

Final Thoughts

If you’re not ready to commit to a paid pricing tool, Airbnb Smart Pricing can be a useful feature so you don’t need to manually change the price according to the market’s demand. However, if your goal is to maximize your profits, paid pricing tools are a better choice than Airbnb Smart Pricing.

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.