@georgygirlofairbnb said it perfectly. I wish it were structured as different RATES for different sized groups. It’s not about the extra COST for extra people. It’s about their cost for the alternative of hotel rooms. I’ve had extra-person fees for years.
We have a three-bedroom house in a Caribbean location that is extremely popular with honeymooners. I heard that about 70% of the visitors to our island are on their honeymoon. And there is overcapacity between vacation rentals and hotels, especially in the low season (late summer/fall).
We have no problem getting groups of four to six in the winter, but we do in the low season (late summer/fall) when it’s mostly honeymooners. Most of the groups travelling then are doing so because prices are lower. So my price for two in the low season has to be in line with the resort price for a single room, and for the larger groups it needs to be competitive with other vacation rentals so I don’t give away a large villa with pool and staff to six people for the price of a single hotel room. Like @jaquo said, we discount for smaller groups.
I don’t factor my costs into my rate other than to ensure I never go lower than our variable plus average fixed costs. All the time I spend on pricing is looking at the competition to see their availability and prices.
