Guests expect more but want to pay less / Market saturation, Rates going down

I just did some research on my competition for the first time in awhile. There are so many new listings in my area that are listed for ridiculous prices! $30 per night for a 2 bedroom house? $60 per night for a 3 bedroom that can sleep 10 people? Now I understand why my bookings have gone down over the past 6 months. And it seems as though guests expect a lot more for a lot less money. I had someone recently request that I lower the price of my 3 bedroom house to $40 per night! If I lower my prices too much more it just isn’t going to be worth the work of hosting.

I’m wondering for other hosts who have experienced this, how did you adjust to the changes while still trying to meet your bottom line?

Lower your prices?
Try to cut supply costs?
Find other ways to be competitive in a saturated market?

About a year ago my $15,000 addition to my Airbnb guest room was finished. I had been hoping to raise prices but after checking the competition I realized I couldn’t. My improvements didn’t give me any pricing power but I think it gave me a competitive advantage. While the construction was going on I was as low as $19 a night on occasion. I’ve had a couple of anxious moments over the last few months because I look at the competition and think “all that for xx a night?”

Here’s what I’ve found/learned.

  1. There will always be bargain hunters. Lots of people here like to disparage them and say they are bad guests. I haven’t found that to be true but I also found I don’t have to lower my price beyond a certain level. Don’t judge, just decline.

  2. There are other guests who won’t even search for a room below xx. Maybe the bargains will book faster but you can get last minute people at a higher rate (opposite of advice about lowering your rate if you haven’t booked.) But only you can determine what this optimal rate is for your market and season.

My rental is only a private room, not a home and I get lots of one nighters. My lessons might not apply. The minimum for me is what a half hour of my time is worth plus my costs for utilities and supplies.

BTW, I had my best month ever last month @ $39 for one in an ensuite room. $10 for extra person or pet.

7 Likes

My places are entire houses, not rooms, but I think other than that our experiences are pretty similar. I am also off I-25 in Albuquerque and get a lot of one nighters passing through. So I think that is what keeps me booked more than tourism, but they both play a part.

1 Like

Yes… If the slowdowns continue into what is normally your high season, it’s probably market saturation.

I’m in a unique market too, but I would just advise expanding the platforms you use and if that doesn’t work consider short term long term tenants… Like traveling nurses, students or corporate users.

1 Like

the listing sites are thrilled when the owners compete and drop prices. It is a race to the bottom. guess who wins?

1 Like

None of the above.

We’re in a very competitive market with more listings being added all the time. And after a while, when people realise that Airbnb isn’t the goose that laid the golden egg, they lose interest. The listings either stay there with empty calendars or they’re taken down.

Because these hosts rely on Airbnb and do no active marketing, because they have few - if any - reviews and because they realise that all they can do is lower their prices, then they get budget travellers and realise that they aren’t making money.

I’ve also known local hosts who have found out that it’s even worse than that - with the cleaning, laundry, increased utility bills etc., it’s actually costing them to host.

Plus, they eventually realise that there are additional costs that they didn’t consider when they had the bright idea of ‘doing Airbnb’ such as insurance, wear & tear and so on. And it’s time-consuming. By the time they realise this - and have had a few less than perfect guests - they decide it’s time to stop.

3 Likes

@barefootNM I sent you a PM

Find other ways to be competitive: There are cheap and cheerful ways to distinguish a listing from the rest. Last year we stayed in a basement apartment that was pretty ordinary but the host included in the kitchen a full-size gumball machine filled with M&Ms that came with a dish of coins to feed the machine. People secretly love free shiny stuff - LOL. The other thing she had was a Soda Stream, that appliance you can make your own soda beverages and a full Nintendo system. We were travelling with kids, so we all enjoyed the novelties. “Invest” in a few of the latest “as-seen-on-tv” gimmicks to add a fun element to a space. They had the game “Cards Against Humanity”, which turned out to be a family bonding experience. Another place we stayed came with an enormous fresh cinnamon roll that was a very welcoming thing to find. Another place had a margarita machine (complete with ice and mix) but that sends a very different message. The possibilities are endless. Most important, however, are the pictures of these items on your listing, and then making sure you provide that item consistently.

2 Likes

I guess I feel like I already have a lot of that. Nintendo, board games, record player, teepee with lights for kids, etc etc. I guess making those things more prominent in my photos wouldn’t be a bad idea.

1 Like

There are fewer bargain hunters on VRBO and HomeAway. I am having a good Air month right now, but for a good part of last year my majority of renters were NOT from Air. With a whole house rental you have MANY more platform options out there.

1 Like

I’ve only ever gotten about 5 VRBO bookings total, compared to hundreds on Airbnb. I am listed there and it helps fill in days now and then, but hasn’t been nearly as much of a source of bookings as Airbnb for my places.

I’ve also had some issues with my calendars not synching properly between VRBO and Airbnb which makes me nervous about adding many more platforms.

Oh my! I took that game to a family party ages 6 to 76 and it was like “oh, we can’t play that with our parents!” Not my family btw, but a family I thought might tolerate it.

1 Like

Old-timers and parents with youngsters might prefer to play the tame version – Apples to Apples – which continues to be a favourite in our house. Still lots of fun.

2 Likes

I have experienced the same. I believe it is the Airbnb pricing suggestions. I do not use it because it devalues my listings. I would rather book less at a higher rate to the quality guest, avoiding the bargain hunters that do not take care of my space.

2 Likes

Something interesting to back up what @KKC said - I just did a little research doing a search for a night I have open next week (one night in a string of many). All of my properties show up for this date, but there are only 12 total listings available for that night (only 8 for tomorrow night). I’m not sure why my 3 places out of the 300+ in my city happen to be among the few available for next week, perhaps because I have had my prices listed higher than average (certainly higher than Smart Pricing). My prices are all higher than the other remaining Airbnb’s for these dates but they are also the only “nice” ones left. The rest have dark photos and fewer than 5 stars.

Part of the problem I think is that so few people seem to charge Cleaning fees. I get a lot of one night bookings and so even though I might have my rate set at $65/night with the cleaning fee and Airbnb fees the guest is seeing over $100 per night. When they started doing the more accurate price quote from th listing page (to include the cleaning fee) I think it really hurt my click rate since suddenly my prices looked much higher including the cleaning fee. I’m wondering if I should get rid of the cleaning fee and just raise my prices higher all around to include it. It’s fine for guests booking longer stays but I see how it makes my properties out of reach for many one nighters.

Another thing I decided to do for now is to make another listing for my 3 bedroom house as just a 1 bedroom, allowing guests access to just the first floor of the house at a lower rate (because the cleaning fee will be lower).

I’m also going to start cutting back on some of the “extra” amenities I provide since most people clearly prefer a lower price. We will see what it does to my reviews though.

1 Like

What amenities? I am a strong proponent of “no extras.” They don’t pay off and each one cuts into your bottom line.
As it is we provide soap, TP, fresh linens, your time in cleaning (time is money). If they never had the amenity to begin with, how will they know to complain?

“Four stars. I would have left five stars but I was expecting biscotti and Nespresso.”

1 Like

Yeah, I think I’m starting to learn that the amenities aren’t paying off. I had in my mind that people would be willing to pay more VRBO style prices and I would provide a more luxury experience but that’s clearly not realistic with the Airbnb budget traveler market. I’ve cut back some already but mainly I was trying lots of different things to see what people cared about most that would make it feel “above and beyond.” I’m too embarrassed to list my full list of amenities :grimacing:

Do it! We won’t judge! I promise! Especially now since you have seen the light. :smiley:

2 Likes

I feel like many people really do appreciate the amenities I provide, but for some people it is always going to be “didn’t provide XYZ.” I had someone leave me a list of items that I should stock including a spoon rest for cooking. Like, use a plate? Another person said I needed bottled water. Sigh.

Anyway, in terms of one-off amenities I provide a plate of cookies as a welcome gift, coffee, tea, cream, sugar, granola bars and oatmeal for breakfast items, shampoo, conditioner, body wash, razors and toothbrushes to take if you forgot one, makeup wipes, etc…

1 Like