New listing pricing advice and Beyond Pricing

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Morning everybody,

We listed a new property last weekend accepting bookings for mid-June onwards, it is an entire unit in the centre of Copenhagen, Denmark.

We priced a little lower than we hoped to achieve ultimately as it is a new listing with zero reviews (although we do have 50+ reviews for another property). Well we have been really pleased with bookings and despite putting the price up significantly mid-week, we still are getting lots of bookings, August is already 50% booked for example.

Weā€™re already beyond the price point we hoped for over the summer.

I decided to give Beyond Pricing a go to see what price point they suggested - yet they are suggesting a lower price than that which we are actually achieving :confused:

So what should we do? Keep putting up the price until the level where bookings stop? A bit of me does like the idea of being booked out well in advance although the capitalist in me knows that isnā€™t the best way to maximise revenue.

How did you settle on your nightly price?

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When i price my properties i look at what others are charging and also hotels.
If you are booked so heavily its time to raise the price. August is too far ahead, and the fact that you already 50% booked tells me that you are priced quite low.

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Raise your prices to where you feel comfortable. If they are still booking you are ok. Price guidelines for my area in NYC are always much lower than I charge, by 20-25 bucks.

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Agree with Yana - raise your prices! Figure out how much you want to make monthly and try to get that with 60% occupancy. Then if you go over, you make a lot more for the hassle which helps mitigate the burnout.

Donā€™t let software drive down your prices - you (and the market) both know better than any 3rd party. That software is mostly useful for optimization of large-scale operations, imo.

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I have a lot to say and ask about setting a base price, which Iā€™m in agony over. It stinks that hosts jump into the market charging nothing - but I did that, too - which makes it hard for the rest of us to get what is appropriate.

This isnā€™t just a ā€˜we-are-the-worldā€™ deal - this is a business and we have to pay taxes, insurance, expenses, etc. Here in the US we have to pay self-employment tax of 15.2% in addition to state and federal income taxes. I allow for 35% off my gross profit for taxes. ouch.

But for now - Beyond Pricing - donā€™t you set your base price? Are they going below your base price? They set one of my prices a bit below base because itā€™s a 2-night stretch and they say those are hard to fill.

@ianmchenry - chime in!!

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Thanks everybody, we will continue to increase pricing until the books stop coming in, weā€™re currently priced on a level with other well reviewed hosts in the area,

Our target price meant weā€™d break even at 50% occupancy, weā€™ve a four night min stay to help minimise the hassle factor.

Will keep raising the prices to see what we can achieve.

Any profit is taxed at 70% here - so weā€™d take your 35% any day.

Will take another look at the beyond pricing set up. Maybe Iā€™ve done it wrong but yes, at the moment it is suggesting below out base price amount.

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As a business mentor told me many years ago, the goal is to maximize revenue and minimize profit, which is just something you pay tax on.

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70% What?! 70% of your income? Oh, myā€¦

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I reviewed other listings comparable to mine to determine pricing. I listed my house at the end of April and within 48 hours, I had already 4 inquiries. Within the next few days, I booked all the weekends in May, and even a week later this summer. After I got that much interest, I decided maybe the price was too low, so I increased the base price by $5 and cleaning another $10. Right now, I donā€™t have anything booked in June, so Iā€™m wondering if I need to adjust back to my original pricing. Iā€™m going to review again later this month.

I agree with others that you may have priced too low since August is 3 months ahead and I noticed many host calendars donā€™t get booked that quickly (in my area).

I didnā€™t use the ā€œsmart pricingā€ option because the prices they were suggesting were lower than what I saw the competition was charging. I think I have a good idea on what the market is based on the #people my house can accommodate.

Good luck!

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Maximize revenue is the way to go.

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Would you be talking about the new Smart Pricing? Beta? I just turned it on for my listing. You can set the lower and upper limits. I set my lower price at what I normally charge but put the upper one at a price that seems high, but still not as high as Abnb suggests. Iā€™m really curious to see what will happen. Itā€™s sort of like what Uber does with itā€™s surge pricing (gouging?)

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You must be making loads of money off your Abnb place(s). If you donā€™t earn under $20,000/year they donā€™t issue a 1099. So if you are making more than that, good for you and thatā€™s OK that you are paying the taxes, et cetera. I make way less than that on my little sofa rental in Long Beach, California so I donā€™t bother and keep my fingers crossed.

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Who else does it? Figure out how much they want to make at 60% occupancy? Or is there another formula you, my fellow hosts here, use?

I just had a terrible experience with Airbnb today (will probably update one of my threads about it) and I regret the pricing one **** guest paid and all the stress I went through. So I am thinking to host less and wanted to see what people around the world is doing.

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Not really sure the question. But Iā€™ll try to answer it anyway.

We set a dollar goal by starting with the amount I used to make at a part-time job I gave up when we began hosting and adding the rent we charged a long-term tenant who we displaced for the STR. We also keep in mind what we could now charge for rent from a LTR.

Then I figured how much we often to have guests. Figured 5 days a week, taking off 4 weeks a year. All an average, right? I donā€™t know what my dead season will look like. Havenā€™t had one yet, BUT I wasnā€™t charging enough.

Then we did some simple math - our financial goal/number of days we want to work. Came up with an average price of $105. Different sized groups pay different price. Then I calculated what our occupancy rate would need to be when we are not taking a vacation vs when we are. I need to book 22 nights when we arenā€™t traveling and 18 when we are, to average to our goal. October is at 20 nights booked, but one of them is paying a laughable rate, so Iā€™m hoping for a nice fat 5-people booking for a few nights.

So now I know when I can start to block off dates because Iā€™ve met that goal, and when not.

Itā€™s rough at the moment since weā€™ve only been in business one year, had a long-term guy last fall, and then were ā€˜closedā€™ for some construction. If we donā€™t hit our target consistently then weā€™ll quit. The busy season will give us what we need to know. Last year my rate was way to low. Beyond Pricing is increasing my summer rates by as much as 50% over my base. And my base is $30-$40 more than what I got per night last year :sob:

But we came very close to hitting the goal for September even though we bought a new refrigerator for the space for $400 (great bargain!!)

We also then calculated time spent, and what our hourly rate is. Comes to $23. Not great for this area - house cleaners and babysitters can make $20 - but it fits our family life very well and has other benefits, so for now, weā€™ll see if we can hit our goals. If we continue to book ahead at that price we will edge it up. But we are 40 minutes from ā€˜city centerā€™ and the area is still unfinished, so most likely will keep the price moderate for now.

btw, in case anyone has hung in with this long post - I figure our gain by taking my gross revenue, less expenses that were directly for the guest space (and a percent of our total utilities). Then I sutract my familyā€™s fixed costs (mortgage interest, etc) that I apply to the airbnb business, then calculate 20% for federal taxes. Then I take the gross, less the direct expenses, less the taxes, and that is my net gain for the business. Since Iā€™m paying the mortgage interest and taxes anyway I donā€™t look at them as airbnb expenses for the purposes of calculating a net gain, just for income tax purposes.

Phew!

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@dcmooney wow and thank you!!! I am saving your reply for eternity! I will tomorrow have it as a basis to make my calculations. Thank you again for explaining so thoroughly.

I really appreciate your detailed reply and would like to add and ask a bit more :blush:

We canā€™t compare with LTR price because a room in a apartment here canā€™t get rented for LTR with our family dynamics. What normally happens is different foreign students who donā€™t know each other gather to rent a large apartment with 3-4bedrooms and then share the rent. One of them goes back to their country they post online searching for another housemate. Locals stay with their parents or in university dorms. We are a couple with a kid and those bachelor party animals would never stay here neither would we want them. There are few exceptions but if not that they want a place to have sex with their partners. Older and more mature people rent studios so they can live alone. Also, since you rent an entire place that sleeps more than 1 do you calculate and name/aim your price before adding extra guests fees?

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Vera, there are many other situations where you can have someone here for work for a week or 2 or more. I dont have kids at home, but my friend does. And she succesfully rents to longer terms guests. There are so many situations out there that you never know until you try. Vacationers in my opinion are the hardest guests, those who stay 1-2-3 days . Its non stop cleaning, laundry and dealing with different people on an almost daily basis.

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I never calculated by an hour. Just never though of it. My price also doesnt depend on how much i pay for mortgage. I definitely calculate in tax. Extra utilities are very miniscule amount. Mostly i look at what market is like.
And if it will be even worth for me to do it at all.

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Right - but for tax purposes, we can deduct 21% of the household expenses (property taxes, utilities, etc.) because we the str portion of our home is 21% of the total square footage of our home.

Iā€™m an accountant, so, taking it down to the hourly rate was a natural step for me. ; )

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The first 3 people stay for our base price, then we add $20 more per person up to 5.

The reason is there is a lot more competition for places that take 2-3 and the competition narrows quite a bit at 5. So I should get more for my place. Plus, the extra wear and tear, noise, breakfast, etc.

RE: LTR - we live near University of Maryland and have had a number of foreign students live with us (just because it was word of mouth from one to the next). Usually masters or PhD students love to have space to themselves and they like the idea of living with an American family. It did work out quite well. Generally they are quiet and studious. And yes, for us also, no overnight guests. But the last student - she didnā€™t do anything wrong per se, it was just not a good fit. I did not enjoy having her live with us at all. Thatā€™s one reason to switch to STR - I donā€™t always like them, either, but they leave!

PM me if youā€™d like Iā€™d be happy to help you work through the numbers. Iā€™m not an expert, really, I just enjoy playing with excel spreadsheets. You should have seen my infertility specialistā€™s face when I brought him six months of charts showing my daily temperature changesā€¦

But yes, Iā€™ve SEEN apartments that had been handed down through the years from student to student to student - just as you describedx Disgusting!!! Years of neglect. Yikes. But we did score a nice microwave as the last student was leaving and had no way to get rid of it. It is still in use in our guest space!

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True, I will never know until I try. If I ever try it would be renting to females only and no visitors allowed. Unfortunately guys come to Taiwan to learn Chinese (undergrad, grad and PhD) but with another 2nd goal that I donā€™t think is relevant to discuss here now, but I would not like to have any of them in my home. As for business people it would be quite good but our apartment is not a good fit for them, no elevator, old typical building, nothing really fancy so I doubt we would get bookings.
I do agree vacationers are a lot of work with the meet and greet, cleaning etc, but I have never lived with strangers not even in my undergrad days, and the apartments has only one floor, sometimes we share the bathroom etc, unfortunately seeing someone everyday on my sofa (guestroom doesnā€™t have TV), cooking etc, would most likely be very difficult to live with for me. I block my calendar to take breaks too, with a LT tenant I could never do it.