The psichological effect of working with cheap rates

You don’t need to be graduated economist to understand that the lower you drop your price the higher the demand you will get. Well, that it isn’t always true (at least it wasn’t for me). It happens to me a lot of times than MOVING UP my prices gave me more bookings than before. So by doing the complete opposite of what anyone would do when they don’t have bookings I got better results in the end. I’m sure there is psychological factor that affects the guest’s mind telling them that for this cheap rate I will mostly get a crappy place.

I don’t’ have a solid background theory to say what I’m saying but it is just what I learned from the experience of playing with my rates for a while. I believe the guest gets confused and uncertain to book with you when they feel that your rates and what he would pay for your place are not in sync. They might think that your offer is too good to be true so there should be some hidden aspects of your listing that justify your cheap rates and if you cross that line further you might become a target for the group of people that chase just a good price (no matter the quality) so you start getting much more requests for discounts than before. YES, your price is already low and you get more discounts because this people just want to pay the less they can.


Absolutely agree. When shopping for a place (hotel, or listing) I have a price range in mind (over $100). If a place is much less I often think it must have something wrong with it, and don’t even look. I know what I intend to pay and pay that.

I’ve raised my rates quite a bit (well, from $69, $79 to $109 base price) and have not suffered any loss of bookings.

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I agree. And I’ve had plenty of experiences with this. If you think about it, we all do. Do we all drive the very cheapest car available on the market? Do we choose the shoes we wear simply because they have a rock bottom price? Do we buy the cheapest possible shampoo for our own use? Even at the supermarket, do we buy the cheapest supermarket-brand tomato ketchup even though it’s vastly inferior to Heinz?

I’m one of the most frugal people I know and love saving money wherever possible but I believe that very few of us buy absolutely everything at the cheapest price possible. Guests are surely the same.

Yes, I’d be happy with a cheap place if it was somewhere to sleep for a few hours before catching a flight for example, but if I’m staying somewhere for a few days or more my perception would be that the cheapest = unsatisfactory. So many people’s first reaction when they see something cheap is ‘what’s wrong with it?’

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I had this discussion last week with a guy that sells ramen noodles. (you can’t make this stuff up!) He used a term for it that I can’t remember, but he said his company had the premium brand, but the lowest price. Although I haven’t bought any since my son moved out, I did use the coupons for the more expensive ones if I had them, thinking they must be better.

On the other hand, when I upped my price to near the top of my market on airbnb, I received a response right away for a month-long stay, then interest waned and I lowered it. Now I have another inquiry for a month’s stay at my lower rate. But I am guessing the glowing review from the first guy had something to do with it.