When Do You Drop Prices?

In one of Chesky’s recent video chats, he mentioned that the amount of people making late bookings has doubled. Previously the rate of people booking within seven days was about a third of all bookings. This now went up to two thirds of all bookings. This trend is likely going to increase over the next few months as people are unlikely going to commit to bookings when the situation is not entirely clear.

For hosts this makes is VERY DIFFICULT to gauge the right pricing strategy - especially since there is a gap of data for at least the last three months if not more. In light of this, we are trialing a new strategy: we are thinking about raising prices across the board and essentially pitch the listing at the one third of bookings who book more than a week before their stay. Then, if that is unsuccessful, we start pitching to the majority of bookings occurring within the seven day window by lowering prices day-by-day until we hit our rock bottom minimum a day before vacancy. I know that this strategy is not exactly new but in light of COVID, it seems to make sense to start experimenting a little bit more with a strategy that we initially shied away from because we quite enjoyed people booking far in advance since it provided security, peace of mind etc.

Does anyone have any thoughts on the above? Is anyone experimenting with this type of drop-prices-seven-days-in-advance strategy? What is the percentage difference between the rate before discounts and the rate after discounts?

Any feedback welcome.

I always had few bookings in advance. I’m sorry to be missing out on this window of opportunity to make money but I’m closed until at least August. I may have to drop my prices, I don’t know yet. But if I do it will only be a day or two in advance. I always had lots of last minute road trippers and hope to do that again.

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We’re already into the Summertime Blues here in SW Florida. Our High Season is November to April and the lockdown in mid-March killed only a couple bookings. We’ve got our first post-lockdown booking this weekend for two nights. June is normally our deadest month.

Personally I wouldn’t play games of giving discounts for timed bookings. Too much fiddley work with the prices on the calendar, IMHO, for what may or may not pay off.

We already have a High Season, Low Season, and Shoulder Seasons pricing structure. Here the only short notice bookings we get are usually Florida natives in the summer booking for in-state getaways.

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Thank you can for the info. May I ask, what is the percentage difference between your three seasons?

If there are more guests booking later, due to uncertainty, it sure seems like they would be willing to pay a higher price to book with shorter notice in order to avoid the potential of losing their money entirely. This model would be similar to most business travel before the pandemic.

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Yes, exactly. And in order to catch these potential guests, the place is priced at a high side thus maintaining vacancies. Only at some stage one needs to throw in the towel. I reckon that’s 7 days before vacancy in our case. Not sure. What I do know however is that I wouldn’t be able to hold up the high price strategy indefinately. At some stage I’d fold. In a major city that could be 48 hours in advance. In our case (not a major city), it’d probably 7, 6 or 5 days in advance - depending what else is available of course.

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I raised my rates significantly this summer over last (my first season) and we are booked thru the July 4th holiday weekend. I don’t really drop them except seasonally. A lot of our bookings come on Monday or Tuesday for the upcoming weekend (drive-to destination). I still book them at full price.

Sometimes if things are super quiet I will knock off 5% to try to jiggle the algorithm, but for the most part it costs what it costs. I occasionally get a magnaminous offer to “fill up a vacant weekend” at a discounted rate and I sneer at the screen before replying “our rates are as advertised”.

  • That said, adjusting your price +/- $1.00 every day or so is a good idea. “Jiggle the algorithm.” It’s a highly technical term.

All I can add to this thread is: do as hotels do. I’m in Orlando, second in hotels only to Las Vegas, the richest person here in hotels is Mr. Rosen. His philosophy is to be booked always, no matter how cheap. So maybe this is an extreme example, after all, not everyone has very deep pockets like this guy probably has.
What I can say is that a very good friend of mine is a manager for two small hotels in Miami, and her job is to adjust prices on a daily basis, even several times a day, always trying to outbid the competitors. Prices also vary depending on website.
My advice: be on top of it and dont be afraid of changing your price everyday.

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To be booked always no matter how cheap

Logical strategy if you are a hotel. You have to heat, cool, and staff the building for the empty rooms as well as the booked ones.

With one single 2000 square foot house, it makes less sense. I have to pay someone to go prep it for a guest. I don’t have to cool it to 74 degrees if it’s vacant. Etc.

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I can see the rationale of booking out the place no matter how cheap but there comes a point when it doesn’t make sense for us as the host. I can see however why large hotel would strive for maximum occupancy since they have so many fixed costs, predominantly staff. We don’t have this as hosts so our aim is more like 70% occupancy.

An STR property, or an in-home listing are not hotels. Completely different business model so sorry, you haven’t added much.

Ah, the great “race to the bottom”. No thanks, not for me and not, I suspect, for the majority of good hosts who have confidence in their product.

JF

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I’m in the same club!

Same here. I liked those 7pm reservations. Hardly work at all. And usually really nice people.

That’s how I played it until I shut down. I’m not taking any chances with my shared home listing until August.

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Race to the bottom and a waste of management resources, imho. Prices can be set automatically within the system without her dealing with lowering past the competition. Stand by the value of your product and if discounting for same day, 10% after 2pm booking.

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I’m closed now because of coronavirus, but I never change my price- same price every day of the year. Works for me, works for my guests, and I have better things to do with my time than constantly check the competition and raise and lower prices. Being “afraid” has nothing to do with it.

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I have never discounted prices and have been using smart pricing for the past two years. This year, my room is booking between $30-$40 more per night than I have ever gotten before. I would never have thought to charge that much but people are happily paying it. No rush to the bottom here. My bookings are rarely more than a week or two out.

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Like @DozerPug I never advertise discounted prices. (The only times I have given any discount is a one night refund for a serious problem - i.e. the apartment’s AC breaking down completely). I also use SP.

I’m not interested at all in the race to the bottom. Most local ‘competitors’ are much chreaper than me but there’s still a good market for the more expensive accommodation.

Although I never drop prices I do put them up at certain times of the year - various holiday times and when there are local events. For certain events, I can more than double the nightly fee.

Not at all a good idea. Most hosts simply don’t have the time; I know I don’t. If hotels have staff they are paying who are doing nothing then okay, it’s something they can do if the hotel is unsophisticated and doesn’t have proper software.

To be booked up, no matter how cheap the nightly rate, is a bit of a weird philosophy. I have two apartments both with 99% occupancy rates but never discount or offer low prices. It’s not difficult to do.

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I think people are being a bit huffy about repricing every day. It’s not a race to the bottom, it helps keep you up in search. Airline ticket prices change all the time too. The smart pricing usually is too low in my opinion but it is based on algorythyms of demand across things like flights and hotels.
I think what I am going to do is go in and follow the smartpricing ups and downs but add £5 - 10 to bring i up to better value.

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I am more likely to raise prices closer to the unbooked weekend. I figure that the cheapest listings will go first, I do not want to be the cheapest, or anywhere close to that. I stay booked regardless of the desperate hosts around me practically paying the guests to stay. I am in this for profit, not to break even or worse.

RR

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I also raise prices as the dates get closer. There’s less to choose from so my places only become more valuable, not less. Everyone’s listings are different but the price is not one of the selling points of my listings - e.g. guests are booking my listings for other reasons, not to get a deal.

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Don’t discount. All discounts do is tell your guests what your property is really worth. Plus, once you lower your rates, it’s very hard to get them back to where they were. That being said, a length of stay discount can be appropriate as longer stays help lower your operating costs and leave fewer holes on the calendar.
First and foremost, you need to make sure you’re priced appropriately, compared to other properties in your immediate area. If you have an advantage on location, amenities, condition, etc., you should be charging more. If your competitors hold the advantages, you should probably be charging less.

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