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Yield Management adopted by Airbnb

The airlines first invented it, the hotel chains adapted and adopted it, more recently Uber has been using it; now Airbnb has jumped on the bandwagon and started suggesting to hosts the daily price they should charge to Airbnb guests using some algorithm which looks to have all the usual characteristics of a, so called, Yield Management System:
-Undercharges long forward bookers - something Airbnb obviously wants to encourage as they keep your money for longer
-Generally penalises late bookers.
-Sharper variations between mid-week and weekend pricing
-Outrageous prices when the whole world knows the town will be full

My observation over a number of years is that travellers and vacationers often move away from hotels to homestay to avoid the pricing uncertainty and fluctuations they find almost universally in the rest of the hospitality industry…

I do check the prices Airbnb is recommending for my property, but only to try and identify any long term pricing trends in my area.

Are there any hosts actually adopting the Airbnb pricing recommendations? If so, I would be interested in hearing their experiences.

Stuart

I have a number of listings, and I am using “smart pricing” for the newest listing on the off chance that the search algorithm is favoring listings with this feature enabled. It’s hard to tell whether it’s working or not, as I am getting some inquiries and bookings, but I don’t know how many I would have gotten without it. In any case, I’ve committed to keep smart pricing on for a month. I set a high minimum, or at least 40% higher then the suggested rate and maybe 15% lower then what I would normally charge. Once I get a fwe more bookings and reviews I’ll turn off smart pricing as it seems to be suggesting very low pricing.

Smart Pricing is different then “price tips” which also show up in the calendar. Again, I’m sure that hosts who use the price tips have some small bump in the search algorithms, as Airbnb WANTS all of us to have very low prices. I’ve posted here before about how it started with Wimdu - pushing hosts to have lower and lower rates by incentivizing your ranking as a reward. At least with Wimdu it was a more transparent transaction. Lower your nightly rate/relax your cancellation policy to their suggested price/setting? Jump up (for example) to the top. They’d show you “you are now in position #1 for 3 guests in the X area”.

I’ve been around the block with Airbnb having listed my first place in April 2010, so I’ve seen a lot of strategies come and go. I think the push for listings to be as low as possible is one strategy that is here to stay.

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How much do you have difference between mid week and week end pricing?

Our problem is the suggest price is too low, we are very very rarely over our minimum price (we get only 5 stars on the price/ quality…)

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Surely this system potentially creates a downward spiral of prices in an area if hosts accept the lower rates, then the next recommendation will be lower still?

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I’ve also been following the tip out of curiosity and I found it varies a lot! I think different hosts in the same area get different tips according to the views of their listing, their booking history, reviews, etc. What really surprised me is that in the last year the tip for a double room went down from 70€/night to 9€/night which is insane -that’s the cost of laundry and cleaning products. I understand adopting the tip would be an investment in gaining visibility. The accommodations in my city were 1000 a year ago, now we have around 7000 and growing. Anyway, I decided to remain steady on what I consider a fair price according to what I offer (five time the tip) and I’m consistently booked. Most of my guest are last-minute travellers, though.

I have no variation between mid-week and weekend pricing. This plus a 3 day minimum stay actively discourages weekend visitors.

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Yes, but to compensate prices will rise even higher for days when you know everyone will be full.

Yes, which makes Airbnb just another booking site!

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Who knows how the Airbnb yield management algorithm works and what criteria it uses - there is clearly no input for variable operating costs per unit…

but if you are one of those who are full and creating the increased prices, you would not benefit from the increases, and it would also create an upward spiral - the system is self-creating.
And what happens if a previous guest wants to return and finds your price has increased?

You are raising issues which have been debated for years within the mainstream hospitality industry. In my view, that is good enough reason to steer clear of yield management systems.

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A couple of thoughts about price tips. My first inclination is that we are NOT a hotel and therefore trying to act and market like one is not what I am seeking. The tips for my waterfront two bedroom apartment which is 1.5 hours from Washington DC, Baltimore & Philadelphia can be as low $75. a night which will not cover my costs especially my labor. I think it is all well and good for Airbnb to create the pricing tips and it may be very helpful for those managing a lot of properties and want to have full occupancy - not my goal. My stategegy is to have maximum profit for my effort and to receive the value for my home that I know it is worth. So after two years and 50 5 star reviews on Airbnb & 20 on Home Away/VRBO, I WOULD like Airbnb to fix their platform so I may charge a pet fee and for taxes instead od trying to “fix” my pricing. Thanks for listening.

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Hey @superhostnyc,

I’d love to learn more about your experience with Airbnb’s smart pricing and congrats on the super host status! That’s awesome!

Thanks

K

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