How to Price Your Airbnb Vacation Rental
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How do I set my Airbnb prices?
Pricing is everything! Before you jump into the market of Airbnb VRBO Vacation Rental ownership or arbitrage, do your research not only on the purchase prices on properties and rental rates of existing vacation rentals in your area, but dive in to bigger factors that could impact your price, your value, and your ROI for your business and investment.
How do you find out your potential ROI for Airbnb? Is an Airbnb a good investment?
For your return on investment you need to look at the following factors:
Purchase price or lease amount - how much is your upfront cost and monthly carrying cost?
Consider that you are taking this down payment away from another investment where it is already earning you returns likely 5% or more. You want to know what your cash flow is going to be to justify withdrawing this investment from it’s other source.
Use a handy Buying Calculator to add up the following estimated items and check your costs and cash flow:
mortgage payment
HOA fees
annual property taxes
strata or condo fees
utilities for garbage, water, sewer or the cost of private water supply - make sure you know what the utilities are
insurance including an STR (short term rental) rider
Electricity, gas - check seasonality, what’s it going to cost if your guests crank the AC all summer long?
internet, TV subscription or streaming
10% set aside for maintenance each month - anything from snow removal to plumbing issues to heat, etc
management fee either monthly or % per booking if using a property manager
how much estimated monthly rent could you earn as a long term, monthly regular rental (not vacation rental?) if for some reason your STR plans don’t work out? Don’t forget to check HOA and local laws to make sure vacation rentals are allowed in your area ad building before you buy.
Most bank websites have a good mortgage calculator to estimate your basic monthly costs, we like this one as it allows you to look at cash flow not just cost.
Cash Flow Calculator for Rental Property
When we were starting out with rental properties, we took an in-person workshop from a trusted, reputable provider. Do your research, there are A LOT of real estate courses that are just a cash grab. While we only did the 3 day workshop and did not become members, we learned invaluable information about negotiating, ROI, and property management, tools that have greatly helped us today. Check out Keyspire for the courses that we took (this is NOT an affiliate link, just our experience was positive with this workshop) KEYSPIRE
AIRBNB Cash Flow
What is your start up cost going to be? You need to fully furnish your space, prepare a stock of 3-4 full sets of towels, 2-3 sets of bedding and duvets, and fully equipped kitchen and more.
A start up cost for a well designed Airbnb for 2 bed 2 bath will range from 10-15K WITHOUT the help of a professional designer. Design matters for your booking and ROI.
Are you hiring a property manager? Property managers generally charge 20 - 30% of each booking
Can you get a good, reliable cleaner/cleaning company and what do their rates start at?
Do you need other service providers like hot tub/pool maintenance or landscaping?
Are you putting in a security system, and is there a subscription fee with this?
Do you need to buy accounting software or calendar management tools to keep track of everything?
Every little thing can add up quickly. Not to mention all of your supplies you will be going through, and the regular replacement of items such as towels and dishes.
How Do I Price My Airbnb Vacation Rental and nightly rates?
Pricing strategy for your Airbnb & VRBO listing is important. It doesn’t necessarily need to be the same on both platforms either.
Look at directly competing properties on both Airbnb and VRBO with the same bed/bath configuration, similar location and amenities and make notes, look for trends and average prices.
Take a GOOD look at their calendar rates through the peak season and slow season, and their design and details of the most popular spaces as well. Places with bonus amenities like hot tub, pool, beach access or a gym, will typically rent higher and be sold out more often.
Note what fees are being charged for cleaning, pets or extra guests.
What are your closest competitive properties priced at?
What do their calendars look like for availability vs booked up when you take a peek at their listing?
Also look at their minimum night stay. It’s always to your advantage to have longer stays 2 nights or more, and easier to find cleaning support for less frequent turnovers. Your cleaners are not going to want to be there 7 days a week after seven 1 night stays.
AirDNA is a helpful tool for this research as well but it doesn’t take into consideration things like pools, waterfront, location and value added items that will significantly affect pricing and popularity on some listings over others.
What is the pricing and demand for different seasons in your area?
What season are you launching in? Is it the peak season where your hot new listing will likely get scooped up, or is the off season where you may be a slow start and not have income for the first few months? (Check out our post on marketing for the off season)
Tips and Tools to use to create your Airbnb rental pricing
Tools you can use to research and help with pricing - do you research on these as the reviews are very mixed on them, particularly in different geograhical locations. Airbnb has also reportedly started charging hosts a FEE for using any of the software that integrates into their system
Pricelab
Beyond Pricing
AirDNA
How does Airbnb smart pricing work, should you use it or not?
I’m going to say NO to using Airbnb Smart Pricing.
It seems tempting to have your rates automatically move up and down, but in our experience, Airbnb always moves them down, and sometimes pairs your lowest rate on PEAK HOLIDAY DATES with added discounts. You need to control your pricing. Do not use smart pricing. It will traditionally recommend lower than average rates. Airbnb is trying to incentivize the most bookings possible, not the best ROI for owners. And their rate recommendations do not take into account your Airbnb’s unique valueable amenities like a hot tub or a view.
Look at your local market, check in regularly and adjust your prices up and down based on how quickly you are booking up (or not)
Should I Offer Discounts or Promotions on Airbnb?
YES, if you are just starting out with your listing, especially in a slower season, offer the initial discount for the first 3 bookings.
NO If you are in an area where it’s peak season and there’s very little availability and you’re likely to get bookings right away, just carefully price so that you are on the low-middle end of your competition.
If you immediately get bookings that same day or week, adjust your rates a bit higher and pay close attention to them vs your competition for the first couple months.
If you find things are slower, look for the promotion option in your calendar where you can set a temporary promo for a short vacancy window on your calendar.
If you are hoping for longer stays and are not in a resort destination type area that gets a lot of vacationing guests, offer a discount for weekly or monthly stays.
Consider different days of the week at different rates and minimum nightly stays. We do a deeper discount for the slow season but increase to a 3 or 4 night minimum stay, otherwise it’s just not worth it for us to rent at the lower rates and the market isn’t there to ask for a higher amount.
The non-refundable cancellation policy is one that you can use too
It gives a 10% discount for guests to choose a non-refundable cancellation for your booking, but more often than not, a guest cancels and then tries to demand a refund anyways.
It’s annoying and not really an incentive you need unless competition is tough in your area.
Location Affects the Price Significantly
Search your area for similar properties with the same amenities, bedrooms and bathrooms and location that is in your area or comparable to your area for value, proximity etc. If you are out in the suburbs when most activities are downtown, you need to have attractive pricing to get people to come alllll the way out to you as they now have to spend extra time and fuel, rental car miles, etc to get out to your place if everything they are interested in seeing and doing is 20 minutes across town.
Pricing and good amenities need to be an incentive for guests to stay with you if your location is not absolutely prime for demand, make sure when you are checking comps, that it is relatively close to your location as well as the hot spots, so you can see the range in pricing.
How Can I Get the Most Money Out of My Airbnb?
Amenities + Design + Location = VALUE for your guest
Yes we know everyone wants to make the most money possible, but there is A LOT to consider when you are starting out. We hope you have selected the best property you can get in the best location you can afford.
Location is VERY important to travellers, they don’t have a lot of time to get around, they want to maximize their vacation or travel by being as close as possible to what they want to see and do.
Once you have selected the potential property,
Then you have researched the competition and market and rental seasons
NOW you need to decide on design, amenities, and value. Every detail that you put in to your space affects the price that guests are willing to pay, and the value that they are going to rate you at in their reviews.
Adding local touches and unique style, such as custom & local artwork or coffee bar amenities from your fave local shop, can really add to the design touch and value for your guests.
If you don’t have an eye for design, HIRE SOMEONE. You can get a virtual design plan done, complete with a DIY shopping guide from many online interior designers like Ariane Design Co. Many stores like Lay-Z-Boy and Wayfair will also assign stylists to help you get everything you need all in one go for a cohesive look.
Don’t go crazy on the design, but make it stand out from your competitors, renovate where you can to have good bathrooms and kitchen, and don’t cheap out on the bed and bedding, those beds MUST be comfortable.
Don’t forget to budget for Professional Photography to get your listing launched with the BEST possible reach to your potential guests. You’ve put in all this work, professional photos need to really sell how great your space is. Our staging & Photo Tips Guide can help you get prepared, or DIY if you want to try that first.
Find out more design tips HERE in our shopping guides and all of our top recommended amenities, linens and kitchen supplies are all here.
We hope these tips have given you lots to consider. Please sign up to stay in touch for our latest posts and bonus items and PIN this article to save for later & share with anyone who may benefit from this or our other guides.
Check out our Tip Guide with detailed information on doing a Trial Run before you officially launch your new vacation rental
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