How to Price an Airbnb (Make More Money)

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What's up guys, it's James here and in today's video, we're gonna be talking about how to price your property on Airbnb in order to make more money. And this is going to apply whether you're hosting your own property just an additional space, whether you're an Airbnb or short term rental investor who wants to get better returns on your property. Or whether you're a short term rental manager, you're managing other people people's properties on Airbnb and you want to help improve the returns, we're going to talk about my philosophy for pricing and how you can use it on your own properties in order to generate stronger returns. So with that being said, I just want to remind you before we jump in that there are some links in the description down below to some free trainings for whichever direction you're looking to go with Airbnb, whether you're managing properties on Airbnb, or you want to be if you want to start managing properties for other people on Airbnb, and earn a full time income, or if you are hosting your own space. Or if you want to be an Airbnb investor, or you are currently an Airbnb investor, you want to be able to scale and build a portfolio that cash flow is really strong and helps to build long term wealth. There are free trainings, jam packed with value, they're linked in the description down below. So make sure you check those out seriously, these trainings are really jam packed with value. They're a culmination of all the different things I've learned over the last six and a half years being in the Airbnb and short term rental space. So I hope they will serve you well in helping you to avoid different mistakes I've made, and really just expedite your path to success. So again, those links are in the description down below. Let's go ahead and get started. So my whole philosophy around pricing that has served me very, very well, it seems to be the one that has produced the best results, for me with the most consistency over the years, is to price. Based on occupancy targets, there's a few different ways that you can price a few different methodologies you can use, there's even software's out there that you may have heard of like a dynamic pricing software, and all of them do different things in different ways and kind of utilize different strategies for optimizing your pricing. But the goal is always the same, the goal is always to kind of strike that perfect balance between your nightly rate and your occupancy rate in order to maximize your returns. Now, none of the different methods have worked quite as well for me as the strategy I'm about to share with you. And that includes dynamic pricing software, dynamic pricing software I've been I historically rather underwhelmed with, they can do a good job depending on the situation, depending on the software you choose. But they really rely on you setting the right parameters and having a thorough understanding of pricing strategy in order to make sure that you know whether they're working well or not. So for those of you that are looking for a quick and easy solution, like you can just plug in a software, and it'll do all the work for you and do a great job. Unfortunately, my advice would be to not go down that route, I just haven't found it to be actually effective, you're gonna be losing a lot of money if you go that route. That being said, this strategy that I'm about to share with you, for one property, it takes about five minutes every week. So even if you're managing a large portfolio of properties, or you want to grow to manage large portfolio properties, by following the training that's linked down below and using those resources, then it's still not going to be a huge suck of time, it's still going to be very, very manageable. Even with 1020 properties, it's really only going to take you a couple hours a week. Really what this strategy is, is about understanding your target. So for different markets and different properties, you're going to have target occupancy rates. And these should be based on what the top performers in the market are doing. So if you see, for example, that in the high season, which for you may be, let's say July and August like it is for me in a lot of the listings that I manage nowadays. And it could be any different time of the year for Florida that I would like the wintertime whereas for up north, it's summertime depending on where you are in the world, right. But if you see in high season that the best performers in the market, and I generally recommend benchmark yourself at the 75th percentile, so the top 25% of the market. And we obviously want to strive to be in the top 10% And even the top 5% Or even better of the market. But let's start with the top 25% Because that is something that I believe that just about anyone with just about any property can achieve as long as you do a great job with the pricing optimization your strategy around Airbnb that you can achieve that. So you want to look at what those top performers are doing. And if you want to get those numbers, air DNA is a really fantastic resource for that. We've also got a link in the description down below for a FREE Chrome extension that you can use to help you with grabbing that data from air DNA. So again, that's called Air export. We developed it mostly for internal use, it is still in beta right now. So I will just put that kind of disclosure out there. It's got a couple of little kinks in it that we're still trying to work out. But I did just want to make it available to you guys on YouTube. I'm not promoting it anywhere else, because we really again did just develop it mostly for our own internal use, but it's such a great tool and
I've gotten such great feedback from the few people I have shared it with that I want to share with you guys as well. So that's available for you as well now grab those performance metrics, those kind of benchmark goals from air DNA, and then you want to plug them into a tool similar to the one that I've gone over previous videos where you want to understand how far in advance you should be hitting what percentage of that goal. So again, let's take the example of July where we know the goal is to be if it's high season booked at 100%, right? And whereas another month, like the low season of January, you know, we might have a goal of being booked at 65%. Because we know that that's really the optimal place to be in January because January is low season. But this is going to be a little bit easier if we use the example of 100%. So let's look at July, if the goal is to be 100%, booked in July, then we need to know what percentage of that should be booked it by June, what percentage should be booked by May? What percentage should be booked by April by February by March? By January? I know those weren't in the right order. But you know, what percentage should be booked by what month. So if we're six months out from July, we maybe should only have 5% occupancy right then. And what we know is that if we are over 5% occupancy six months out from July, then our listing is underpriced because we're getting overbooked, whereas if our listing is does not have 5%, it's got less than 5% occupancy six months out, then we know that overpriced, right, so we should we're getting under books, so we should actually lower the price, we get some more bookings in there. And then we know exactly how we are on track for that goal, six months out, five months out, four months out, three months out, two months out, one month out, and then even 30, and 14 days out from the actual month of optimization, right. And we know this for every month. And so each week is what I recommend, once a week, you can go in there and even look at how you're doing relative to your goals. And you're constantly making micro adjustments. Now, the benefit here is that you're always making small tweaks. So it's very rare that you ever have to make big tweaks. Big tweaks are basically where you're just kind of throwing a Hail Mary. So anytime I see someone, this is what I see people doing a lot of is that you they know they should be booked 100% for July, but they have no idea or no benchmark of how many of those bookings they should have by April. So they suspect when they're not booked at all in April, that it's okay, I'll leave it, you know, over the next over over may in June, I'll get the rest of those bookings for July, I know it'll fill up. And then lo and behold, June comes around, they don't have nearly enough bookings for July. And so they have to start dropping their rates and slashing their rates drastically. Now, what that means is that, instead of decreasing their price just a little bit a few months ago, they have to decrease their price a lot at the last minute in order to get those bookings in, or they take a gamble and keep their rates high, when they aren't really sure if they're actually going to get booked up at those rates or not. And that could pay off for them. Or it could really go quite poorly. So you really want to do this. And that's what I recommend is basing all your decisions based on the target the occupancy targets. Now what this will allow you to do is really fine tune things for your specific listing, because the reality is that each listing is going to have its own kind of threshold for what the price is going to be and how well it's going to perform, right? Because we can't, we can analyze and figure out how well a property will perform within a within a relative range. But you may be at the high end of that range or the low end of that range. And that's ultimately going to come down to how nice your listing is the amenities that it has. And so in order to really fine tune our pricing, we need to have a pricing strategy that is tailored to the actual performance of our listing, and not just benchmarking purely off of the market averages.
So we don't want to look at the market average price, for example, the average daily rate that a lot of people tend to look to and use as their guiding light, because that's an average daily rate, we may be able to outperform that quite drastically, maybe we can do a lot better than that. Or maybe we're going to be slightly worse than that. Maybe we're gonna have some bookings come in lower than that average daily rate. And some bookings come in higher than that average daily rate. Right. Just it's really challenging to operate and actually use that average daily rate number to really actually make decisions with your listing. So having that target occupancy rate be your kind of Guiding Light is a really a better strategy. And then for different listings, you'll have different benchmarks of how far in advance your property should be booked up. There are good rules of thumb for that as well. So I'd highly recommend looking those up, they are going to vary a little bit from place to place, but we use them and again, those tools if you want access to those kind of benchmarks, you want access to tools to allow you to track this like our target occupancy rate tracking spreadsheet, they're included in the trends, we cover them we discussed and we show you how to get access to them in the trainings down below in the description. So depending on whether your host yourself, you want to manage other people's properties, or you want to invest in short term rental properties, just pick the applicable training and you'll be able to get access to those tools. That's really my best recommendation for how you should price your listing. I hope this was helpful. I know we didn't get into actually using the tools we've done that in separate videos we actually go through the tools but I did want to share just my philosophy around pricing so that everyone here can understand how I view pricing and the strategy that Having tried a whole bunch of different strategies, the strategy that I've found to be the most effective so that you can hopefully implement that for yourself. Again, links in the description down below for you to get access to the tools training resource. I hope those are valuable to you as well. If you did like this video, please take a quick second and hit that like button give the video a thumbs up. Also, make sure you subscribe to the channel if you haven't already. With that being said, have a fantastic rest of your day and I'll see you in the next video.