Optimizing your apartment price on Airbnb
2 min read

Optimizing your apartment price on Airbnb

I've recently become interested in Airbnb and how to effectively set your apartments rental pricing.

Background :

I've only used Airbnb  once to date (it was while I was on vacation for 21 days this past December). During this time I was able to earn my entire months rent. Not bad for 14 days worth of work.

Today :

I'm not actively looking to rent my apartment. At the same time, I'm interested in how much I could theoretically get if I were to rent it. I guess my economic background (college major) is coming back to me.

I put up my apartment on Airbnb for $95 a day. How did I get to this number? I started by looking at apartments of a similar size / quality in my area. It seemed like the going rate was ~$100. I figured I could undercut the market, steal all of the demand and book my apartment throughout the month.

Experiment 1 : $95 - 12 rental offers next day.

I'm in business!

Experiment 2 : $140 - 14 rental offers next day.

This seemed strange to me. I raised my price and the demand went up? My friend Eric commented that "accommodations are one of those things where low prices scare some customers" - I think he's right here.

Experiment 3 : $190 - 0 rental offer next day.

I got too greedy.

Experiment 4 : $180 - 1 rental offer next day.

Back within the realm of reason. However, still too high.

Experiment 5 : $170 - 4 offers next day.

I've kept my apartment at $170 since then. I'm getting a steady stream of offers every day (between 3 and 5). Broadly speaking, it seems like I've found my price point.

This whole process made me realize that an Airbnb pricing optimization company should be built (or Airbnb should do it themselves - the problem is which side of the market should they serve? The sellers or the buyers?).

Things pricing optimization startup should do :

  • Put some sort of tracking pixel on the apartment's Airbnb page. This would allow the company to track how many more / fewer people are getting to the apartments page as the price varies.
  • It would be great if they could pixel the search results page. That is, allowing the company to know how often the apartment is coming up in searches based on how they change the apartments price.
  • Automatically adjust prices based on the pricing of other apartments in the area.
  • Automatically adjust prices based on availability of the other apartments in the area. If you're apartment is in the East village, and all the other apartments in the area are booked, your apartments listing price should rise.
  • Take into account holidays / weekends.
  • Do some analysis on photos of other apartments in the area to determine a relative quality index.
  • Factor in amenities available veruss others in the area. How does adjusting these amenities change price?
  • Airbnb allows different fees (a cleaning fee comes to mind). Would a buyer that's not willing to pay $180 a night pay $170 with a $20 final cleaning fee?
  • Another thing that matters is how often does the seller actually want to rent their apartment. In my experiments above, I did get 1 offer at $180. If that one offer is at the right time, why lower the price?

What would the companies pricing model look? They could just take a flat % of the final rental price but they would need to be able to prove to the seller that they're making them more money. Also, would this become similar to the realtor problem where the realtor is incentivized to sell a house quickly (and make some commission) rather than wait out for small gains in the price?