Airbnb Smart Pricing and Its Alternatives

An effective Airbnb pricing strategy is crucial for your success on the platform, whether you rent out an apartment in an urban area, a ski house rental in the mountains, or a treehouse surrounded by nature. However, finding the right, competitive nightly rates for your listings can be tricky.

That's why Airbnb offers hosts the opportunity to turn on its Smart Pricing tool, which can help you adjust the nightly rates for your property based on different factors. But is Airbnb Smart Pricing the right option for your listing? Can you rely on Airbnb's pricing algorithm to keep your rates competitive and optimize them for maximum revenue?

In this blog article, we'll discuss how Airbnb Smart Pricing works and its alternatives to help you set the best nightly rates for your listing.

What Is Airbnb Smart Pricing?

It's a built-in dynamic pricing tool that helps Airbnb hosts adjust their prices over time to respond to travel trends in their local area. Airbnb Smart Pricing uses an algorithm that analyzes and evaluates relevant data for each property listing to calculate and adjust the nightly price.

The tool uses various factors about your listing and area and automatically updates the nightly rate to match the demand of the relevant market. But it does it only within a minimum to a maximum price range you have set.

This tool can be helpful if you want to continue to optimize your Airbnb pricing without constantly monitoring it. Implementing smart pricing aims to increase the chances of getting booked for your vacation rental property.

When you get a lot of bookings, managing them can be rather time-consuming. That's why savvy Airbnb hosts use short-term rental software like Hospitable, which can help you streamline almost all operations. You can put your STR business on autopilot with our STR super app.

It's up to you to decide whether, when, and how to use Airbnb Smart Pricing.

• You can turn this Airbnb functionality on by switching the Smart Pricing toggle in the Base Price section under Pricing. You can also turn it off at any time.
• You can set the minimum and maximum nightly prices so your listing won't go below or above unless you decide to set discounts or promotions.
• You can override Smart Pricing on any date—you need to select specific unbooked dates in your calendar and turn off this feature on those dates.

Airbnb Pricing Algorithm: How Does It Work?

The tool works on an algorithm that generates price recommendations from metrics related to the property. After analyzing the relevant data, the Airbnb pricing algorithm will recommend the optimal price based on its calculations. It takes into account hundreds of factors, including:

• Your listing details, like location (local demand), property type, amenities you offer, and guest reviews (their number and your average ratings);
• Search activity in your local area, including how many travelers are searching for certain dates and the average number of people who view your listing;
• Number of bookings in your local area, including those with similar property types and amenities.

Should You Use Airbnb Smart Pricing for Your Listing?

On paper, the platform's built-in tool seems almost perfect, and it works for some hosts, but the general consensus on vacation rental host communities is mixed. Here are some reasons why Airbnb Smart Pricing may not be the best option for you:

• The tool is aligned with Airbnb's interests and prioritizes bookings over host income because of the commission that the platform takes for each booking.
• Airbnb's pricing decisions may favor guests over hosts, so the algorithm may lower prices to attract more guests, meaning you earn less per reservation.
• Airbnb's pricing algorithm primarily focuses on Airbnb's internal data, which may not provide a complete picture of your local STR market. It doesn't consider data from other OTA platforms.
• Airbnb smart pricing is limited to Airbnb, so controlling prices and ensuring parity will be challenging if you list on multiple booking channels.

What Are the Alternatives to Using Airbnb Smart Pricing?

You can set your prices yourself based on your market research, adjusting your pricing manually based on seasonality, events, and spikes in demand. But this process is very time-consuming, especially if you list several short-term rentals and mid-term rentals on multiple channels.

A better alternative is to use Hospitable's built-in Dynamic Pricing solution. It will give you access to real-time data to optimize your nightly rates, maximize occupancy, and increase revenue across your connected booking channels. You won't have to pay to use the Dynamic Pricing feature because it's included for all Host, Professional, and Mogul users at no additional cost.

With Hospitable, updating prices won't be confusing or time-consuming, and since Dynamic Pricing is embedded within the Hospitable calendar, you'll be able to manage all your bookings in one place. Setting up Dynamic Pricing is easy—you just need to choose a pricing strategy that aligns with your revenue goals (aggressive, recommended, or conservative) and set the minimum and maximum price limits.

As soon as you enable our Dynamic Pricing feature on some or all of your properties, we will immediately push the current recommended nightly rates to your channels, including Airbnb, Vrbo, Booking.com, and Agoda, as well as your Direct booking website. Then, prices will be automatically updated every 24 hours based on the latest market conditions, including demand, seasonality, day of the week, local events, and other factors.  

Hospitable also integrates with several third-party dynamic pricing tools designed to work with hosts and property managers. They respond to market trends, fluctuations in demand and supply, and seasonal changes more effectively than the Airbnb pricing algorithm, but they are not free. Still, if you want to explore alternative solutions, you can find a list of dynamic pricing tools that Hospitable integrates with on our Integrations page.