What is Airbnb Smart Pricing and How it Works

Setting prices for a rental is always a bit of challenge because the market is always changing. Prices can change based on competitors, seasons changing, decor, location, availability and many other factors as well. To be honest it is more of an art than a science. Even with thorough research, and past performance, there will still be mistakes and missed opportunities with pricing.

Airbnb has found a way to address this issue with their smart pricing program. You are not forced to use this, however the site heavily promotes it, and even makes it appear to be mandatory at times. Smart pricing has some excellent benefits in some cases. If you have a last minute vacancy you would like to fill, it is probably the fastest way to book a property. It really helps those properties that aren’t as picturesque or are located in less desirable locations. But it certainly isn’t fool proof either. If things aren’t right in a rental, potential guests will notice and choose something else.

The problem with smart pricing is that it is promoted as a “smart” algorithm that will offer the property at the optimal prices to get guests to book. You set the ranges from say $75/night to $150/night. Most hosts expect the weekends to be priced higher than say a Wednesday, because weekends are more popular, and therefore have more competition which should drive the price up. In practice, smart pricing is an exercise in frustration. It seems to automatically choose the bottom of the price range and only fluctuates $1-2 between days. I thought it would be good for special event times like Superbowl, but potential guests can still game the system by booking generously ahead of time as many people do for special events.

The bottom line is that the majority of guests are hunting for the lowest prices possible (surprise!) and the smart pricing is catering to that. It will almost always zoom to the bottom of your price range, and stay there no matter how popular or busy the tourist season is. It also prompts you to lower your pricing to about 20% below market.

I love this tool for beginners and those looking to gather reviews. I would recommend using it for a short time until you get a feel for the business. Once you have some hosting confidence, get out of smart pricing as soon as possible. Guests that are obsessed with deal hunting are much lower quality than those that don’t mind spending a couple of extra dollars for a nice place. For more details on how to set pricing with confidence, sign up for my Vacation Rental Secrets Course.