Transcription
60% of the listings on Airbnb use the platform's built-in pricing tool called Smart Pricing. Are you one of them?
There's three other types of Airbnb hosts as it relates to pricing. The first is the host who sets one price all year round. The second is a host who manually adjusts the prices. And the third is using a dynamic pricing tool like Price Labs. In the comments, tell me which group you're in. You want to be in the fourth group, using Price Labs.
I use Price Labs and I purchased this Airbnb from a property manager who was using the same price all year round. The worst of the four groups to be in. I did almost nothing to this apartment and I am making $160,000 versus their $45,000. And I attribute a lot of the gains there to my pricing strategy.
Being such a crucial tool to your Airbnb success, I am going to try and solve this question once and for all: Which is better, Price Labs or Airbnb's Smart Pricing? We're going to go into Airbnb, my account, and we're going to look at Airbnb Smart Pricing and everything that they offer. And then we're going to go over to Price Labs and see what the difference is. We are not going to be diving deep into Price Labs, that's not what this video is about. I have a whole playlist dedicated to Price Labs. So let's dive in.
All right, let's go into Airbnb and figure it out. Now, when I find, while I find my listing, I remember when Airbnb rolled out Smart Pricing. It was in 2016. It was a year after I left that company. It has made a few iterations over the years, but not much has changed. Now, my calendar is blocked because my listing is ranked so high. And these videos I make, they're not just me talking with you. Six minutes. I make an outline. One day I revise that outline. I have to wait for good sunlight and record the video because I want to deliver you very quality information. So we can still do this video, totally 100%. But that's why my calendar is blocked out.
So this is Airbnb Smart Pricing. Now, I supposed to have that off, but it doesn't matter. So when we have it off, we have a base price. Okay, so you can see all of the days are at this base price. Now, when we turn on Smart Pricing, you'll see the price has changed. They, they're at $115, but here we go down to $97. And they ask for only one thing, Airbnb. When you turn on Smart Pricing, they change it from that base price to what is your minimum and what's your maximum night. Now, most listings don't have to put a maximum. But this is very different than a dynamic pricing tool like Price Labs, which we'll get into in a moment here.
However, I did want to go over some other settings in the calendar that you can still use whether or not you're using Smart Pricing. But let's just have a look at the prices here. So we are coming from a low of $97, a lot of $97s, some $96s, so $113. So we're, we're varying the price about 20% it looks like for the next few months. On Price Labs, you'll see the price actually varies 100% from from $90 to to $180, $200 bucks.
Couple of the things, discounts. Discounts are always available. I just wanted to call out one tool that maybe you're not aware of within Airbnb, which is pretty cool. You can actually add a discount for two days, three days, four days. And if you do that, then you can take advantage of what I call a creative discount. I have a video on that, and it's about basically raising your price but at the same time offering a discount for every length of stay except one night. Thus, you're allowing yourself to get booked for a night at a 20%, 25% premium, whatever you choose.
Promotions. I wanted to take you actually to a different Airbnb because we haven't used any on this one. But a lot of hosts reasonably ask me, "Hey, should we do promotions?" Because when we do a promotion that's within the Airbnb system, and we must get extra bookings. Also, when the guest is about to check out, Airbnb shows pretty obviously that this guest is getting a discount. This listing is on discount. But I did run it with this new listing and, oh well, doesn't give me. It says zero views. You're gonna have to take my word for it. Uh, doesn't give it doesn't give me much confidence in Airbnb's uh historical data. But it did say a thousand views. So this promotion I ran for this new listing, I gave 20% off for the first three bookings. However, I didn't really give 20% off. I raised my price 20% and then gave 20% off. The theory being, hey, because I'm using this promotion, even though I'm not really giving 20% off, uh, am I going to get booked at a normal rate because it's a promotion in Airbnb and they're showing it really obviously, "Hey, you're getting what, $100 off this reservation?" And the answer is no. I did not. It did not help at all. I got 1,000 views and not one person booked. When did they book? They booked when there was a change between my PMS, property management software, and Airbnb forcing me to simplified pricing, thus reducing my price 15%, and then I got booked. Now I'm ready to put that to rest. Promotions don't work. And if you've been following my channel, just real quick, uh, simplified pricing actually doesn't matter anymore. Airbnb has changed the platform. It appears. I'll release a video when I'm 100% confident, but it looks like they've changed the platform so that it doesn't no longer matter if you're on simplified pricing. You have no advantage being on or offload pricing. So it actually doesn't matter. But I still would have liked to not get a 15% discount. I've since raised my prices. There's nothing special about these additional charges, cleaning fee, pet fee, etc.
Now let's go over to Price Labs. I am an avid user of Price Labs. I have been using Price Labs for many years. Although I also use all of the other tools, including Airbnb's Smart Pricing, because I want to ensure that I'm using Price Labs because they're the best, and not just because I have an existing relationship for them or just because I've been using them in the past, which so many hosts do. They've been using one PMS and they're like, "Well, it's good enough, so I don't really want to change." I want you to know before you make the decision, whether it's a PMS, whether it's a Smart Pricing tool, I have videos on all the popular Smart Pricing tools. I want you to know before you sign up whether or not you're going to stick with it for the long term.
This is my newest Airbnb, so let's just have a look. The first thing you notice, by the way, I I should let you know, is you're a little bit overwhelmed. Okay, I'm going to give a summary at the end about the real differences between Airbnb Smart Pricing and Price Labs. Well, the first thing you notice quite obviously is, whoo, there is a lot going on here. We got calendar, neighborhood data, hotel data, there's other tabs and things going up, buttons, numbers, percentages. I get it, I get it. But here's the thing, it's so worth it to learn because none of your competition is learning it. And if you learn it, you're going to make twice as much.
So we can already see with with uh Price Labs, they are varying the price a lot more. And that, in my experience, is much more in line with actual market demand depending on the day of the week, whether it's midweek or weekend, depending on the month, and depending on uh hotel occupancy, other Airbnb data in the area. The base price here is, I'm just going to call it a few things, base price. The things that are different from Air from Airbnb Smart Pricing, the base price is crucial. The base price, think of it as what you would charge for your Airbnb on an average day in an average month. And then Price Labs takes that number and then varies it up and down on any available day you have, whether that's three, six, nine, 12, 24 months into the future. They'll raise it and lower it depending on a variety of other metrics like the ones I just went over. If I raise this to $250, all of these prices aren't just going to go up $50 bucks. Some will go up $100 bucks, some will go up $5 bucks, depending on that individual day demand.
Now, you can scroll over this and again, a little bit confusing, but it's worth your time. I TR I promise you. And I have a whole playlist on Price Labs videos, everything. How do I determine minimum price, maximum price, base price? How do I do customizations? How do I actually change things? How do I know on optimizing my price? And then what you'll notice the big, big difference between between Price Labs and Airbnb is this customization section. Price Labs has customizations for anything you want to do. Anything you want to do, you have it here.
Now, a customization you use a customization to counteract a booking trend that you don't like. What's a booking trend? A common booking trend is, hey, a lot of guests are booking my weekends and not weekdays. Okay, that's a booking trend. Uh, I'm noticing that that's a trend. And what do I want? I want my weekend days to be higher priced and or my weekday price to be lower. That's how you want to effect. You want to change that booking trend. Now, you come in here, come into more customizations in general, and we have day of week pricing adjustments. So you might do, as I said, maybe negative 10% midweek and or maybe plus 10% on the weekend. And maybe Thursday is your weekend.
I'm just going to show you one more customization. I have a video all about customizations. I go through this dashboard and I go one by one through every customization and I tell you when you might want to use it and how to use it. I go in, I make the changes, and we go to the calendar, we verify the changes, which is very important that you know the the customizations you're making are affecting your calendar in the way that you want it.
Now, the other and final one I will mention is this custom last minute price. This is beautiful. So when you do this, we're going to add percent gradual. Okay, and we're going to do 50%. I know that sounds crazy, but let me explain. Now, we're going to do with, we're going to do a discount. By the way, it could be a premium, but in this case, it's going to be discount. And then within days, that's going to be your booking lead time. Airbnb actually tells you your booking lead time. In this case, this is a new listing, so I'm not sure what the the booking lead time is, but probably about 30 days. So if we save changes, then we're going to look at a calendar and I'm going to tell you how this actually affects the calendar. You see right in the middle there, last minute pricing factor, negative 35%. So that is December 2nd. When I go to December 1st, that 35% is going to go up, maybe 36%, 37%, and then it'll go up 39, 38, 40. Okay. So as the days get in closer, the the last minute pricing factor, the discount is going to go up because that's how true demand works. You're more likely to get booked if you have 30 days to go than if you have 3 days to go. So at 30 days, we apply a 1% discount, but at 3 days, we're applying a 40 something 8% discount. Never lower than your minimum. But I love that because the discount actually matches true demand. How the true demand is changing. How do most hosts do it? Most hosts do a step discount. "Hey, at 15 days, lower me 20%. You know, at 10 days, another 10%." That's not really how how demand works. So that's not really what you should be doing. Let me take that off because I actually don't want that for this particular listing.
To summarize, Airbnb Smart Pricing versus Price Labs. Airbnb Smart Pricing, it's free, it's included in the tool, it's very user-friendly, extraordinarily so. And that's because there's almost no decisions to make. You have to say your minimum and maximum price, that's it. Now, the downside is that you're going to be missing out on a giant portion of revenue that you could otherwise make. Why is that? Think about it from Airbnb's perspective. If your listing is a $100 a night on average, but some nights you might be able to get $150 bucks. Airbnb's incremental percentage, let's say they're making 10%. To keep the number simple, on a $100 night, they're making $10. Let's say on a $200 night, they're making $20. But Airbnb knows that if they boost your price to $200 bucks, they're less likely to get your listing booked. For Airbnb, that only represents $10. So if they lower your price to $150, you're much more likely to get booked at that rate. And Airbnb is only missing out on $5 of potential revenue. They're going from $20 to $15. So Airbnb's incentive is to get your listing booked at a very high occupancy as much as as much as possible and take a small commission on more nights rather than try and get you maximum profit and take a slightly higher percentage of commission on fewer nights. But also keep in mind that if Airbnb can convince you to lower your price, that's a better guest experience. That keeps them more competitive with hotels.
On the other hand, we have Price Labs. It does cost money, about $20 a month, though I would argue it's an investment. It is much less user-friendly, but that means you have a greater upside. The more difficult something is, the fewer people are doing it. That's why 60% or so of Airbnb hosts are using Airbnb Smart Pricing because it's so easy. But I'm here to help you. I already mentioned my Price Labs playlist. I also have an online program which we go over my pricing strategy. In part five of my new book, Profitable Properties, it's all about pricing and my pricing strategy and the five common calendar occupancy and how you strategize for each one of those five.
Now, if you want to join Price Labs, you can do so with my link in the description. They're going to give you 30 days free plus $10 credit off your first bill. This video came directly from a comment. They asked, "Hey, what's better, Price Labs or maybe Smart Pricing?" Very good question. If you have a similar question, post it in the comments and I'll answer it in a future video. Till next time, happy hosting.