Transcription
So you don't know what your base price should be for your Airbnb listing? In this video, I'm going to solve that problem for you, plus teach you how to manage your pricing forever with my simple two-step strategy.
I'm Danny. I used to work at Airbnb, but more than that, I have become a super host and short-term rental property investor. And as it relates to pricing, how do I know my strategy is so functional? Well, in my last investment called The Belatti Penthouse, I quadrupled the revenue of the prior owner with this strategy that I'm going to teach you right now.
What is base price? Think of base price as your listing's price on an average day of the week in an average month. It will change. My strategy says to know your base price, you must first know your BLT. Luckily, Airbnb shows you what your BLT is in their insights dashboard. I'm showing you now how to get there. It's located under the sub-tab conversion titled "Booking Lead Time." Now, I would go back 3 months at least. Be sure to select the listing that you're interested in. You can see my booking lead time is 26.8 days, so we'll use that in this example.
As soon as we know our BLT, we then develop our occupancy targets. How do we develop our occupancy targets? It's based simply on math. Now, I'm going to round up our booking lead time to 30 days. I'm going to tell you why I'll do that later on in the video. If your booking lead time is 30 days, that means that roughly half, or 50%, of your reservations are coming between today and up to 30 days, and the other half, or 50%, are coming 31 days into the future, typically about 60 or 90 days out. So, if we know that half are coming before and after 30 days, that means at 30 days into the future, we want to be about 50/50% booked. You only be about half booked, right?
So, pop quiz to see if you got that concept. At 15 days into the future, how much do we want to be booked? Well, somewhere between 50% and 100%. We always want to be booked, so that's going to be 100%. So at 15 days, it's going to be something like 75%. That's our occupancy target. Now we have occupancy targets for 15 days into the future, for 30 days into the future, which is the main metric. The main metric is your occupancy target 30 days into the future. And this strategy is so powerful because it now gives us 30 days into the future to make adjustments so that we're not looking at our calendar this week empty and saying, "Crap, I got to lower my prices now."
Stick around until the end where I'm going to give you a tip on last-minute discounts, which is a generally a customization that all hosts should be using. Now, whether you're a new listing or an existing listing, you have an idea of what your base price should be based on my prior definition. If you don't, and you're totally lost, that's okay because our friends at Price Labs are going to help us out. They're going to recommend a base price to you. Use that. If you're new to Price Labs, I have a discount code for you in the description. And if you're not using Price Labs, it is a pain tool. Go to Airbnb, go to your market, select your number of bedrooms and bathrooms, zoom down the map to your area, and look at your competition and get an estimate that way. Remember, it will change, so we need to make an educated guess at our base price at the beginning. After we do that, then occupancy will tell us what our base price is going to be, but I'm getting a little bit ahead of myself.
Let's say in this example, I think, or Price Labs tells me, that my base price should be about $125. Now, forget about it for a week, then compare your occupancy target to your real true occupancy at the booking lead time. Our booking lead time in this example is 30 days. Our occupancy target for 30 days is 50%. This is why I like Price Labs because it shows you so easily. Let's run through an example. If your true occupancy is higher than your occupancy target at your booking lead time, remember, always your booking lead time, then you will raise your base price. How much to raise it? My suggestion is raise it by 10%. That means in this example, if we're at $125, now we would be $137. Our base price. If you have a giant house or a luxury house and your base price is $1,000, after this change, it would be $1,100. Forget about pricing for another week.
Pop quiz. Let's say when you come back, your true occupancy is now below your target occupancy at the booking lead time. 30 days, remember, it was above and we raised. What do we do if our true occupancy this week is below our occupancy target at booking lead time? That is correct. We would lower by 10% our base price. It's that simple. We are changing our base price based on our occupancy, which is a metric that we know it to be true. And you just learned step one of two in my pricing strategy: booking lead time, occupancy targets, and base price.
Now, there is a little bit more to it, and I have a playlist dedicated to topics ranging from anything you could think of about pricing, but I wanted to focus on base price because it gives both new and experienced hosts the most confusion. At the end of this video, I'm going to recommend you a couple videos that I want you to watch next to further your knowledge in the pricing department. If you want a little bit more hands-on and very up-to-date actualized advice on this topic, I recommend you join my online program called Profitable Properties Program. You can join at a low monthly rate or pay one lifetime membership fee. There, you will interact with me and a community, and you get access to the forum.
Step two of my pricing strategy is about customizations. Those are a little bit more advanced. The one thing I hinted at earlier in this video was about last-minute discounts. The trick with last-minute discounts is that you want to discount a little bit more than your competition, a little bit sooner. That's it. What does most people do? What does most hosts do? They discount 10 days into the future, 15 maybe days into the future, and they do a step discount. All of a sudden, one day to the next, there's a 10, 20, 30, 50% discount. That's not an optimized way to do a last-minute discount. Remember, everything's got to be optimized.
What I recommend is you create a gradual discount. This is a customization offered on Price Labs, all up to 50% starting at your booking lead time. Whether your booking lead time is 25 days, 30 days, 60 days, you should add a 50% gradual discount up to your booking lead time. That means that in our example, 31 days into the future, there's no discount. 30 days into the future, there's about 1% discount. 29 days into the future, a 3% discount, and so on, until tomorrow, there is up to a 50% discount, but never lower than your minimum price.
If you have further doubts on base price, let's just keep this video comments to base price specifically. Do comment below, and I will respond. Till next time, happy hosting.