Transcription
Your Airbnb is unbooked because you're trying too hard to get the right price. You're trying to be so specific, and it's destroying your business.
Just like with the Grasshopper project with SpaceX, where they're trying to land the rocket on its tail, the fact that their algorithm was trying to get the rocket to be precisely up and down was the reason why it kept toppling over and falling. It was the flexibility and the use of ranges that allowed the rocket to finally land. And SpaceX is now SpaceX.
And if you have a struggle bus relationship with your calendar, where you get a bunch of last-minute bookings or you just actually can't get any last-minute bookings and you end up with like 40% occupancy, then this mindset shift is going to save your life. The truth is that there's no one perfect price that you nail every single day. We have to build a relationship with this game and get as close to the right price as possible within a period of time, within what we call our golden window, so we can get the best ADR. And if we miss that closeness to the perfect price, then, like last minute, we've got to pick up the slack. And I want to introduce the concept of ranges to you in this video.
For price, it's very important because in the world of short-term rentals, every single day is a new piece of inventory. It is slightly different than every other day on your calendar. Supply and demand fluctuates all the time. And what we can do can be perfected through iteration.
Have you ever seen the show The Price is Right? It's just like that, where your perfect price could be $700 a night. And yeah, you charge $400, you're going to get $400, you lost an opportunity at another three. You charge $550, $575, $590, you get booked in all these scenarios. And then the moment you go over $700 and you do $701, you lose the entire reservation. You lose $700, right? We would rather take $5 than to place it at $701 and lose the whole reservation, wouldn't we?
Now, what's cool is we have a certain amount of time. There's no one guess. That's why I love this game. There's no one singular guess. You get to guess a bunch of times. Six months from now, your calendar is wide open, right? And you're going to set a price. And our loyalty to price six months from now is to try to make sure that we don't guess too low that we like eat our shoe, right? You accidentally set it at $150 when you could have made a thousand. Oh, that'd be brutal. A lot of people are having that issue with FIFA right now. People are booking for FIFA, realizing that they didn't raise their rates.
And as time goes by, we're going to enter into a period that is most optimal for you, where there's a lot of travel traffic. And one of my students in the Philippines, his Price Labs data really shows this really well. So, we'll pull this for you right here. At about the 40 or 50-day mark, occupancy starts to climb, which means a lot of people are planning their flights and their stays between 30 and 50 days in advance. So, the pricing strategy that I'm helping my Philippines student build is around this golden window in that 30 to 50-day mark. And it's at this point that we want to be as close to correct as we possibly can. And until that 50-day mark, we've got all this time to get a bunch of data and to figure it out. So, we set a hypothetical price that we think is too expensive way farther out. And then as 50 days arrives, we hopefully nail it, right? And we have that 50 to 30-day mark to get the best good price we can get.
And at that 30-day mark, inside of 30 days, we slowly lose some topside. And depending on the size of your property, that 30 to 50 window will change, but then also your last-minute window will change. And there might be a point that you can't get a booking at all. Whether it's today or five days from now, there's no bookings to be had. It's too last minute. And so we need to pick a price that's going to get booked by, say, five days from now. And if we get a booking 10 days from now, it's going to be too cheap. We get a booking 25 days from now, it may be too cheap. We get a booking 40 days from now, that's probably your likeliest to get the best value. And if we get a booking a year from now, it's too cheap, right? So, we've got this value of too cheap and we've got this peak window. And it's going to be your job with your property or your portfolio to identify when your golden window is into the future. It changes by market, it changes by guest count, it changes by seasonality. It's an ever-moving target.
And [snorts] just like with the Grasshopper project, trying to land that rocket in various wind conditions and all this stuff, various payload sizes, whatever, right? Based on that, we have to work in ranges because to try to calculate to the penny what is correct is going to be way too much mental work for everything else that you have to calculate. And so we'd rather do this in increments of dollars: $5, $10, $25. The bigger your property, the bigger the increment.
And one thing that I wrote in my revenue manager's handbook, which you can pre-order, right? We're actually doing our first paper print now. So, you can pre-order and we'll get that book to you super right away. I hope you love it. I've spent years writing that book. Ranges can be refined. So, big properties initially, you might be moving in $500 increments to try to find the initial ballpark. And this is better for you day one to move your prices by a thousand bucks either way and try to hunt for a price home. And then after you get some booking data, you refine that to $500 increments and then $300. By six weeks into your like journey as a $4 million Scottsdale property, you are now moving in $100 increments instead of thousand increments. And perfection at $2,000 a night plus. If you're moving in $50 units, that is hyper-specific for a property that makes more than $2,000 a night. You fretting over eight bucks is going to be what destroys you because you're overthinking it.
Now, once you're down into a smaller range, and I see a lot of students, they screw this up so bad. When you're with studio apartments or small properties where your price is sub-$200 a night, I see them rounding way too much. They'll use a setting on Price Labs and do 25% increase or 50% increase. My friends, you are battling for $2. You're battling for $4 when your price is sub-$200, okay? And those little mini efficiencies can lead to $3,000 more profit at the end of the year where your total profit was going to be $7,000 anyway. So going from $7,000 to $10,000 at the end of the year is huge just by being humble in your measurements with smaller units.
Okay, this is the heart of ranges. Ranges are relative. Ranges are relative to your total size, to your total booking rate. And now, while you do not have the answers or you do not have a relationship with your data, this is the better way to put it. While you're not dancing with your data and having a relationship, your ranges are big to try to find what's correct. You're trying to get in these ballparks of hot and cold. And then once you start to hit numbers and your hit rate starts to go up and more days are booking, you start to recognize where those outer edges actually exist and you start to refine, and now your movements become smaller on your calendar. And this, once you're there, is when you can start automating more into something like Price Labs or Guesty GPO or Wheelhouse. But while you're still swinging the bat at these huge different price ranges, you cannot tell Price Labs what works. That's one of the biggest truths, right?
So, um, the first thing we want to do is to find our best ballpark price. And the best ballpark price can be found by looking at your competition and using my wish list strategy, designing your ballpark price with a wish list strategy. And then you can even if you want to use Price Labs right away, you can carve the black line, is what we call it in Pricing School Level One. By the way, this is super low-level stuff. Pricing School Level One is like less than $100. Amazing program. Tell you what, we'll do it for less than $50 bucks. If you're on this video, you can have Pricing School Level One for less than $50 bucks, not just less than $100. But you can carve your black line to perfection using your competition.
Now, your listing is unique, like I said. And since your listing is unique, we do not want to just price the way that our competitors are priced. We start to use them to inform where we start. And then we use our own booking data as a feedback loop to then continue to perfect our rate plans. And we can set more complex stuff in Price Labs over time. But it is ranges and the relationship between data that makes this very simple. You do not need to know algebra. You don't need to be a rocket scientist to know that if you got booked a month out for $200 and you got booked out six months for $250, that getting booked six months out for $250 is better than a month out for $200. You know that that's better, right? So this is range-related data. There's a range of dates and there's a range of price. And the moment that you start to build this little relationship with the lead time and ADR, you can really do a lot with knowing nothing about numbers.
Okay. And so we try to boil this down in Pricing School to a very simple relational data kind of strategy. The high-level stuff, like my portfolio does like a million a month. And at the high-level stuff, we get kind of wonky, right, to try to optimize in some crazy ways where we're trying to pull data from multiple sources. That's for later. Okay. Um, but I will tell you that I've done this for 11 years without a degree in math, right? I dropped out of music school, and I just want you to know that you can pull this off. You can do this DIY. And I actually encourage you to do this DIY because if you try to give this to Price Labs too soon, um, you're going to break your systems. You don't have a system to break, but you're going to break what could have been a system. Um, and you're gonna have no understanding of the numbers. And when Price Labs fails you, you're going to go, "Why did the Wizard of Oz fail me? Why does he hate me? You know, why are all the Munchkins in Munchkin Land suffering?" Because you don't understand how the world works first.
So, let's get a baseline for your property. Learn what's unique and special about your property. Start to test prices. You're going to get a feedback loop of your rates, and then you're going to evolve your pricing strategy around your own data. Um, and that's the key. And ranges is going to be how you do this without overthinking it because you're going to make like a thousand little decisions a week, kind of. Um, and ranges makes like 900 of them intuitive.
So, with that said, pricing school link is down below. Um, it's going to be only for this video. We're going to do a special discount. I don't know how we're going to pull this off, but I've made a promise that we have to cash that check. So, we're going to see how that goes. Um, love you guys. Um, and I'll see you on the other side.