What Should Your Airbnb Pricing Strategy Be

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What Should Your Airbnb Pricing Strategy Be

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Surprise! Your Emotions Should Have Nothing to Do with Your Pricing Strategy

If you’ve been hanging out with us for a while now, you know that we’ve been hosts for a loooong time. We’ve hosted in large, medium, and small markets. And when it comes to pricing an Airbnb, no matter what market they’re in there is something important you need to understand:

There IS a market.

Meaning, you shouldn’t blindly choose a price for your short-term rental. And you definitely shouldn’t let your emotions decide on your pricing either. 

Before we jump into pricing strategies the first thing you need to do is determine what your base price is and what your minimum nightly price is. We call this “knowing your numbers”. Once you know your numbers you’ll be able to play around with different strategies. 

And different strategies will yield different results in different seasons.

Whew. I know. It’s a lot. But I would venture to say knowing your numbers is the most important thing. From there, there are third-party dynamic pricing tools that can do most of the work for you.

But they will ask you for “your numbers”. So….let’s get to it. 


woman on laptop

Know Your Numbers

Base Nightly Price: I need you to gather all your numbers. These should be most of them:

  • Mortgage
  • Electric
  • Gas
  • Water
  • Garbage
  • WiFi
  • Netflix Account, etc. (if you plan on providing for your guests)

Now, add up all those numbers and divide them by 30. This will give you your base nightly price. This is the point where you will break even with a booking.

This isn’t a number for us to shoot for -just a number that you need to know. 

Minimum Nightly Price: This number might take you some time to figure out. This is the number that you will plug into your calendar when you need to choose between leaving the space vacant or getting a minimum nightly price. Usually this price only goes into effect the day before a vacant night or the day of a vacant night. 

Let’s say my base price is $60/night. It’s a random Tuesday in January and it’s 10am. My minimum nightly price will then go into effect. Let’s say it’s $40 (I just picked a random number). So, although I’m down $20 it’s better than having to eat the entire cost of a night.  

You can find your minimum nightly price by experimenting with your base price. Try lowering it $5 – $7 and see how often you can book last minute stays. 

The one thing you will want to keep in mind is there is a price that is TOO low and not worth the liability of getting a guest who is looking for a super cheap night’s stay…if you know what I mean. 

Is this your first time in the Airbnb business? Contact Nestrs for some tips and tricks

airbnb living room

How does pricing work on Airbnb?

One of the most important things to know about pricing on Airbnb is that you, the host, are in complete control of your pricing. You can price it as high or as low as you want. 

But with freedom comes responsibility. 🙂 Responsibility to the health of your local short-term rental market and the health of your bank account!

But, I’m guessing you already know that since you’re reading this blog post. 

Airbnb does have its own dynamic pricing system. 

Dynamic pricing just means that you are keeping your pricing flexible to meet current market demands. 

Airbnb’s product is called Smart Pricing. Here is how Airbnb defines Smart Pricing:

Smart Pricing lets you set your prices to automatically go up or down based on changes in demand for listings like yours. You’re always responsible for your price, so Smart Pricing is controlled by other pricing settings you choose, and you can adjust nightly prices any time.

Airbnb’s Smart Pricing tool does take into consideration what’s going on in your local short-term rental market, but, if I’m being honest, not enough to keep you ahead of the curve and keep your profits healthy.

However, I will say, if you’re a new host I recommend turning Smart Pricing on until you’ve got 5-10 5-Star reviews on your listing. I believe that Airbnb will give your listing a little extra love if you use their Smart Pricing product. They’ll serve up your listing to more potential guests than if you’re not using it. Once you have several 5-star reviews you can now rely on that fact that your Airbnb is trusted among travelers and you can turn off Smart Pricing and replace your pricing efforts for another third-party pricing system, which we’ll talk about in more depth below.


woman on iphone

Factors to Consider

Now that you know your base price and your minimum price you can start to consider all the factors that will help you understand what your market price is. Factors to include are:

Location – Just like with any other form of real estate: location, location, location! I’m hoping you have a short-term rental in a fantastic location because if you don’t it will just be an uphill battle when it comes to getting your occupancy up and making a profit. If there is little to no reason for someone to stay in your Airbnb…they won’t!

Amenities – What sort of amenities do you offer? Off-street parking in a popular urban area? In unit washer and dryer? Hot tub?

Square footage – Potential guests will want to know the size of the space they’re renting to, one tip I have for you is to know what the square footage is of your property. If it’s a desirable size for your area and market, that can help you drive your market price up!

Shared spaces/Amount rented – Understand that what kind of space you’re offering will determine how your space will fit into your existing STR market. Is it an entire space? Is it a space that is mostly independent but guests will have to share a backyard, etc? Or is it a bedroom you own in the hall from yours? All are great options, but depending onwhat yours will help shape your pricing. 

Demand – Demand for your Airbnb will ebb and flow. This is why being in a desirable location is key. You’ll be in demand more often than not and can lean on your market value rather than your base value most of the time.

The weight of all these factors will also be determined by your local competition. And when I say local I mean loooocal. Who has an Airbnb on your block? Just down the street. Stay hyper focused on your immediate surrounding area and see where your STR stacks up.

Need help with design, hosting, styling, and everything else? Nestrs can guide you through the proccess


Now that you know what your base price is, what your minimum price is, and you know where your listing stands as far as what it has to offer you can start to think about pricing strategy. 

Dynamic Pricing

I mentioned it earlier in the post that knowing your numbers is step 1. Step 2 is putting the numbers to work. This can be super time consuming. If you don’t know about the small but mighty awards ceremony happening down the street at the local university you might not know that Aunts, Uncles, and Grandparents will be coming to town to celebrate with their family. 

In order to update your pricing and get aggressive with orphan nights (nights that are unbooked and sandwiched between dates that are booked) you need to be on top of your calendar. But monitoring your calendar takes a ton of constant checking-in. Time that could be better spent obtaining more properties or making your current ones better -or spending time with family and friends. Which is why I highly recommend finding a third-party dynamic pricing system to include in your hosting bag of tricks! 

I have used both Beyond Pricing and PriceLabs. We’re currently using PriceLabs. Using the platform requires a small learning curve -but it’s well worth it! PriceLabs has an entire blog full of useful tips to help you maximize its value!

Using dynamic pricing tools, like PriceLabs, is by far my favorite strategy. I plugged in my base rate, my minimum rate and then PriceLabs does most of the heavy lifting for us. We rarely have to offer our spaces at our base or minimum rates, which is exactly where we want to keep it!

Extra Amenities for Higher Cost

Some markets can support adding extra amenities to the listing and have that translate to a higher per night rate. For example, if you’re in a hip urban downtown location with amazing views, your listing will probably be very desirable because of the sweeping skyline views! This can translate into a higher nightly rate. 

wine and kitchen

Comp Pricing Strategy

This is my least favorite strategy but it’s worth sharing here since it is popular among a lot of full time hosts. The goal = keeping your calendar as full as possible by beating your competitors by 20%. If I can be completely honest with you guys, and I think I can be, I’ve never needed to rely on this strategy because I put so much thought into my spaces before opening their doors that my reviews and repeat guests speak for themselves. But, this is a strategy that you can put into place.

High fees and low base rate

Get aggressive with fees including:

You can get potential guests to check out your property by enticing them with your lower rate. You’ll make your money by collecting higher than normal cancellation fees, cleaning fees, etc.

  • Higher base rate and low fees

If your property has been around for awhile and boasts plenty of 5-star reviews and lots of positive guest feedback you can rock out a higher nightly rate and keep your cancellation policy and cleaning fees relatively low. You’ll want to advertise those features in your listing’s title or description so potential guests know they should include that information in their decision making process. 


bedroom with bed and window

Evaluating Airbnb Performance Over Time

Experimenting with price

Once you set your numbers remember…they’re only set for now! Start a spreadsheet and keep track of the average nightly stay per month and compare them to the occupancy rate you end up with at the end of the month. This way the following year you have data to refer back to and help you strategize your pricing moving forward. 

Another thing to keep in mind is while it’s great to have monthly goals, know that because short-term rentals have seasons it’s better to look at the year as a whole when it comes to your numbers. Meaning, if you’re in a midwest city like I am, don’t freak out if your January numbers are bleak. Do your best to make the most you can (by using strategy and data) but know that a lot of your revenue will come from your peak season. 

Determining what works

You not only need a solid pricing strategy but your product also needs to be presented well to guests who book and to potential guests online! Airbnb loves it when you respond to potential guests quickly and when reservations end in a 5-star review. The more Airbnb serves up your listing on their website the more impressions your listing makes which leads to more opportunities to get booked at your market rate! 

I’ve said it once and I’ll say it again: short-term rentals are not passive. I don’t care what the gurus tell you. If you scale your business big enough to where you can outsource most of the leg work then sure, your business can become passive that way. But most businesses are like that and that’s the goal of most business owners. But, at the beginning, there is a lot of work involved. There is a lot of strategy involved! 

Try out different tactics, record the results, and then decide what works best for your listing. 

two woman fixing the bed

Consulting Airbnb professionals

If you know there is room in your numbers to hire a professional -then do it! We manage Airbnbs for a number of clients and we make sure they have a solid understanding of their numbers before they bring us on -because now another expense they’ll have to factor into their base price is their management fee.

And that’s ok! 

Working with experienced Airbnb professionals should mean more money for you in the end. 

Definitely more time.

Don’t know where to start? Nestrs can set a path to help you succeed in your Airbnb business

Now Go! Work on Your Pricing!

Let’s break it down, shall we?

Step 1: Remove your emotions from your “strategy”. If you enjoy hanging out with us online I already know how hard you worked making your Airbnb guest ready. But, unfortunately, your opinion of how your hard work should translate into pricing is irrelevant. 

Adjust your mindset and start looking at cold hard numbers!

Step 2: Determine your base rate. Take all of your monthly expenses and add them up. Now, divide that number by 30. That is your break even nightly rate. 

Step 3: Determine your minimum rate. There is a number that is TOO low where you’ll be attracting guests that you do not want to serve. Find that sweet spot number you can plug into your pricing strategy when you want to avoid having vacancies.

Step 4: Decide on your pricing strategy. Whether you want to advertise a higher market value or undercut your competitors try out a strategy, record its results, and always be ready and prepared to adapt to your market.


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