Pricing Your Short-Term Rental

When we touched on dynamic pricing tools in our previous article, we realized that we haven’t actually written an article yet to help you out with pricing! We’ve honestly been shying away from it because it’s a little too technical for our tastes. Not that we don’t know anything about it. It’s just a HUGE topic filled with contrasting opinions. And if you’ve been reading some of our articles here, you know that we don’t really like to let the nerd juice and statistics ooze out. Other places already have that covered. But, just for you, we’ve tried our best to provide an introduction on how you can get started to price your short-term rental listings better on Airbnb, Vrbo, Booking, and all other platforms!

Quantity, Quality, BigMacs, and Michelin Stars

For starters, it’s essential to understand the elements that would (or should) affect your pricing. Just like with anything else, prices vary depending on the amount or quality of the features offered. A smartphone is more expensive than your “standard brick” phone because the former can do a lot more than the latter. A BigMac from McDonald’s would obviously be more affordable than a burger from a Michelin-star establishment since the quality is much better (even if they’d be similar in weight and appearance).

In the same way, if you can offer more features or amenities, the higher you can raise your prices. The better the quality of the unit is (materials, furniture, appliances, plumbing, customer service, etc.), the more you can add extra dollars to what you’re asking for from your guests.

Coordinate with the Competition

Of course, we can’t forget about basic economics (which we DEFINITELY remember from high school)! If there’s a demand for it, then prices are expected to be up. If everyone else offers the same stuff, even at a higher quality, you’d be forced to price it lower to get the advantage. Become your own private investigator and look at what your market is like.

But, who ARE your competitors in the first place? Keep watch for those listings that look like yours. Are you in the same area? Do you have the same design? The same rooms, amenities, or features? Do you both target the same niche? If so, try to see what their prices are like and see where you can adapt to get more clicks!

Costs (Honestly, this Should Have Been Listed at the Top)

Next, we have costs. How much do you spend to keep the place running? And when you think of these operating expenses, it’s not just about taxes, insurance, and other bills (fixed costs). You might also need to cover yourself from variable costs, which are expenses that vary (as “variable” would suggest). These are for repairs, potential furniture/appliance replacements, extra cleaning (for when your guests spill some wine on the carpet), and many others that are unforeseen.

Even when these things happen, you still don’t want to break even. Your price should account for these unfortunate instances.

History Repeats Itself

The phrase “past is past” doesn’t really work with short-term rentals (and probably with any kind of business)! If you’re someone who’s been doing this for about a year now, try to see which season had the best numbers.

If you’re doing well in winter or summer, maybe you should use that to your advantage! If you don’t have that year-long experience, you could consider joining online communities and see what has worked for them. It’s not always the case, but if many people are having success with one method, it would likely work for you too!

Dynamic Pricing

With all that said, it’s critical to note that the right way (at least for us) to approach pricing is a “dynamic” one. Some hosts will just set a price and leave it as is. But as the information above suggests, you’ll need to be on top of pricing and adjust them based on the changes in your environment. If seasons, markets, and other variables shift, your rates should move accordingly.

If the average price has gone lower and you’ve left your price too high, no one’s going to look at your listing. If the average price goes up and your rates are way below average, you might get too many bookings and miss out on getting more revenue. It’s essential to keep up with the times. (If you think that’s a little tiresome, read on to number 3 below)

Things to Remember

Being able to nail the perfect price for your listing isn’t the ONLY thing you have to do to get success with short-term rentals. It’s just a single ingredient to a gigantic recipe! Here are some things to keep in mind while you’re figuring your price out:

1. While we did mention that hitting the right price can help you gauge your revenue, earning in the short-term rental is a snowball that starts small and eventually grows bigger as it rolls. If you ever find yourself not making any money in your first few months, don’t worry. That’s what all new hosts experience! The learning process takes time, effort, and money. Once you get the hang of things, you’re going to be fine.
2. In relation to the first point, it might be a good idea to start below average. Why is that? If you’re just starting, you need those reviews first. Stores and restaurants give away a ton of free stuff during their “soft openings,” right? You might want to follow suit.
3. Dynamic pricing services exist! If you’re the type of person that likes to leave things to work on their own, then this might be the solution for you. Let the computers do their work – both researching pricing data AND updating your prices on the platforms you’re on. Examples of these services are Pricelabs, BeyondPricing, and Wheelhouse. While these would significantly decrease the time and effort you’d need to invest in pricing your listings accordingly, we still recommend learning what pricing trends are like. From there, you can optimize these services based on your preferences.

And there you go. This is just the tip of the iceberg, so we encourage you to dive deeper into the pricing game and see what’s in store for you. Feel free to check our site out for more short-term rental tips or hop on forums like Biggerpockets to expand your knowledge on the real estate game!

Also, if you want to invest in a new property, you can try things out with Shorefront Investments! We’re Florida-based real estate investors looking to buy and sell properties fast. You could be one of our buyers by joining our buyers’ list! Are you thinking of doing things the other way around? Trying to sell your property instead? You can also give us a call at (850) 713-4866, send us an email, or fill a form on our front page!