Dynamic Pricing Tools for Vacation Rentals and Airbnb
Lately, we’ve been exploring dynamically pricing one of our vacation rental using an algorithm rather than manually pricing them. For now, we are doing a one-month trial for one of our properties.
The way dynamic pricing tools work is they crawl Airbnb and Vrbo to see how much people are charging and whether those dates book or not (ie does the date get reserved on the calendar). If they see lots of dates in a market book up that’s a signal it’s a hot market, especially if they are booking at a high price. They may also use calendar data around holidays or historical data to see when prices typically spike.
In the past, we’ve resisted dynamically pricing models because it felt too “extractive” in that you were maximumly pricing things to get the highest price from guests. That’s has the potential to leave a bad taste in their month and could result in negative reviews as well as a less amiable relationship between the property owner and the guest. You want things to be a “win win.”
However, we decided to try things out for a variety of reasons. One, we wanted to use tools to dynamically shift minimum stay periods. For far out stays you want to encourage longer bookings. But if you haven’t gotten a booking yet you want to lower the minimum stay and pricing until you get a booking. Doing this manually is a pain and using a tool makes it much easier. Second, it feels like now is a good time to experiment with new tools because people are mostly just booking at the last minute because of coronavirus. Third, it felt like historically we’ve been our property low relative to the competition, so getting some pricing insights is helpful. Since we now have over 150 very positive reviews for the property we are testing, there is probably some room to increase prices.
In our research, it seems like the main players for dynamic pricing are Beyond Pricing, Wheelhouse, and PriceLabs. After our trial is complete we’ll do a writeup on which vendor we chose and how it went. Some of the vendors charge you a percentage of your revenue for their service. Others just charge you a flat monthly fee.