Airbnb pricing strategy is one of the most important aspects of Airbnb’s business. The pricing will determine the value of the service. As Airbnb has a diverse range of entities, the pricing strategies are also quite diverse. Here’s all you need to know about Airbnb’s pricing strategy.
Types of Pricing Strategy Applied by the Company
Businesses under Airbnb follow different types of pricing strategies to attract their consumers. Some of the effective pricing strategies are:
- Maximum full rate strategy: Businesses follow competitors’ pricing strategies. Usually, this strategy is followed when businesses are in a more demanding state.
- Maximum rate each night: Under this strategy, businesses charge the maximum rate for each night. For exotic locations and services, businesses apply this strategy.
- Long term rental strategy: The long-term strategy is implied when businesses charge monthly rates for the house. Usually, when the property is located in a more demanding and busier area, businesses implement this strategy.
- Balanced pricing strategy: When businesses apply the three above strategies, then experts call it the balanced Airbnb pricing strategy. This is a more liberal way of setting the pricing.
Details Discussion on the Airbnb’s Pricing Strategy
Businesses consider multiple aspects before deciding on a suitable pricing strategy for their product. Some of the factors that businesses consider before deciding the pricing strategies are as follows:
Category of the Property
Airbnb businesses choose their pricing strategy according to the type of their property. Airbnb has a list of properties from which you can choose and categories your property. For example, if you’re property comes under the 2-bedroom house category, then the pricing has to match the other 2-bedroom houses available on the site. In this case, you can choose the maximum full rate. On the other hand, if you’re offering a luxurious island or a house then the ideal strategy for you will be the maximum night rate.
Property’s Location
Location plays an important role while choosing the right pricing strategy for your business. Before you choose the right pricing strategy, you need to see whether the location of your property is on-demand or not. If your property’s location is always on demand then you can imply the maximum full rate strategy. If your property’s location is on-demand during certain seasons, then go for the balanced pricing strategy.
Also, if your property’s location creates a breathtaking experience for your consumers, then you can certainly go for the maximum night rate. On the other hand, if your property is located on the busier side of the city, then go for a long-term rental strategy.
Other important aspects that businesses look at while choosing the pricing strategies are:
Competitor’s Pricing Strategy
People who are booking your competitor’s property, are your potential consumers. Before choosing a suitable strategy, businesses observe competitors’ pricing strategies. They try to find out why competitors are choosing that particular strategy, how it is working for them, so on and so forth. Hence, competitor analysis is a must for Airbnb businesses.
Now you need to offer something different to your consumers to gain a competitive advantage. In this case, if the number of competitors in a certain area is very high, you can go for the maximum full rate or the balance pricing strategy.
Target Consumers
Target audience plays the most important role when businesses decide the pricing strategy. If a business’s target consumer is budget travelers then the appropriate pricing strategy is the maximum night rate strategy. If the target consumer is a corporate industry then long-term such as monthly rates are the perfect pricing strategy.
Investment
Investment plays a vital role while choosing the pricing strategy. If you’ve put a larger amount of investment in your property, then the maximum full rate is the right strategy to imply. This strategy needs quite a bit of attention. Besides this, you can also try the balanced pricing strategy as the amount of risk is lower compared to the other strategies.
The pricing strategy of Airbnb includes some special elements. These are:
Extra Fees for Cleaning
Every guest loves to live in a clean apartment. Usually, Airbnb does not offer cleaning services. But you can offer this special service by charging some extra amount. This additional service will certainly give you a competitive advance. Like two sides of the coin, this also has a good and a bad side. Cleaning service will keep the property beautiful but it might throw off some consumers. In this case, you can give consumers the option to choose. One thing that should be avoided is to keep this cost hidden from your consumers.
Additional Charges for Extra Guests
If your area and service are lucrative, you can charge an additional amount for consumers who bring an extra guest that was not mentioned in the booking invoice. But you will have to see your demand and how consumers are reacting to these additional charges.
Deposits for Security
Some of the Airbnb entities take an advance amount for potential future damage. Sometimes this can throw off the consumers from booking. In this case, you can do is, take this amount in advance and sign a promissory note that once the tenure is over and the amount will be given back to the consumer if the property is intact.
Holiday Discounts
Discounts are the most important element that keeps the consumers attracted to a deal. It instantly promotes a business. As an Airbnb business, they can provide weekly discounts or prebooking discounts. The most desired one is the holiday discount.
Pricing Strategy of the Competition
Most of the competitors such as Vrbo, FlipKey, HomeAway, etc. follow the four strategies mentioned above. These are
- Maximum full rate strategy
- Maximum rate each night
- Long rental strategy
- Balanced pricing strategy
Recommendation
Whenever a potential consumer does Airbnb, the first thing he or she notices is the pricing. According to the pricing, the consumers decide whether they will book the place or not. When it comes to Airbnb, pricing is the first impression. Therefore, the strategy needs to be spot on. The most important thing that you will have to keep in mind is that no matter which strategy you choose, never keep a hidden cost. Maintain a degree of transparency while creating the bills.
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Nishat Tarannum Mridula is a contributing writer at The Strategy Watch. She has been contributing for last two years.
Nishat is currently studying at the University of Dhaka. Even though her major is in Banking, she enjoys writing on diverse topics, starting from appliances to blogposts. She is in the middle of completing her BBA from University of Dhaka. Alongside that, she writes different types of business articles for The Strategy Watch.