Key takeaways
- A smart Airbnb pricing strategy is the difference between covering costs and turning a real profit.
- The best pricing strategy blends multiple methods: cost-based, market-based, and dynamic pricing.
- Always factor in your true expenses and seasonal demand before setting rates.
- Avoid common pitfalls like underpricing, ignoring competition, or relying on “gut feel” alone.
“How much should I charge for my Airbnb?” is probably the #1 most-asked question for new and experienced hosts alike. It’s objectively a huge decision to make, and it’s true that your Airbnb pricing strategy is the lynchpin that can make or break your vacation rental business.
But it’s also an intimidating question to tackle. How do you know the “right” price for your vacation rental? And where do you even start to determine that?
This guide will alleviate some of that uncertainty. By the end, you’ll be on your way to developing a smart pricing strategy that maximizes your revenue without scaring away prospective guests or leaving money on the table.
New to Airbnb pricing? Start here.
Let’s start with the basics and break things down. Pricing your Airbnb shouldn’t be guesswork. It requires combining data, strategy, and a little experimentation to land on the sweet spot that maximizes bookings and revenue.
Pricing your Airbnb is a combination of:
- Understanding your market and competitors
- Knowing your operating expenses
- Using the right tools strategically
- Trial and error!
Most common Airbnb pricing strategies
There are so many different ways to approach pricing your Airbnb. Here’s a breakdown of the most common strategies you’ll see – and how to decide which method makes sense for you.
Fixed pricing
Fixed pricing is a set-it-and-forget-it method. It’s when you just set a nightly rate and leave it at that.
It’s not particularly strategic. If you use it, you’re probably leaving money on the table.
But it’s actually more common than you think.
Quite often, hosts don’t do the research and ongoing maintenance required to establish a strategic Airbnb pricing strategy. Which means you’re already a huge step ahead if you implement any sort of more thoughtful strategy.
Seasonal pricing
The next (big) step up from fixed pricing is seasonal pricing.
To illustrate: This would be setting a higher rate for the summer season, a mid-range “shoulder season” rate for spring and fall, and a lower “off-season” rate for the winter (assuming those align with the seasonal travel trends in your market).
Seasonal pricing can get a bit more granular, too.
You might set higher nightly rates around a popular local event or festival. For example, Airbnb rates in California’s Coachella Valley sky rocket around each weekend of the infamous Coachella festival in April.
In our opinion, seasonal pricing is a must. If you’re ignoring travel patterns during each season or failing to leverage demand during peak periods, you could be missing out on revenue or opportunities to fill vacancies.
Dynamic pricing
Dynamic pricing is an advanced approach to pricing your Airbnb – and assuming you’re using technology to automate the process, it’s also a very hands-off strategy.
Dynamic pricing means you automatically adjust your nightly rate in real time to account for factors like demand and seasonality.
You could do this manually, but who has time for that? Your best bet is to invest in dynamic Airbnb pricing software that does it for you.
Market-based pricing
When we say market-based pricing, we mean setting your Airbnb nightly rates based on what others in your market are priced at.
A market-based Airbnb pricing model considers:
- Location
Location has the biggest influence on Airbnb pricing. And we’re not just talking state or city – you have to get granular, down to the neighborhood. A 3-bedroom listing in Times Square is going to have a higher nightly rate than the same listing in Queens. - Property type
You can obviously charge more per night if you’re renting out your entire home vs. just a single bedroom. Similarly, a glamping tent with an outhouse will almost always cost less than a house with a full bathroom in the same national park. - Amenities
Amenities definitely play a role in your listing’s perceived value. A property with a hot tub and sauna can justify a higher nightly rate than the exact same property without those desirable amenities. - Local competition
At the end of the day, it comes down to how your property compares to other similar properties in the area. Factors like your property’s age, cleanliness, furniture, and design all impact how guests perceive your space and assess its value compared to other options.
Cost-based pricing
Beyond looking outward to assess the market, you also need to look inward: How much does it realistically cost you to maintain your Airbnb? After all, you only generate revenue after you’ve covered all the costs of running your STR.
Cost-based pricing makes sure that you’re earning enough to at least cover your expenses.
Host tip: Blend multiple pricing strategies
Our opinion? No single strategy works perfectly on its own.
For best results, use a hybrid pricing strategy that blends a few of the methods we just discussed.
For example, use cost-based pricing to set your minimum rate (so you always cover expenses), layer in market-based pricing to stay competitive with nearby listings, and then turn on a dynamic pricing tool to capture seasonal swings and last-minute demand.
3 steps to setting a competitive price for your Airbnb
You could just set a price that feels right…but we don’t recommend that.
If you really want to maximize your listing’s success, it’s worth the effort to set a competitive Airbnb price.
These three steps will give you a clear foundation to price your Airbnb rental with confidence:
1. Market and competitor research
We’re not gonna lie, market and competitor research can be a huge undertaking – and the more extensive your research, the better.
The topic warrants its own complete guide, but we’ll start with the basics.
- Create a list of competitors (ideally at least 10)Don’t just look at the 10 closest Airbnbs to yours. Filter competitors to find the ones that are most similar to your listing. For example, the competitors you assess should have the same number of bedrooms, similar amenities, and be located in the same neighborhood.
- Gain first-hand knowledge of the areaIf your property is located outside of where you live, make sure you visit and stay in the area (ideally more than once) to improve your understanding of the neighborhood and its tourism trends.
- Pinpoint your competitors’ key metrics Use a tool like AirDNA to determine your competitors’ average daily rates (ADR), occupancy rates, and average lead time (how far in advance guests book their property on average). Compare these metrics against your own (if you’ve already started hosting).
There are tons of tech tools out there nowadays to help you navigate this research.
For market and competitor research, we recommend trying:
- AirDNA
- Beyond Pricing
- PriceLabs
2. Calculate your costs
We’re not talking an estimate here – you need to really sit down and do the math to get a solid understanding of your monthly and annual expenses to run your Airbnb. The more accurate the assessment of your expenses, the better positioned you are to price your listing strategically.
Typical expenses includes:
- Your mortgage
- Airbnb host fees, aka the cut that Airbnb takes from every booking.
- Marketing and advertising costs to promote your listing
- Utilities (gas, water, electricity, internet, etc)
- Short-term rental taxes and insurance
- Amenities and replenishables (toiletries, cleaning supplies, kitchen basics, etc)
- Cleaning expenses
- Property management fees (if you don’t manage the property yourself)
- Maintenance costs (repairing plumbing, HVAC, and other household things)
Add up all the expenses you pay in a single month, and divide by 30 to determine the lowest nightly rate you can charge to break even.
3. Consider your revenue goals
You probably didn’t get into Airbnb hosting to just break even – you want to generate real revenue. So you need to charge a nightly rate that goes beyond your break-even point.
When you take the time to pinpoint your revenue goals, you’ll naturally get a clearer idea of what nightly rate you have to charge to reach that.
For example:
Say you want to generate at least $3,000 per month in revenue.
Your expenses come out to about $1,500/month.
Your listing is occupied 50% of the month on average, so about 15 nights.
To break even, you’ll have to charge $100 per night ($1,500 ÷ 15 = $100)
To determine what rate you’ll need to achieve your monthly revenue goal, add your desired monthly revenue ($3,000) to your monthly expenses ($1,500). Divide by the number of nights you fill per month (15) to calculate your required nightly rate (in this scenario: $300/night).
Airbnb pricing tools: Are they worth it?
Ultimately, Airbnb pricing tools can pay off if you use them right. So long as you maintain some amount of oversight, they can save you hours of manual work while helping you earn more per booking.
The key is balance. Pricing tools work best when you still check in regularly and set parameters that reflect your goals. Leave them totally unchecked, and you risk undervaluing your property or over-inflating your rates.
Pro tips for using Airbnb pricing tools:
- Don’t take a “set-it-and-forget-it” approach
- Remember to set minimum and maximum rates
- Compare multiple tools before settling on one
- Take advantage of free trials wherever possible!
What is Airbnb Smart Pricing? Is it worth it?
Airbnb Smart Pricing is a dynamic pricing tool built into Airbnb. It adjusts your rates automatically based on Airbnb’s algorithm, which appears to factor in seasonal demand and daily booking trends.
The best part about the Airbnb Smart Pricing tool is that it’s free and built into the platform, which makes it easy to use. You can also maintain some control over it by setting minimum and maximum price limits, or overriding it with specific nightly rates for certain dates.
The downside is that many experts and fellow hosts feel that it’s not the most trustworthy pricing tool available. Think about it: There’s a bit of a conflict of interest. Airbnb as a company might be willing to price your property lower than you’d like just to win the booking commission. What’s worth it to Airbnb might not be worth it to you, the host.
So the TL;DR: Use the Airbnb Smart Pricing with caution, and consider experimenting with other tools to compare results.
Should I ever offer discounts on my Airbnb?
Yes, it can definitely be beneficial to offer discounts on your Airbnb – so long as you’re strategic about it.
We recommend using discounts as an incentive to encourage more bookings and increase your occupancy.
Types of Airbnb discounts to consider offering:
- Early bird discounts: Offer a discount for booking far in advance.
- Last-minute deals: Fill vacancies for upcoming nights.
- Gap-day discounts: Fill orphan nights (single nights that are vacant in between stays)
- Extended stay discounts: Offer a discounted rate for long stays (7+ days is the sweet spot!)
Common Airbnb pricing pitfalls to avoid
Even the most experienced vacation rental hosts can trip up on pricing. Here are the biggest pitfalls to watch out for as you fine-tune your nightly rates:
Over- and under-pricing
The classic Goldilocks problem: Price too high and guests will scroll right past your listing. Price too low and you’ll end up fully booked but barely covering your costs.
Both scenarios will prevent you from reaching your revenue goals.
The sweet spot is a rate that reflects the value of your space while staying aligned with the other listings in your market.
Not accounting for all your costs
Too often, we see hosts setting nightly rates based on guesstimates or gut feelings.
Basing your rates on what “feels right” or solely on what other listings near you are charging means you’re not factoring in all of your expenses.
Always calculate your break-even point before locking in your pricing strategy.
Ignoring seasonality
Travel demand rises and falls throughout the year. Ignoring these patterns means you’ll either miss out on premium pricing during peak periods or struggle with vacancies in the off-season.
Seasonal pricing adjustments (or a dynamic pricing tool) help you maximize revenue during busy times and keep bookings flowing during slower months.
Not keeping up with the market
Your competition is constantly shifting. New listings pop up, others drop off, and guest expectations seem to change on the daily.
If you set your rates once and never revisit them, they’ll be outdated fast. Check your competitors’ prices, amenities, and occupancy rates frequently so you can keep your listing sharp and appealing.
FAQs
How do I calculate my Airbnb price?
- Start by figuring out your break-even rate by adding up all your monthly expenses and divide by the average number of nights you expect to book each month. That gives you the minimum nightly rate you need just to cover costs.
- Layer in your revenue goals (how much profit you want to make) and compare with local market rates so you’re competitive.
- Use a dynamic pricing tool to automate this process and adjust for seasonality or demand spikes.
How much do Airbnb hosts make?
A recent U.S. average shows hosts make around $10,000-$15,000 per year from a single property, but high-demand markets and well-run rentals can earn much more.
That said, earnings vary widely depending on your location, property type, occupancy rates, and tons of other factors.
Some hosts bring in just a few hundred dollars a month to offset their mortgage, while others manage multiple listings and generate six-figure incomes.
How much does Airbnb take from hosts?
Airbnb charges hosts a service fee on each booking. In most cases, that’s a flat 3% cut of each booking. However, hosts on the single fee model pay a higher host fee of 14-16% so guests don’t see added service charges.
What are the best Airbnb pricing tools?
Every host has their own favorite pricing tool – just check out the many threads on the r/airbnb_hosts Reddit.
Here are some host favorites:
- Pricelabs
- AirDNA
- Wheelhouse
- Beyond
- Airbnb Smart Pricing