Ok, so you’ve set up your space, taken great photos, written a great description and are ready to list it. Now comes one of the biggest questions: how much to charge per night?? Charge too little and you’ll be leaving money on the table. Charge too much and you won’t get any bookings. You have to find that sweet spot.
To figure this out, you’re going to have to do some homework.
Start by looking at other listings in your area. However you don’t want to just find a handful of comparable spaces, look at their price, and then set yours comparably. You need to dig a little deeper: how many reviews does this space have? If it’s only got 8 reviews then you know it’s not a very popular spot and may not reflect the market. Look at the listing’s availability calendar. This will show you the prices for individual nights (which can often vary widely) and will give you an idea of how booked the space is.
What you are ideally looking for is a few spaces that are reasonably comparable to yours, and that are frequently booked. Read over the descriptions of the space to make sure you’re actually looking at a comparable space. It’s not always just about the location. Do they offer extras that your space doesn’t have? Is there some unique feature to your space, or theirs, like an amazing view, a hot tub, direct beach access, etc?
Another thing to pay attention to is the cleaning fee. This can vary WIDELY between listings and is a bit of a hidden charge. You can use this to your advantage (which we’ll discuss in a bit), but you’ll want to pay attention to this when checking out the competition. An $89 a night room with no cleaning fee is quite different than an $89 room with a $79 cleaning fee.
With a little work, you should be able to get a sense for a ballpark rate to charge per night. Let’s say you’ve found 3 comparable listings near you that are popular and well-reviewed. Their average prices are around $79, $89, and $95 per night, and cleaning fees are all comparable at about $29.
With a new listing, you’re going to have to be price competitive. Once you get established, you can compete in other areas as well like the strength of your reviews, but initially you will want to be aggressive with your pricing in order to build some momentum. With the above example, the average competitive rate is about $87 a night. We recommend starting out about 20% lower than the competition, so you’d want to price your space at $69 in this case ($87 x .8 = $70, and then we round down). Airbnb will allow you to offer a discount on your first few listings as well, which we recommend doing as they’ll help promote your space. So the first couple bookings you won’t be maximizing your revenue, but the point is that you want to build momentum and get a few good reviews under your belt first. Once you’re rolling along, then you can worry about tweaking your pricing for maximum dollars.
What about cleaning fees? ALWAYS charge a cleaning fee, for one thing. It’s much better to have a slightly lower nightly price and a slightly higher cleaning fee, than the opposite (especially if people tend to only book your space for a couple days on average). The reason is that Airbnb initially only displays your nightly rate to people when they’re looking to book a space. So if your space is $75 a night and your cleaning fee is $39, you’re going to LOOK more attractive at first glance than the competitor who’s at $85 a night with a $19 cleaning fee, even though your spaces are the same price for a two night stay ($189 total). Again we’d recommend having a cleaning fee that’s fairly comparable to competitive listings, especially initially. We recommend figuring up how much time it actually takes you to clean your space on average, and charging about $30 per hour as a rough cleaning fee. This will also give you enough of a cleaning fee that if you eventually want to hire a cleaner, the fee will likely cover their cost.
MINIMUM STAY LENGTH
Airbnb lets you specify the minimum stay length, so if you want to only allow bookings of 2 nights or longer, for example, you can set that. This will obviously depend a bit on your personal preference, but in our experience, having a 1 night minimum is the best way to go. Here’s why: if you require 2-night stays, you’ll start to end up with a lot of what we call “stranded days”. For example, Guest A will book 2 days on Monday and Tuesday. Guest B will book 2 days on Thursday and Friday. So now Wednesday is a “stranded day”….nobody can book it because it’s only one night that’s available. The problem gets even worse if you require longer stays like 3 days or more. Unfortunately, while Airbnb just recently started allowing you to tweak this requirement seasonally (so you can vary the minimum on certain parts of your calendar), they haven’t yet implemented the PROPER solution, which would be to allow you to automatically make exceptions to your minimum stay requirements on stranded days (ie. having a “2 night minimum” unless the night is stranded in which case a guest could book that night for a 1 night stay). We don’t know if they’ll ever offer this option, though…hosts have been requesting it for years now.
So the solution? We recommend doing 1 night stays but having a slightly higher cleaning fee. This will discourage shorter stays when your nights have standard pricing, since the cleaning fee is the same whether they stay for 1 night or 10 nights. Consider: an $89 room with an $89 cleaning fee has an average nightly price of $178 for a single night stay, versus about $98 for a 10-night stay. What you can then do is lower the nightly price on your stranded nights, sometimes substantially. What we’ll do is gradually lower the price as the date draws closer, starting about 2-3 weeks out. For example, say your space is normally $119 per night with an $89 cleaning fee. 3 weeks from now you have a single stranded night that’s unbooked. Lower the price on that night to $99 for a week. If it’s unbooked after a week, lower it again to $79 for another week. If it’s still unbooked, lower it again to $59. With the $89 cleaning fee you’re going to be getting $148 for that single night if it books up. You’re getting paid a reasonable rate to clean the space, so the question simply becomes: is it worth it to you to have someone in the space that night, even at a low price? For us, we’re willing to do about a 50% discount for these stranded nights. With this strategy, we’ve been able to maintain a 95%+ booked rate year-round.
The other thing to bear in mind is that, because of the cleaning fee, you make a LOT more money with short term stays. Consider a space that’s $100 a night with a $50 cleaning fee. If you have one 30-day booking, your total revenue for the month would be $3,050 ($100 x 30, plus one cleaning fee). If you had thirty 1-day bookings, though, your total monthly revenue would be $4500 ($100 x 30, plus $50 x 30)! That’s 50% more revenue from the SAME space! Yes those 30 bookings would be a LOT more cleaning work, but the point still stands: short-term bookings will make you more money. So you just have to decide if you want to maximize revenue, or minimize work. Obviously this will depend on how much time you have to devote to cleaning your space, or whether you’re having to pay someone else to do it. Ideally if you can’t find the time to do it yourself, find someone who can do it for less than you’re charging in cleaning fees, so you can still make extra cash. But if you hire out your cleaning, be sure to really train your cleaner well and spot-check them…nothing will hurt your reviews like an unclean space! Even just a stray hair on a sheet can set a really bad review tone, so be extra meticulous with the cleaning!