This is part of a series for Monetizing hacks for Airbnb & STR Hosts. Parts 2, 3 & 4 will be released in the coming weeks. You can read the introduction to this series here.
This series is all about looking at ways to discover the hidden money in your hosting business. Think of it like finding money underneath your sofa cushions. The way you are presenting your listing, managing your calendar, charging for additional services or streaming your costs could mean that you are leaving money on the table or missing out on margins. I can help you with this- if you want an audit of your listing contact me here.
Earning Higher Base Rates
This is your main money maker and it is an area that all hosts agonize about. “How much should I charge”. Of course the correct question should be “How much can I charge?” The following categories talk about how to maximize your revenue from each day of the year.
Projecting the right image
The Short Term Rental market has matured greatly from the early days of VRBO and then Airbnb entered the market. You can’t just put up a few dark and blurry photos and expect that the money will fall from the money tree.
These days it is all about guest experience. I want you to start thinking of your business as a product and to consider what you are actually selling. Your listing is more than a bed and a place to sleep. You want the guests who will see your place as somewhere they will want to be and see your listing as an experience – a total package.
You need to attract awesome guests who are in the top end of their budget. A poorly presented listing signals that you don’t really care about your house and signals to guest that they don’t need to either.
These days, guests are spoiled for choice. There are lots and lots of amazing properties and hosts who have really upped their game in the design And styling stakes. So you do need to play the game too.
This is more than professional photos and staging. Although these do go a long way. There are plenty of ways that you can do this by yourself if you are starting out and don’t have the budget. But build into your business plan to have a professional photography session at some point. A fresh eye over things will really allow you to see your listing with new eyes.
I am going to evoke the all important BRANDING. Yes this is term that is really overblown these days but it is really the essence of a profitable Short Term Rental business.
Your brand consists of your copywriting, your photos, your captions, your inclusions, your bio, your social media. This is all BEFORE you engage with your guests. Your brand is a reflection of who you are as a host, the features of your listing and is also a reflection of who you are signaling as your ideal guest.
Spend some quality time digging into these three elements and make sure your brand is the sweet spot at the intersection of:
You, Your Listing, Your Ideal guest.
When you have nailed all of these, pricing is not a factor of your marketing. You will know what your ideal guest is prepared to pay and you don’t have to use discounting as a marketing tool. You can have an independent pricing policy that reflects your VALUE to the guest.
I can guarantee that your current pricing is not a true reflection of the value you are bringing your guests and so with the right marketing, you can charge what you are worth.
Discounting is the fast track in the race to the bottom. This bottom is where all of the mediocre listings with the negligent hosts and guests who are left unsatisfied. These hosts attract the guests who also don’t respect you or the sharing economy at all. These guests are looking for cheap accommodation or a party house and not an exceptional experience.
There is no secret formula to this. It takes some time and effort from you to look at your business objectively – work ON your business rather than IN your business.
You do need to spend quite some time testing different price points, value propositions, copy text and photos to make sure you are attracting your target guest. I won’t lie, it is more effort from you, but if you are serious about taking your business to the next level and charging top prices to amazing guests then you will need to dig in.
If this is all overwhelming for you, I am offering a branding audit service. I will give you actionable tips right now to make sure you are putting your best brand forward with where you are now.
Seasonal Pricing
This is just good common sense. But you would be surprised how many hosts don’t significantly adjust pricing based on peak times. Look at the most popular seasons in your location and the times that there is a high demand. Be it a conference, summer in a beach resort, winter in a ski resort or simply spring time.
My listings are in Tokyo and my peak times are Cherry Blossom blooming season in late March/Early April and New Year’s Eve. I have set peak pricing to 3X the normal rate and then with shoulder seasons on either side.
If you have a large world event – World Cup, Sporting Finals, Olympics, then even look at closer to 10X. Test and see what the market will bear and also what the general prices of similar listings in your town. Don’t be the most expensive nor the cheapest but make sure you are comparing similar listings to yours with hosts that are offering comparable standards of hospitality to a similar market niche of guests.
I know that I will book up well in advance for peak season dates. I set the prices super high for bookings at least 8-12 months in advance of these peak times. If it comes close to the dates (say 2 weeks out) and I have some empty days, I will fiddle with the pricing to fill up any holes in the calendar. But I am confident that I have captured the maximum margin from most of the bookings.
A note here that I do not use the suggested Smart Pricing on Airbnb as I do not feel it is a good reflection on what my market will pay. Sure I am about giving great hospitality but I am also not about to leave money on the table.
Weekend/Weekday Pricing
If weekends are your most popular time, then by all means charge a higher nightly rate for these nights. Note that for multi-day or every multi week bookings, the standard OTA’s like Airbnb or VRBO will show guests a total for their stay so the different nightly rates will average over the whole stay.
Don’t analyse this too much – you can really go down a rabbit hole. Focus on capturing the longest bookings with the highest total amount that you can from your ideal guests. This is by all of your standard marketing techniques that I talk about in other blog posts.
The most important tool in your tool box here is communication. For new prospects who reach out to you, engage with them, find out their plans and needs for length of stay and budgets.
Anytime your guests feel like you are adding value, the more they will see you as an ally.
What I like to do, is to try to get people to book for longer is to suggest that they will get a weekly discount if they increased their say, 6 night booking to 7 days to get more value. Technically this is a win win as you are filling up your calendar and the guests are feeling like you are adding value. I will discuss discounting in a future post but mostly right now, I want you to e focused on how much you can charge upfront.
Additional Guest Fees
This tends to polarize the hosting community and guests at times too. Some hosts offer a flat rate for the whole house no matter how many guests as long as they don’t exceed the number of total guests possible. That is totally your call and it really depends on your listing and the expectations of guests you are trying to capture. Clearly an apartment for 2 is a good idea to rent for 2 people for a flat rate.
But in Tokyo, I have large houses for large family groups. For example, I have a 6 bedroom house that can sleep up to 16. However, I only advertise this for 12 people but I will open it up for more if there are lots of children in the group.
I am always thinking about how comfortable the group will be based on how many couples, singles, grandparents etc. Again, I am thinking about the guest experience that I am offering and tailoring my hospitality assists to the needs of each guest group.
However, I do charge an extra fee for guest after 4 people – around $20 pp, per night. When you have 12 people this really does add up and does add to my profits. However, this is not just a profit grab. I do need to ensure that I have a good margin as the strain on the utility expenses does increase dramatically with more people. I can’t predict utilities in advance and for the very cold or very hot months, the utility bills can triple. This is how I rationalize the additional fees to guests – I show my humanity and explain my side of things and reasonable guests – the guests who are my ideal guests – will understand and appreciate the transparency.
Some guests will try to negotiate on this fee to bring down their total overall cost, but when you explain that really these people are only paying $20 per night and they wouldn’t get anywhere in town for that price, it makes more sense.
Look at ways you can be adding value rather than offering a discount. The secret is communication, communication and, you guessed it, more communication. Get to know your potential guests, find out what they are needing over and above a place to sleep and you are creating an experience that goes beyond the financial transaction. Show that you care and that you understand what they need and then have your business be the ones to provide this.
But it is around this time in the relationship with your potential guests that you can get a sense of whether these people are going to be your ideal guests. Or whether, kindly and with love, you suggest that a different listing or another host will be more suitable to their needs.
This is really on a case by case basis and I am happy to get on a call and talk you through this conundrum.
Race to the bottom – no thank you!
If you come from a real estate background then you are really focused on the “comps” or the competition pricing. You are looking at a snap shot of what the current pricing is now and how you can get a quick sale. As a seller don’t want to be the most expensive house in a cheap neighbourhood or if you are a buyer you are looking to buy the cheapest house in the most expensive street.
Forget this approach in STR. Think like a CEO in a long term and sustainable business that is highly niched. You don’t need to be competing on price and price alone. Of course, it makes good sense just to look at the other places around you, what they are offering and their prices. But remember that their unique features and their ideal guest will be different from yours so be objective. There is enough business for everybody so focus on you, your listing and your ideal guest.
When it comes to pricing, I price based on the amount of VALUE I am providing to my ideal guests. I am always talking to my ideal guests about their budgets, what they usually spend on their trips, and what they expect – then I exceed their expectations while staying in their budgets. I have spent so much of my time discovering everything I can about my ideal guest, what makes them tick and what is a price point they feel is good VALUE that is is fairly instinctual these days.
Admittedly, I do have the luxury of multiple properties with different price points and different layouts so I can quickly suggest a better option to guests who are looking at a property that is above their budget. This way, I can retain that guest in my orbit while not needing to discount to gain their business. I have helped them solve a problem and helped them make a choice.
If you don’t have multiple listing then again, come back to the value of the overall experience you are offering and stay firm on your pricing. Remember that if your calendar is blocked with a lower priced or discounting booking, it can’t be booked by a higher value booking.
Occupancy rates
Use your occupancy rates to test your pricing models. I will address “orphan days” and how to fill them in the next part of the series, but I will just put this here that if you have 100% occupancy then your prices are too low. Put them up now and keep putting the up until your occupancy goes down. Test test test and communicate with your ideal guests and really get to know them.
I test different price points and play around with the models ALL the time. This is not a set and forget arrangement. I have no scientific evidence for this, but I find that when my prices are higher than average, I get more guests who are totally my ideal guests.
Stop thinking that you are competing on price and focus on what the market will bear.
Please keep this in mind. You are not offering a cheap place to sleep – you are giving guests an exceptional experience which is valued more than the collective costs.
Stay tuned for part 2, 3 & 4 of the Monetizing hacks for Airbnb & STR Hosts Series.
disclaimer: We may receive a small introduction fee from the vendor. This will not affect any prices that you are charged. But I will only recommend vendors that I know and love and ones that I have used for myself as a customer.
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