Insights
Should You Compare Prices with Nearby Listings?
To optimise your pricing strategy, it is essential to look at the entire year rather than relying solely on the rates of nearby listings at specific points in time.
Different demand periods can be misleading and do not necessarily predict future demand accurately.
Comparing with other listings with overly high occupancy rates or a different number of reviews and array of amenities may lead to over or underpricing.
Frequently updated data and a more thoughtful pricing strategy is essential to achieve correct pricing rather than just viewing other listings at random periods.
Many hosts work out their rates by looking at the prices of nearby listings. Airbnb has even launched a tool for hosts to check the rates that nearby properties were booked. But is this approach effective in maximising your annual revenue? While it may seem logical, it could potentially lead to either overpricing, resulting in fewer bookings, or underpricing, leading to a reduction in potential earnings for your property.
Below is a potential list of pitfalls.
‘Halo’ Effect of High Demand Periods
When you view nearby properties, the rates you see may be due to fluctuations caused by surges or high/low season prices – and this may not necessarily be an accurate predictor of future market demand.
Following a demand surge period, new hosts could be encouraged into the market and who base their rates on “what they saw” – only to find a lack of bookings in subsequent periods.
In Sydney, the post-Covid reopening led to a surge in travel during 2022 and these ‘boom prices’ were further extended with WorldPride (March 2023). Many new hosts entered the Airbnb market and based their rates on this exceptional period. Airbnb bookings in April-June 2023 were even higher than the same period in the previous year. But the increase in the number of new listings meant that any host who mispriced their accommodation faced high vacancy rates.
Occupancy Doesn’t Mean the Optimal Rate
Some hosts believe they their listing is doing well because they have ‘occupancy’. The new Airbnb tool for hosts even shows you the ‘booked rate’ of nearby listings to ‘help’ you set your prices. But this information could actually just be indicating below-market rates.
Listings that are booked out very far in advance of high-demand times are likely to have ‘sold out too early’. Cheapest places will be the first to be booked out very far in advance for high-demand periods (holidays and special events). A host wanting to maximise their revenue (not necessarily occupancy) should be on alert if they their calendar is being filled too far in advance.
We recently tested the Airbnb tool for some school holiday dates and viewed listings that had been booked out more than several months in advance; all were well below average market rate. Hosts should not want to ‘compete’ with these listings.
For 'booked prices' to be useful for pricing, hosts need to know when a booking was made. If a booking was made very far in advance (and the calendar has high occupancy), it’s likely the listing is underpriced. Conversely, bookings made within an ‘average booking window’ may be closer to the market rate.
Higher Number of Reviews Mean Higher Rates
New hosts are often told to set their prices by looking at nearby listings. However, if a nearby listing is managed by an experienced host with many reviews, it is unlikely that a traveller will choose the new host over the highly reviewed host (with most other things being equal).
Our research has found hosts with more reviews tend to earn more. Guests tend to choose properties with more reviews, plus high-review properties also rank higher in search results, leading to higher bookings.
The double-whammy for new hosts is that if they don’t attract bookings (and reviews) in the first month of listing when Airbnb gives them a promo boost, Airbnb's algorithm may lower search result rankings due to the limited early activity, making it more difficult to gain visibility among potential guests. (Read between the lines here.)
Compare Amenities with Amenities
The amenities you offer significantly influence where your listing ranks in travelers' search results. A listing with a broad array of amenities is more likely to appear more frequently and achieve higher rankings than one with fewer offerings. If a host mistakenly uses the pricing of a competitor’s listing that has different set of amenities to her own when comparing prices, there is the risk of over / under pricing.
Even basic amenities, such as Wi-Fi, a fully equipped kitchen, a washing machine, an iron, and a dryer, can substantially impact the visibility of your property in search results. It is crucial for hosts to identify similar amenities offered in nearby listings to assess an accurate and competitive pricing strategy.
Conclusion
While setting prices based on nearby listings may appear easy, it can be deceiving. The rates displayed in neighbouring listings may be subject to factors that are not obvious at first glance. To optimise your pricing strategy, it is essential to look deeply at each comparative listing, consider future demand and view a calendar beyond a specific point in time.
Additionally, the pricing of a neighbouring listing may not accurately reflect the rate paid when the booking was made or lengths of stay.
If you are looking for a more advanced approach to setting your pricing and increasing revenue, consider Airbooster. We offer professional tools and a data-driven pricing strategy, so your calendar will be continuously priced to reflect the market. The ultimate objective is to position your property in the top 25% of listings in terms of annual revenue.
Many hosts work out their rates by looking at the prices of nearby listings. But is this approach effective in maximising your annual revenue?
Estimating your potential Airbnb revenue may appear to be a guessing game - but Airbooster will provide you with a realistic appraisal of your potential earnings based on nearby Airbnb properties that directly compete with your property.
One of the biggest myths among Airbnb hosts is they accept a ‘market rate’ for their property. What most don’t realise is that some hosts earn two or even three times more than other similar listings nearby.
If a guest gives you less than five stars for a stay, can this affect your annual revenue?
Airbooster tested whether the number of reviews or the rating score of a listing could affect annual earnings.
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