Australian Insights
Do Ratings and Reviews Affect Your Annual Earnings?
The number of reviews and your rating score may or may not affect your annual income - depending on the type of accommodation and area.
Having a ‘low rated’ property does not necessarily lead to low income - a smart pricing strategy can compensate for low ratings.
If a guest gives you less than five stars for a stay, can this affect your annual revenue? Losing a star causes grief and hot discussion amongst hosts - but apart from denting your pride, do reviews or ratings truly impact your bottom-line?
Airbooster conducted a test to determine whether the number of reviews or the rating score of a listing could affect annual earnings.
We analysed the annual income of Airbnb two-bedroom units and houses in the Newtown, Glebe, and Surry Hills areas of Sydney that were available for bookings over a 12-month period until April 2023. The purpose was to observe the impact of these factors on revenue.
Number of Reviews
We looked at the annual income of 67 two-bedroom apartments and houses and sorted the listings into three groups based on the number of reviews received (ratings were ignored - see next section):
- Low: Fewer than 15 reviews
- Medium: 15 - 50 reviews
- High: 50+ Reviews
Results saw that as hosts gained more reviews, their was a slight increased in average annual revenue. However - it was not a large difference; the group who had 15-50 reviews only earned about 5% more than the low review group; and the group with a large (50+) number of reviews earned only 12% more than the group with few reviews.
Star Ratings
We looked at the annual income of 67 two-bedroom apartments and houses that were sorted into three groups based on the their rating score:
- Low Ratings - Less than 4.4 stars
- Mid Range Ratings - 4.4 - 4.89 stars
- Excellent Ratings - 4.9 - 5 stars
The results showed that ’‘star ratings’ is not a strong predictor of income success. In fact, the listings with ‘Mid Range’ ratings, on average earned less than listings with Low Ratings. Even listings with an excellent rating of 4.9 - 5 stars only earned 10% more on average than the listings that had scores of less than 4.4 stars.
The explanation for this is below.
Conclusions
Number of Reviews
In our test group, hosts experienced an average increase in annual revenue with more reviews. This can be expected because guests naturally choose listings with more reviews, resulting in better occupancy. A listing with more reviews generally ranks higher in search results, creating a virtuous circle in attracting bookings. Hosts should take note of the following:
- If you have a high number of reviews, your prices should be higher than average. One mistake made by hosts is to maintain the prices they initially set when launching their listing without raising rates when they earn more reviews.
- For brand-new listings, Airbnb provides assistance by ranking them higher. Hosts should leverage this period to accommodate as many stays as possible to gather a significant number of reviews. It would be worth slightly underpricing the listing to encourage more bookings and earn a credible number of reviews.
Ratings Score
It was puzzling to observe how low-rated properties could still generate reasonably good income despite receiving terrible scores. These properties had ratings of 4.3 stars or less and guests left scathing comments about cleanliness, broken amenities, or poor communication. Further examination of this "low rating" group revealed that the majority were hosted by professional managers, some of whom had dozens or even scores of listings. Unfortunately, cleaning and communication standards are not always high for these managers, resulting in lower ratings.
However, many professional property managers employ pricing strategies. For example, one listing had a rating of 3.9, a very low rating, but still earned just under 85k. Another listing from a professional manager had a rating of 4.05 and earned over 88k. Surprisingly, these bottom-rated listings actually earned more than many higher-rated properties.
(Note: Not all professional managers have good pricing techniques; many earn below the average of nearby listings and also receive bad ratings from guests. We recommend that all landlords understand the earning range for their listing so they can evaluate the performance of their property manager. "Management" should involve optimising earnings, not just cleaning and guest communications.)
The size of your property also impacts the importance of these factors. Ratings and reviews hold more significance for larger properties (2+ bedrooms) where groups and families tend to choose accommodations more carefully when their trip is focused on having an experience together.
The main conclusion is that while it is important to prioritise guest experiences that result in a five-star rating, losing a star does not necessarily spell catastrophe for your annual earnings. Implementing pricing strategies aimed at increasing annual revenue is of greater importance.
Airbooster specialises in techniques to improve annual earnings for short-term properties. We identify factors that influence your search ranking and booking rate and focus on price strategy for optimal 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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