Buying an Airbnb investment property is only completing the job halfway in your journey of making money with Airbnb rentals. You may ask why. Well, simply owning an Airbnb is not the prime factor for success. As the boss of your Airbnb business, you need to invest a lot in research in order to make a fortune with short-term rentals.
Exploring how to set your Airbnb pricing strategy is one of the most important tasks when owning and managing a short-term rental. Curious to know how much to charge for rent and how to increase Airbnb rental income? Then, you’re in the right place! Make yourself comfortable and let us guide you on setting the right Airbnb pricing strategy for your short-term rentals.
Why Is Setting an Airbnb Pricing Strategy Important?
Setting an Airbnb pricing strategy has a crucial effect on your Airbnb business. That’s because, nowadays, owning an Airbnb is not an easy activity- it is a real battle. The Airbnb rental property market is a brutal place to be due to the high level of competition. Consequently, when a real estate investor does not choose a rental rate wisely, there is a chance that soon, his/her Airbnb business will go down.
Moreover, as the real estate market changes, applying the same vacation rental pricing strategy is a huge mistake. The market changes, new businesses appear, and customers’ needs and wants evolve.
Thus, the investor’s task is to use various Airbnb tools, conduct comparative market analysis, and do everything that is necessary to keep making money with Airbnb. In other words, setting an Airbnb pricing strategy the right way is a step towards owning a successful vacation rental property business. Once it’s set, even then you should constantly keep an eye on the market and change the strategy when needed.
The Successful Strategy Depends on Your Research
In order to successfully set an Airbnb pricing strategy, you should do proper research. This is due to the fact that you cannot properly set a rental rate without exploring the market and gathering information first. Here are the two main things that you need to explore:
The Real Estate Market
The path to a successful investment property always starts with research on the real estate market. This is done in order to ensure that investing in a certain location is a smart thing to do. Consequently, choosing the right Airbnb pricing strategy starts with a correctly chosen market.
Exploring the market will give you an idea of the short-term rental market trends. Moreover, you will be able to explore not only other rival Airbnb properties (which we will explore in our next point) but the charging rate of hotels and motels in the area, which is also quite important.
The Competing Income Properties
When questioning how much to charge for rent, it is always smart to check the rental rates of other income properties. For this, an investor should investigate real estate comps, just like when buying or selling income properties.
Knowing your competition’s rental rate will help you in setting your own Airbnb pricing strategy. In order to quickly find accurate real estate comps, use various Airbnb tools. Mashvisor’s Airbnb profit calculator is a great example as it focuses on short-term rentals and their Airbnb data (rental income, occupancy rate, cap rate, cash on cash return, etc.)
Make a Pricing Plan
Well, you have done your research. Now you are ready to set an Airbnb pricing strategy. Which points should you pay close attention to? A real estate investor should understand that throughout the year, his/her Airbnb occupancy rate will fluctuate. Therefore, rates for Airbnb rentals should change according to the forecasted Airbnb occupancy rate.
Plan When to Increase the Rent
If you are new to the Airbnb business world, do not rush to increase your rental rate. The key point here is to gain a positive reputation with your Airbnb rentals first. Your investment property should have many positive reviews and many satisfied clients that will return despite the fact that the rental rate has increased. At this point, you’ll be enjoying a high Airbnb occupancy rate.
Consequently, when you gain such confidence in your Airbnb rental property, it is time to increase the rent. Sometimes, it is possible to forecast when your investment property will gain that popularity and rise in occupancy rate. However, for beginner real estate investors, it can be quite difficult to gauge. Thus, we advise hiring an Airbnb property management company that is experienced in managing Airbnb rentals.
Check When the Location’s Peak Season Comes Around
Another thing that is crucial to highlight is the peak season of the location your vacation rental property is situated in.
To put is simple, during peak seasons (whether it’s the festival season or your property is in a summer resort destination), you should closely monitor your competition and have an approximate estimation of tourist flow. Consequently, if you see that your competitors increase the rental rate, increase yours as well.
Another possibility of knowing when to increase the rent is through analysis. Therefore, if the results show that there is going to be more demand than supply, increase the rates of your income properties. The important thing here is to analyze the whole year so you have a clear picture of the possible business. That way, setting your Airbnb pricing strategy will be way easier.
Keep in Mind Special Occasions
Keep in mind special occasions as this might result in the increase of demand for Airbnb rentals. The best way to check for such special occasions is through the internet, social media, or simply to go to the town hall. Do your research as all those small details will help you in setting an Airbnb pricing strategy as well as making money with Airbnb.
To sum up, your steps in setting an Airbnb pricing strategy should start with the analysis of your income properties. Using Airbnb tools, such as Mashvisor’s Airbnb rental property calculator, is always a great move.
After knowing what kind of rental income your property can bring in, analyze the surroundings as well as make the whole year plan based on the area your property is located in. Analyze your competition and only then set an Airbnb pricing strategy.