Last Updated on June 16, 2023 by Rental Recon
You just received a phone call from your spouse on their way home from work. They have great news. There will be a companywide three-day weekend to celebrate a fantastic quarter, and the two of you haven’t had time to take a vacation in years. The only problem is that it is two weeks away. Your intuition tells you Airbnb prices will be far too high this close to the booking date.
Is your intuition correct?
Do Airbnb Prices Go Down Closer To Date? Or Do They Go Up?
Airbnb prices tend to be cheaper the closer you are to your proposed booking date. This price fluctuation happens because hosts are willing to reduce their listing price to increase their occupancy rate. To a host, it is better to have a source of revenue at a reduced price than no revenue at all.
Let’s look at several factors involved to drive the concept home.
How Occupancy Rate Effects Pricing
Occupancy rate is the amount of time a specific listing has guest reservations. When a listing has a low occupancy rate, its management software will indicate low performance and signal the host that they need to make adjustments. Typically, hosts want to maximize the occupied number of days for each listing because it generates more revenue.
The more days a property generates income for the host, the better.
However, many factors outside the control of hosts will impact the likelihood a property gets booked. Seasonality, special events, the number of similar listings in the area, and even the day of the week the guest wants to arrive are just a few of those factors.
Let’s say you own a beach house in New England. Summertime will be your peak season because very few guests want to sit oceanside during the North East’s frigid months. As a savvy host, you know your occupancy rate will be lower, so you lower the price of your listing to make your listing more attractive.
What does this have to do with last-minute bookings?
An average length of stay an Airbnb host can expect from any guest is between 4 and 6 days. Using common sense, we can deduce the most popular days a guest wants to book as the weekends, with a few days before or a few days after. There will be high occupancy rates and high pricing if there is high demand.
If you are planning a last-minute stay during peak season, it is unlikely you will be able to secure a “high occupancy” day of the week. However, an opening indicates a possible unexpected cancellation, and the host will want to fill that space ASAP, which means a relatively lower rate.
If your last-minute travel plans include “low occupancy” days, you can nearly guarantee this booking will be at a discount. Again, it is better to have a smaller revenue stream during “low occupancy” periods than no revenue.
Additionally, having low occupancy indicates to Airbnb’s search algorithm that your listing isn’t as popular as the competition’s. Check out our article on tips to secure more reservations, if you are having a tough time filling your calendar.
When Should I Lower My Airbnb Price?
If you are an Airbnb host and the answer above is news to you, don’t worry. Here is an outline of the three most important times you should lower your prices.
Last Minute Bookings
We already went in-depth on this one, but ensuring you have a discount code for last-minute bookings is a great incentive for guests. By incentivizing last-minute bookings, you ensure maximum earning potential.
Fill Gaps In Your Listing Calendar
Speaking of gaps. Lowering prices between “high occupancy” periods will encourage travelers to fill those gaps. By filling those gaps, you are increasing the occupancy rate of your listing, which means you are earning income more often.
Encourage Long Term Bookings
Consider a typical host scenario. Your listing is booked 22 days out of a 30-day month. You have four total bookings; two bookings are for six days, and two are for five. This schedule means you will have to do four complete property turnarounds for each group of guests.
That’s four cleanings, four introductions, and four chances your guests won’t respect your well-worded and thoughtful house rules.
With a long-term booking (a booking of three weeks or greater), you can generate the same occupancy rate with 75% less activity surrounding the management of that booking. Long-term bookings leave more time for you to engage in building your business rather than managing customers.
Funnel Bookings During The Off Season
Finally, each short-term rental market has a reoccurring season when bookings are less frequent. This period is your off-season, and keeping prices at a peak season rate can hurt occupancy and thus hurt your bottom line. Reduce your listing prices during this time to guarantee occupancy.
Does Airbnb Drop Prices?
The answer to this question depends on the pricing strategy you selected for your listing.
If you manage the price of your listing manually, I.E., you set a daily price for your listing, and you adjust your price depending on market demands, then no. Airbnb will not lower your listings price in a manually managed pricing strategy.
If you are using the Airbnb Smart Pricing feature, then Airbnb will drop prices depending on market variables such as supply, demand, and seasonality. Automated pricing is a powerful tool that can build efficiency into your business, but there is a learning curve to effectively employing this tool.
When selecting the Smart Pricing feature, you will establish minimum and maximum listing prices. A minimum price ensures your listing stays above a manually selected price, and a maximum price prevents your listing from becoming too expensive.
Additionally, many hosts (myself included) have found the Airbnb Smart Pricing tool assesses the price of your listing slightly lower than where it should be. When you compare the autogenerated price to a manual market analysis of comparable properties in your area for the same period, you’re likely to see higher prices from the manual analysis.
This discrepancy does not mean you should throw the baby out with the bathwater. Smart Pricing is still an easy-to-use tool that can provide your business with robust pricing solutions in minutes. When you are ready, there is a suite of third-party software providers, such as DPGO or Beyond, which essentially function the same as Airbnb’s Smart Pricing tool, but with more precision. Check out our comprehensive guide to pricing tools.
How Do You Get the Price Down On Airbnb?
You have a few options if you find that perfect weekend getaway spot that doesn’t fit your budget. However, understand that each option has some risks associated with it. Below we’ll discuss your options and what those risks are.
Option 1: Book Far In Advance
Hosts want a full calendar year-round, so they often offer discounts on their listings if booked with enough lead time.
However, hosts generally understand their market exceptionally well and are less likely to offer these discounts during high occupancy periods. Therefore, if you wait for a deal during a specific time, the host may never offer it.
Option 2: Wait Until The Last Moment
As previously discussed, a host will lower their price if the check-in date is right around the corner.
The obvious risk here is that waiting until the last minute to secure a booking does mean you may never have an opportunity to book. Other guests may book the listing before you have a chance, or an anticipated cancellation may never happen.
Option 3: Book A Longer Stay
Booking a more extended stay will incentivize a host to reduce the daily price of a listing to help keep their calendar full.
You may not need all that extra time.
Option 4: Negotiate
If none of the above options are available to you, then it may be time to send the host an inquiry and begin negotiating for an acceptable price.
Understand, however, that hosts put a great deal of research and time into their prices. Therefore, your negotiations are likely to fail unless you have some intangible value to the host. This value includes whether you and the host grew up in the same hometown, are fans of the same sports teams, etc.
Beyond offering something to incentivize the host to accept your offer, don’t expect a host to adjust their prices readily.
Does The Airbnb Price Increase After Inquiry?
You don’t have to worry about price fluctuations when you send a host an inquiry. Inquiries do not affect a listing’s price, nor do they affect a host’s acceptance rating. Instead, inquiries are simple, pre-reservation messages a guest may send to a host. Typically, guests use inquiries to confirm important reservation information before committing to a reservation.
Do Airbnb Prices Go Up The More You Search?
Prices may go up the more you search, but it is not by design. Fundamentally, Airbnb is a search engine, and many factors affect when guests can see a listing. The more you search, the more “less relevant” listings you may find, and a listing with a price that is too high will lower its relevancy.
