"Smart" Pricing: How Smart Is It Really?
BY MIKEL HUBBARD
FORMER HGTV PRODUCER | CO-FOUNDER, THE HOST CO |
OWNER, TIMES EIGHT PROPERTY & DESIGN
The vacation rental industry is teeming with software that will tell you what your nightly rate should be. You just have to hand over your calendar and they’ll decide what people pay. It’s scary, but is it worth it?
Smart pricing is only as smart as you make it.
It often doesn’t take into consideration the style of your home and will compare your rental to homes that are nothing like it. So take it with a grain of salt. We think it’s a good gauge to let you know when you should raise or lower your rates IN GENERAL, but it’s up to you to account for other factors.
Keep in mind that the goal of smart pricing is to get people to book your house more, not to make you the most money per booking. Smart pricing might tell you the right price is $72/night, but that doesn’t mean you wouldn’t eventually book your home for $125 if you had left it at that price. We’ve found that for the first year of having a rental, it’s better to set your own prices - but use Smart Pricing as a guide if you’re unsure. If you think your home is worth more than Smart Pricing (it’s sometimes worth A LOT MORE), Smart Pricing will learn from your prices and over time, will come closer to matching your price that rather than the average price of a rental in your area.
Here’s another example of when Smart Pricing doesn’t work as well as it should: Smart Pricing may say a Labor Day is worth $200/night when it’s April and no one is considering Labor Day weekend plans yet. So someone books your house. Come August, it’s now worth $400/night because nothing is available. If you had set your own price, you could have waited for a higher rate.
Smart Pricing’s goal is also to get homes down to a price that people want to book your rental over a hotel. But that doesn’t mean it’s worth renting at that price. Airbnb and other rental services wants the booking fee… it doesn’t really matter to them how much YOU make. If you’re not making a rate that pays for the upkeep and mortgage, stop. Price your home at a rate that covers the wear and tear and makes it worth your while. You are better off renting your home 10 nights per month at 150/night than 30 nights per month at 50/night.
Have any of you had good luck with Smart Pricing? We’d love to hear your thoughts in the comments.