Last Updated: 08/12/2022
If you’re 100% booked on Airbnb, you’re probably losing money.
It sounds crazy, but it’s the truth. You’ve got to stop and look at why you’re 100% booked because you’re probably losing revenue.
We’re going to talk about pricing strategies and Airbnb occupancy.
Often you hear hosts, both new and experienced, bragging about the fact that they’re completely booked, sometimes for months and months in advance.
It might make you feel great and give you a sense of accomplishment, or maybe a sense of relief. Sure, it looks good, but there is a problem here that might not be immediately obvious.
The reality is: if you’re booked 3, 6, or even 12 months in advance, and you have no unbooked days, you’re probably making less than you could be.
We’ll explain why below.
Many BNB Hosts Sell Themselves Short
They make the mistake listing their newly listed property at a nightly rate below its total potential value.
Let’s use an example. So, you list your place for around $80 a night, which is low compared to your local competition. However, it doesn’t take long for you to get a tonne of bookings at $80, and you’re booked out for the next few months. A couple of those weeks go right through a busy holiday period.
The thing is that once you get a few reviews, you’re going to look cheap compared to the rest of the market, which is sitting at around $120 or more.
The kicker – people will probably pay that $120 or more, especially if your property is an attractive option compared to your competition.
So, let’s crunch the numbers. At an $80 nightly booking rate and an average of 30 days for a month, you’ve only made $2,400.
When we raise the rate to $120 per night, you manage an average 70% occupancy rate. You’ve now made $2,520. Good work!
The best bit is that you still have an extra nine nights available to book.
This is where you have the chance to raise your overall revenue amount dramatically.
Now is the time to use some pricing strategies to get the remaining nights booked.
Pricelabs and Wheelhouse are two good examples here.
So, if you managed to get the rest of them booked at $90, that’s a further $810. So, even if you just managed four days at $80, you’ve squeezed out an extra $320.
Both of these examples demonstrate how you can make more money, with each bringing your total monthly earnings to $3,330 and $2840. Both beat the $2400 example.
You’re also achieving or getting very close to 100% occupancy but with more profit.
It’s all about filling up your calendar with big, chunky bookings. Then we fill in the smaller gaps with cheaper value bookings. It seems counter-intuitive that lower-rate bookings are the ones that make you more money, but the truth is that they can and will make you more money.
Whenever you’re trying to find the perfect balance between occupancy and price, you have to resist the temptation to drop your rates.
You want to choose rates that fill up your calendar and provide you with a base income. Then you can work on extracting that extra value.
Now we’ll talk about accepting bookings in advance and how they can mess up your calendar.
So, let’s say you get an inquiry for a booking that’s a couple of months in advance, and they want to book just one night.
That one night can get in the way of longer bookings that would otherwise fill up your calendar.
In these circumstances, you have to say no.
But that’s not to say that you don’t have to accept small bookings.
You always want to prioritise longer advance bookings over shorter bookings. So accept the 4, 7, or 10-night advance bookings first.
Then, when your calendar looks full and you’re approaching 70% or even 80% occupancy, you can accept the shorter ones and look to secure the extra revenue.
Remember, chunky first, then fill the gaps.
Managing Demand To Maximise Your Profit
Hotels have been using this strategy since hoteling began.
It’s essential to price your nightly rates to reflect seasonal demand.
The reason is simple – supply and demand.
You need to raise your nightly rate during peak times like holidays, local events, musical festivals, or peak travel seasons. When peak demand happens, guests are more likely to pay more because rates are usually higher, and everyone accepts it.
If you don’t raise your nightly rates to meet seasonal demand, you’re going to lose money.
On the flip side, when times are slow, you can’t keep asking top dollar because you will miss out on bookings.
Instead, it would be best if you lowered the nightly rate to get those bookings and fill up your calendar.
This might sound scary, but the thing is that your peak seasons will make up for the slower times, so don’t worry about it too much.
An easy way to do this is to make a calendar of all these events, which you can usually find by searching the internet.
Once again, using dynamic pricing software will help with this. But be mindful that they may not be completely reliable for local holidays.
Use Discounts & Longer Stays To Your Advantage
Offering longer-term discounts is an excellent way to reduce your turnover and cleaning requirements as well as fill up your calendar.
We’re not talking about a huge discount here. Instead, something as small as 10% will get you a strikethrough label on your price, while 25% will get you a feature in an Airbnb email.
The principal takes us back to the chunky bookings mindset, where you want to fill up as much of your calendar as possible with longer bookings.
Airbnb also prioritises bookings with a discount in the search results. It’s modelled on the same concept as a search engine like Google, but instead of using keywords, it filters by region, availability, the best match for you, and a bunch of other info that we won’t go into right now.
So, if you set even a slight discount, you’re not only going to appear higher in the results, but you’re also going to encourage a longer stay.
To use the promotions feature, you need to set a minimum stay of 7 days with a minimum of a 10% discount.
Or another strategy is to encourage stays 28 days or longer, with a monthly discount. This is an excellent strategy for a few reasons.
Firstly, there is less cleaning and turnover requirement, less wear and tear, less work to manage your bookings, and you still achieve a high occupancy rate.
Secondly, while that discount rate might seem like you are losing money, you’re actually gaining time and achieving a higher occupancy, which tends to help it even out.
Thirdly, a 30-day minimum stay might classify your property as regular accommodation, which in some places can mean you don’t need council approval to operate a short-term rental accommodation business.
Setting such a big discount might go against conventional thinking, but sometimes going against the grain is the best way forward.
You can raise the rate and still apply a 10% discount, so it looks like you’re providing a decent saving, but you’re actually not losing much if any of your money, but still getting a 7-day long booking.
The reason that a small discount will work is simple – Airbnb as a platform doesn’t offer the option to filter between the size of the discount. Instead, it’s designed to show users that there is a discount and will favour your listing in the results section.
You can use Airbnb’s new listing discount when your listing is brand new. This gives three separate guests the chance to book your property within the next 30 days at a 20% discount.
Airbnb actually claims that you can get your first three bookings up to 30% faster using this feature, so why not try it out?
As we can see, discounts are a helpful tool that you can use to secure lengthier bookings, especially during off-season times.
You can also do a similar thing on VRBO with their “new host promotion”.
Of course, these are both excellent ways to get some reviews when you first start, so be sure that your property is looking fantastic, has great photos, and is ready to go as soon as you upload it.
Automate Your Nightly Rates To Make More Money
There are two ways you can automatically change your pricing, and both of them can make you more money.
Pricelabs is the easiest way to automatically change your pricing on the fly.
It takes some time and patience to learn how to use it, but once you do, you can see your revenue automatically increase, and you’ll save tonnes of time. Instead of manually managing your calendar every day, you can set your preferences and let Pricelabs do the work.
Pricelabs works by comparing your listing to all of the available data on Airbnb, which they then use to apply dynamic pricing adjustments to meet demand and seasonal change. This helps you to get more bookings, as your property is always available at an ideal price.
You can also do a similar thing using Airbnb’s built-in rules system, albeit with more time involved and less automation.
Pricelabs will even give you a free 30 day trial, as well as free training, so it can really be worth it if you have time.
Otherwise, leave it to us, so we can help you make more from your property without any extra work.
Reach out to us when you’re ready to get started!
– Team HoliHome