Pricing: Are You Missing Out On Rental Income? Follow My Experimentation with PriceLabs
I’ve been active a lot on #REtwit (Real Estate Twitter) and #STRtwit (Short Term Rental Twitter) and engaging with a lot of other STR owners and investors. One thing that I’m picking up is that I’m way too hands on with some of my operations where an app or tech could help me streamline immensely. I also happen to be reading Atomic Habits at the same time, and I’m 100% buying into the belief that 1% improvement each day yields amazing results over months and years. So, here we go - I’m going to try out an app called PriceLabs as a way to become more hands off the pricing of my AirBnBs while generating more rental revenue - a double win.
A bit of context on my STRs if you’re new around here. I own 2 cabins in North Conway, New Hampshire, a popular tourist destination in New Hampshire. North Conway is a great 4 season destination, with peak Winter and Summer seasons, and great Spring and Fall seasons. Ski slopes abound, as does floating down the Saco on a hot summer day. I’ve owned these cabins for 3 years and have successfully built a side hustle. Now, I’m doubling down on making the business more operationally efficient so I can focus on other side projects.
Here’s a snapshot of my last 2 months of pricing. Now, the first thing I’m noticing is how difficult it is to analyze pricing within Airbnb’s app (leveraging “Insights”) without any sort of spreadsheet monkeying - they don’t even let me split out the listings to analyze each individually, so I’m hoping that PriceLabs will do a much better job for me with their dashboarding and analytics capabilities. My forecast for the rest of the year is similar to the trailing history, so I’d like to beat that, maximize profits, and reinvest in improvements to give my guests the best stay.
What does PriceLabs do?
Straight from PriceLabs’ website, PriceLabs works to recommend prices for Short Term Rentals based on market supply and demand, seasonal and day-of-week trends, special events and holiday predictions, and the number of days left to book. It uses automation and data driven insights to make you more hands off of managing your pricing operations, while still giving you the freedom to customize.
Step 1: Setting my Base Price and Minimum Price
The Base Price, according to PriceLabs, is the average price I want for my cabins across the year. I’ve decided on $275 for Cabin 1, and $300 for Cabin 2 - I went with a blend of gut instinct and what PriceLabs recommended. The Minimum Price is the floor of what I would charge. This is important, because in my experience, the more you devalue your property, the more likely you’re going to get guests outside of your target market (think - unsavory, unwilling to follow house rules, etc.) I do plan on making some renovations this year, and as a result I will likely increase my Minimum and Base Prices to compensate for those renos. I can do this easily by adjusting what percentile of the market my Base Price will be priced in. Right now, for both cabins I’m targeting the 50th percentile, or in otherwords - 50% of STRs will be priced higher than me, and 50% will be priced lower. I like the value that my cabins provide to families looking for affordable getaways, and I’m not ultra high end, so 50th percentile feels right at this time. This view above is really cool because I can actually hover on other comparable rentals in my neighborhood and see what they are charging, how many bedrooms, etc. - regardless of the platform they are renting on. I can also change the neighborhood I’m being compared against.
Step 2: Setting Daily Prices and Syncing to AirBnB
The algorithm of PriceLabs is extremely powerful. In the above picture, you’ll see that my Base Price is generating seasonality by month recommended by PriceLabs, where peak winter and summer months are charging higher than the slower spring months. What’s interesting about this is how much revenue I probably missed in January of 2022 on this particular Cabin, Cabin 2. Referring back to my average price in January, I charged on average $273, whereas Price Labs recommends $373. That’s a $100 loss a night, at 31 nights and 80% occupancy, that’s almost $2,500 of revenue I missed out on. Conversely, I’m about to enter a bit of a slump between March - May in terms of pricing, so in my own planning I may be overcharging currently and missing out on potential bookings as a result, and lost revenue as well.
PriceLabs takes it a step further by analyzing daily rates. Here’s a March calendar of PriceLabs recommendations for Cabin 2:
A couple of callouts about this view:
The “hover over” feature day-by-day (the black box) is pretty incredible. What it’s showing me is all the factors that are weighing into adjusting Cabin 2’s Base Price down to the $207 it’s recommending for that particular day - it’s knocking off 19% for seasonality and 12% for lower demand for instance.
It also shows me my listing’s health compared to the neighborhood. I’m not doing terribly, for bookings 7 days out I’m at an 86% occupancy compared to the market which is currently lower.
I can also add in date overrides if needed as well, whereby I can customize and override the price to what I feel is appropriate.
The best part is that I can sync this to AirBnb, without manually updating my prices (something I did constantly on an ad hoc basis - totally unsustainable).
Impressions Thus Far:
PriceLabs is incredibly easy to set up and get the hang of. I probably spent less than 30 minutes actually connecting my AirBnB listings, and then 2-3 hours poking around and getting used to the tool.
I would say about 80% of the pricing recommendations are in the range of what I would have expected, and the remaining 20% is surprising to me. If I look out to August, weekend rates are being recommended at over $800 – in September over Labor Day weekend, the rates are over $1000!!! I can’t even imagine pricing like this, but I’m leaving it for now in case I truly get any bites this far out.
Measuring Success:
Like any good business owner, I have a plan for the year in terms of how much rental income I want to bring in, and that’s based on some assumptions around my occupancy and price per night. I figured I would give this a shot for April-May, though I have a couple of caveats in my business:
I’ve already booked up all my weekends in March and I know based on PriceLabs I’ve likely underpriced those weekends
In April or May I’ll likely block some days for renovations on our backyard and landscape that I didn’t factor into my original projections
Below is what I’m assuming for price per night and occupancy for the next 3 months and what I hope to “beat” by using PriceLabs. Note, in my planning I had rolled up the Cabins together, so I just have a blended price per night. In my future planning I’ll definitely split them out to analyze closer.
We’ll see where this takes me. I’m excited to experiment with PriceLabs and see how I can improve my use of it over the next 3 months to drive more income during a typically slow season.
Like what you see? Drop me a note or comment below to connect.