Why Relying on Airbnb Pricing Tools Could Cost You Thousands (2024)

As an Airbnb host, one of the hardest things you’ll do is determine your Airbnb pricing.

So, you’re probably considering using an automated tool that takes all the guesswork out of calculating your nightly rate.

With automated pricing tools, all you have to do is connect the software to your listing. From there on out, the tool will automatically update your pricing on Airbnb. It’s simple, easy, and (in theory) sets the optimal price for you.

But, do those tools truly set the best price to maximize your revenue? Are simplicity and ease worth losing control over one of the most important aspects of your business?

Read on for an honest review of Airbnb pricing tools based on my first-hand experience using two different tools. Learn why relying on any one tool could cost you thousands of dollars in revenue.

This post may contain affiliate links. If you click a link and make a purchase, I may earn a commission at no additional cost to you. As an Amazon Associate, I earn from qualifying purchases. I’m not affiliated with Airbnb in any way (other than being an Airbnb host, of course). Read my full disclosure policy here.

Note: All information referenced in this post is up to date as of 11/21/2021. For the most up-to-date information, please refer directly to the Airbnb/VRBO website and individual third-party pricing tools you’re considering. Also, please note that I’m not affiliated with Airbnb or any automated pricing tool. Everything in this post is based on my personal experience.

Let’s look at the two types of pricing tools available to Airbnb hosts: Airbnb’s built-in pricing tool (Smart Pricing) and third-party pricing tools.

1. Airbnb Smart Pricing

Airbnb’s built-in tool, Smart Pricing, is one of the most convenient ways to determine your pricing on Airbnb.

But, solely relying on this tool might cost you as much as half of the revenue you could be earning.

I used Smart Pricing for two months (I know, that’s not long! After two months, I was losing so much money I had to turn it off.)

Here’s a comprehensive list of Smart Pricing pros and cons, based on my experience:

WATCHOUT: If you do sync your listing calendars on VRBO and Airbnb, when you open new dates on Airbnb, those dates automatically open on VRBO, too. So, you’ll want to set the right pricing for those dates on VRBO soon after making them available on Airbnb.

Pro tip: Pricing is just one of the 50+ ways your listing can be optimized today to start earning you more revenue today!

The biggest issue I had with Airbnb Smart Pricing is that my nightly rate was very low. I can’t stress this enough.

With Smart Pricing, my nightly rate was half of what it used to be with a third-party pricing tool.

At first, I didn’t realize how much this would impact my revenue.

That’s because right when I started using Smart Pricing, bookings came flooding in.

And I thought they would keep flooding in. Since my pricing was so low, I expected my occupancy rate to increase enough to more than make up for the lower nightly rate.

Unfortunately, most of those bookings were for holidays and weekends – popular nights that I believe would have gotten booked at higher rates. And, even with this super low pricing on Airbnb, my weeknights didn’t get booked.

In the most extreme case, one guest booked the Christmas holiday months in advance (and before I turned Smart Pricing on.) This guest then canceled just before check-in (this is one reason I now stay FAR AWAY from flexible Airbnb cancellation policies.)

When that guest canceled, Smart Pricing immediately dropped the price on those nights to a ratehalfof what the initial guest committed to.

Why?

Because that’s what Smart Pricing predicted it should be, despite the fact that those nights had already been booked at a much higher rate.

All in all, my total revenue for the two months I used Smart Pricing was half of the expected revenue forecasted by AirDNA.

So, why did I start using Smart Pricing in the first place?

2. Third-Party Pricing Tools

A couple of months after opening my Airbnb, I started using an automated pricing tool from a third party (meaning, it’s similar to Smart Pricing but it’s not built by Airbnb so it uses different data, methodologies, etc.)

(Note: I manually calculated my Airbnb pricing when I first opened my Airbnb. Here’s why that’s crucial.)

After manually calculating my pricing for a bit, I was super excited about the ease and simplicity of using a third-party pricing tool.

Like Smart Pricing, these tools have proprietary algorithms and competitive data you simply don’t have access to on your own. They also automatically update your nightly rate as market conditions change, in an effort to capture the most bookings possible.

Unfortunately, if you’re anything like me, you might find that the downsides far outweigh the benefits.

Here are the pros and cons of third-party pricing tools, based on my experience:

What’s worse than only getting half of your expected revenue?

Not getting any revenue.

When using a third-party pricing tool, there were two months where I didn’t get any bookings at all.

With these tools, you’ll get your absolute highest nightly rate. But that high nightly rate does nothing for you if no one actually books.

So, should you give up on automated pricing tools altogether? Should you manually calculate your rate instead?

After months of frustration and disappointment, that’s what I decided to do.

And it was a disaster.

Learn why you shouldn’t manually calculate your Airbnb pricing.

Pro tip: Pricing is just one of the 50+ ways your listing can be optimized today to start earning you more revenue today!

The Solution

After months of trial and error, I’ve learned the hard way that, if you want to maximize revenue, there’s no easy solution to determining your pricing on Airbnb.

So, I scrapped all of the traditional approaches.

And instead, I created my own strategy.

You can get my hybrid pricing strategy here.

Recommended:Why Manually Calculating Your Pricing On Airbnb Is a Mistake

Recommended: Best Airbnb Pricing: Get My Simple Yet Powerful Strategy

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Have you decided on your pricing strategy? Let’s hear about it in the comments.

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