8 Common Vacation Rental Pricing Mistakes (And How to Avoid Them)
Pricing your vacation rental can feel like a challenge. Setting your nightly rate too high may cause guests to choose another property. Set it too low, and you could miss out on valuable profit. By avoiding common pricing pitfalls, you can boost your revenue, regardless of whether your property is listed on Airbnb, Booking.com, or any other channel.
Below are eight common mistakes vacation rental hosts make, with practical examples. Utilizing dynamic pricing tools, such as Smoobu Dynamic Pricing, enables you to avoid these issues and optimize your earnings.
Most common pricing mistakes
Setting the right price for your vacation rental is key to maximizing both bookings and revenue. Many hosts fall into familiar pricing traps that can reduce their occupancy and income. Here are eight of the most frequent pricing mistakes—and how you can avoid them.
1. Using a Fixed Nightly Rate All Year
2. Not Comparing Rates with Similar Local Listings
3. Underestimating Expenses and Hidden Costs
4. Not Adjusting Rates for Last-Minute Bookings
5. Ignoring Long-Term Market Trends
6. Basing Prices on Emotion Instead of Data
7. Not Differentiating Between High and Low Season
8. Overlooking Local Events and Festivals
Understanding these pitfalls helps you develop a more effective pricing strategy to keep your property competitive throughout the year. Now, let’s explore each point in detail, including real-world examples.
1. Using a fixed nightly rate all year reduces your earnings
Many hosts use a fixed nightly rate throughout the year. This ignores seasonal changes in demand, such as increased interest during holidays or local events, and slower periods in the off-season. With a static rate, you risk undercharging when demand is high and losing bookings when demand falls. Dynamic pricing enables you to adjust your nightly rates and optimize your income.
Example:
A coastal vacation rental is listed at a constant €150 per night year-round. While this may seem attractive during the off-season, nearby beachfront properties regularly charge €250 or more per night during summer. The host misses out on increased income during peak travel periods by not adjusting their rate.
Solution:
Regularly update your nightly rates based on seasonality, local demand, and area events. This flexible approach helps maximize income during busy times and maintain bookings during quieter periods. Whether you adjust prices manually or with pricing tools, staying proactive with your rates is essential.
2. Not comparing your rates with local competitors
Some hosts set their rates without checking similar properties in their area. Guests compare multiple listings on channels like Airbnb or Booking.com, so it’s essential to align your rates with those of local competitors. If your price is too high or too low compared to similar properties, you could lose bookings or undervalue your vacation rental.
Example:
A city center property is listed at €200 per night, while similar nearby properties offer rates closer to €160 per night. Guests often choose the lower-priced alternatives, resulting in fewer bookings for the higher-priced property.
Solution:
Regularly compare your rates with similar local properties and adjust as needed. This helps ensure your property remains attractive and competitive. You can complete this task manually or utilize pricing tools to simplify the process.
3. Underestimating expenses and hidden fees lowers profit
Hosts sometimes underestimate expenses, such as cleaning fees, channel commissions, maintenance, and local taxes. Failing to consider all costs can reduce your profit. Setting prices that look good on paper but don’t cover expenses puts your earnings at risk.
Example:
A mountain property is listed at €180 per night. After deducting cleaning fees (€40), channel commissions, local taxes, and maintenance costs, the actual profit may be only €80 per night. Over time, this impacts your overall earnings.
Solution:
Calculate all costs, including cleaning fees, channel commissions, maintenance, and taxes, before setting your nightly rate. Review these regularly to ensure your pricing remains up-to-date and maintains a healthy profit margin.
Learn about Airbnb's commission and service fees.
4. Not adjusting prices for last-minute bookings means missed revenue
Many hosts keep their rates unchanged as the booking date approaches, missing the chance to fill empty nights. Offering discounted rates for last-minute bookings can help you attract spontaneous guests and boost occupancy.
Example:
A luxury property is listed at €220 per night but remains empty three days before the weekend. Without a last-minute discount, potential guests often choose other properties that offer lower prices for short-notice stays.
Solution:
Offer discounted rates for last-minute bookings to attract guests and fill vacancies. Adjust your prices as the date approaches to increase occupancy and avoid missed revenue.
Discover how you can deal with last-minute bookings and cancellations.
5. Ignoring long-term market trends reduces competitiveness
Failing to adjust your rates in response to market changes can result in lost bookings to more competitive providers. Market trends shift due to events, economic changes, or the introduction of new properties into the market.
Example:
A ski property keeps the same high nightly rate each winter, even as more competitors list at lower prices. Guests book the more competitively priced options, leading to fewer bookings for the static-rate property.
Solution:
Monitor and adjust your rates to reflect changes in demand, new competitors, or shifts in the local market. Regular updates keep your property attractive and maximize revenue.
6. Basing your prices on emotion instead of data
Setting prices based on personal feelings or perceived value, instead of objective data, often results in fewer bookings. High rates due to emotional attachment can put off guests, while undervaluing your property can limit earnings.
Example:
A restored farmhouse is priced at €300 per night based on the owner’s sentiment. Similar local properties rent for around €220, so guests opt for the more reasonably priced alternatives.
Solution:
Use objective market data and competitor analysis to set your rates. Data-driven pricing enables you to stay competitive, increase occupancy, and balance income with bookings.
Smoobu can help provide you with more analytical insights.
7. Not differentiating between high and low season in your pricing
Failing to adjust your rates for high and low seasons can negatively impact your earnings. Overpricing during quiet months leads to vacancies, while underpricing during peak periods results in missed potential income.
Example:
A vacation property near a ski area charges €200 per night year-round. During peak winter, similar properties charge €350 or more, while off-season rates can be as low as €120. The host loses income in winter and bookings in the off-season by not adapting their rates.
Solution:
Adjust your rates to match seasonal demand. Set higher rates for peak periods and lower rates during quieter times. This helps keep your bookings steady and your revenue strong throughout the year.
8. Overlooking local events and festivals when setting prices
Forgetting to adjust prices during local events or festivals can mean missing out on high-demand bookings. These events can attract more guests to your area and increase the property's value on specific dates.
Example:
An apartment in a city famous for its annual festival keeps a standard rate of €150 per night, while other hosts double their rates. The property books quickly, but at a much lower price than what guests would have paid during the event.
Solution:
Keep an eye on local events and adjust your rates accordingly. Being proactive with event-based pricing enables you to capture additional revenue during busy periods.
We can help you adapt to the seasons.
But what is dynamic pricing?
Dynamic pricing utilizes real-time data and, in some cases, AI-powered algorithms to automatically set your property’s nightly rates. The tool analyzes a range of data points, including market demand, competitor prices, booking trends, local events, and seasonal factors.
By continually monitoring these variables, dynamic pricing ensures your property is always competitively priced and optimized for both bookings and revenue. To learn more about how dynamic pricing and market analysis can benefit your vacation rental, visit our dynamic pricing guide.
The simplest solution for vacation rental pricing optimization
Smoobu Dynamic Pricing works seamlessly with Airbnb, Booking.com, and other leading channels. It continuously monitors market trends, competitor pricing, local events, and seasonal demand to adjust your rates automatically. This ensures you maximize your occupancy and profits, without extra effort. Even better, Smoobu also partners with some of the industry leaders to provide you with more variety.
Take control of your vacation rental pricing. Let Smoobu Dynamic Pricing keep your property optimally priced so that you can boost your earnings with confidence. All Smoobu users (except for trialists) can test it out for free for 30 days.
Leave a comment