Setting Prices, Minimum Stay, Cleaning Fee
Gotta get that CASH MONAAYY!!
But don't get too greedy or no one will come to your birthday party. Also, don't short yourself, or it won't be sustainable.
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Setting Your Nightly Rate
- Check out Airbnb and Vrbo listings in your area to get a feel for the market, and take note of how booked up they are 1 month and 1 week in advance
- Consider local hotels (remember they already rolled in cleaning costs, don’t have a minimum stay, virtually guarantee a professional level of service, and don’t have minimum stay requirements)
- For the first five to ten bookings, set a lower price to quickly earn those five-star reviews
Ratings and reviews play a huge part in how in-demand your home will be. The faster you can get those first five or to ten glowing five-star reviews, the faster you can raise rates, increase the number of bookings, and therefore increase income. Until then however, I’d recommend setting your rates ~20-30% lower than similar listings in your area. If you set your initial price too low, you may miss the types of guests you’re targeting due to the price filter they search under.
Much to my surprise, I found that though other Airbnb’s in my part of town had 100’s of glowing reviews, it only took me getting 5-10 glowing reviews before I could charge rates competitive with those nearby.
Here are some important things to consider when setting rates:
Set your rates personally. I tried using the “auto rate set” feature in Airbnb, but found it was way off relative to my local market, typically setting my rates too high and resulting in a very low booking rate.
Set higher rates for weekends, around nearby events, and during peak season. This requires staying up on what events are happening nearby that are likely to drive increased traffic. For example, when it was college graduation season I could demand considerably more than in the dead of winter. As shown in How Much Will I Make?, the price swing across seasons can be tremendous. To keep tabs on things, I recommend not allowing booking more than three months out. In the case of hosting in Boston, December through March are essentially dead when it comes to tourists. So, I set rates these months almost embarrassingly low, and essentially just hosted to rack up the excellent reviews. Often times, I found that when these same guests returned during peak season, they were happy to look my place up again and pay peak-season rates.
Be dynamic with your pricing. If a room isn’t booked one week out, consider lowering the price. If it’s only three days away, drop the price to the lowest amount you’re willing to host for.
Target an occupancy rate of 75 – 85%. If rooms were 50% booked three weeks out, the booking rate would typically get to the desired 75-85% booking rate with little change to price. So, if you find you’re getting booked up fast a month or more out, you’re likely leaving money on the table and should consider increasing rates. Alternatively, if you’re not getting any booking a month out, consider a slight price decrease.
Should I Set Minimum Stay Requirements?
Like many things in life, it depends. Based on my experience, even when I did not have a minimum stay duration, almost all of my guests stayed for at least two nights. In addition, the odd night that was open frequently got filled by someone making last-minute plans. If, however, you live in a ski town where most people book both Friday and Saturday night, it may not be worth the risk that someone only books Friday night, therefore leaving Saturday more likely to be empty. Also, if you find greeting guests or cleaning to be particularly taxing, a two or three-night minimum may be worthwhile for you (though it’ll likely result in lower overall revenue).
My solution to this was to set the cleaning rate at a cost high enough that people were encouraged to look elsewhere for single-night bookings, but – if they were willing to pay for it then it was worth my time.
How Much Should I Charge for My Cleaning Fee?
If you are renting an individual room, a cleaning fee of $25 – $35 is reasonable. Because I opted to hire someone to “turn the rooms” (keep the overall house clean, change/wash bed sheets, clean the bathrooms), I simply charged as much for cleaning as the person charged me. Because this does factor into the overall cost that people pay, I spent nearly a month interviewing housekeepers and cleaning services until I found just the right one. The housekeeper was paid $25/room. Including laundry and general sweeping, each room took about 40 minutes to turn. On days she drove over for only one room, it wasn’t a terrible rate (including driving time), but on days all three rooms needed to be turned she made very good money. As discussed in Should I Hire a Cleaning Service, this person or company is the lynch-pin of your hosting operation.
If you are renting an entire home, the cleaning fee can vary from ~$100 – $200 or more.