10 Steps to Set the Right Pricing Strategy for Airbnb in 2025 – Dynamic Pricing & Essential Tools

You may then ask yourself the following questions: “I don’t know where to start to set the rates for my Airbnb vacation rental. How do I set the rates for my vacation rental to ensure I have the best possible profitability? What are the criteria for setting the most profitable price possible? Which pricing strategies for my Airbnb should I choose?”

Your final goal will still be to invest and make your Airbnb as profitable as possible. But one thing remains rather difficult to establish: the price per night! Follow this 10-step guide to set the best possible vacation rental rate and discover what dynamic pricing is.

10 Steps to Define the Right
Pricing Strategies for Airbnb

Many beginner owners underestimate the operating costs and are overly optimistic about the potential profits. Understanding the economic efforts you have to make to run a business such as a vacation rental is the basis for good management of the prices that visitors will be willing to pay.

Analyzing and estimating the expenses of your business can, therefore, help you better understand how to manage your property and optimize costs and allow you to define the most profitable rates. So, instead of making an estimate based on your neighbor’s vacation rental, try these ten tips to estimate your rental rates accordingly.

1. Establish the identity of your property

Let’s begin with the easiest things:

Location and environment of your Airbnb

Firstly, you have to know the location of your accommodation. Properties located in tourist areas are more in demand, and prices are, therefore, more expensive.

Is your property located in a tourist spot or not? Or in a place with few visitors? Whatever the location, you will have to consider the dynamism of the location of your property in the price. You could also do research on the cities offering the highest average prices per night on Airbnb.

After answering the questions above, identify the surroundings of your property. So, if your property is in a dynamic environment close to bars, restaurants, and museums, or to the beach, the mountains, or a lake, think of it when setting your price. In addition, you will be able to highlight the ecosystem of your property in order to justify your price.

For example, an apartment in Sliema, Malta, can easily be rented for €397 per week since the property is located 5 minutes from the beach, while an apartment equivalent 8 km from the beach will rent for around €154 per week.

Nature of your seasonal rental

Of course, you have to take into account the nature of your property since this is part of your hosts’ search criteria. Whether they are looking for a chalet, a gîte, a villa, or a mobile home, your rent will vary greatly.

Property characteristics and their impact on rates

Factor	Key points	Impact on pricing
Property type	Is it a chalet, villa, gîte, mobile home, or apartment?	Larger and more exclusive properties (e.g., villas) can command higher prices, while mobile homes or basic apartments may need competitive rates.
Architectural style & design	Is the property modern, rustic, traditional, or uniquely designed?	Stylish and well-designed properties attract higher-paying guests, while basic accommodations may need lower pricing.
Size & layout	How many bedrooms, bathrooms, and common areas are available?	Larger properties with multiple rooms can accommodate more guests, justifying higher rates.
Outdoor spaces	Does it have a garden, terrace, balcony, or private outdoor area?	Properties with outdoor spaces can charge a premium, especially in desirable climates.
Exclusive amenities	Does the property offer high-end features like a jacuzzi, sauna, BBQ, or private pool?	Luxury amenities add significant value, allowing for premium pricing.
Technology & convenience	Smart home features, fast Wi-Fi, entertainment systems, and workspace availability.	Tech-equipped properties attract digital nomads and business travelers, increasing demand.
Unique selling points	Does the property have a panoramic view, private beach access, or historical significance?	Unique elements justify higher pricing and differentiate the listing from competitors.
Example scenario	A modern villa with a pool and beachfront access vs. a basic studio in a city center.	The villa can charge a premium for luxury and exclusivity, while the studio may rely on affordability and location.

In addition, the intrinsic characteristics of your property, including its architecture, decoration, surface area and outdoor spaces will have a considerable influence on the price. The amenities you offer in your holiday home can also justify your price based on the rarity and quantity of the amenities (jacuzzi, BBQ, electric fireplace, etc.).

Capacity

Take note of the number of bedrooms, toilets, bathrooms and kitchens in your holiday home. This way you can set prices based on your capacity. If your property can accommodate more than 7 people, you could set a relatively higher rate since it is very likely that it will be rented by a large family who will share the costs.

2. Identify your competitive advantage

After establishing the identity and characteristics of your property, let’s now look at the “extras” that will boost the rental value of your property. Identify these additional things that can be diverse and varied. These may include the following:

• Additional well-being: a sauna, a jacuzzi, a swimming pool, etc.
• Equipment available: washing machine/dishwasher, a barbecue, a fireplace, other electronic equipment, etc.
• Consumable goods: shampoo, shower gel, fruit available, breakfast, etc.
• Additional linen: sheets, pillowcase, duvet, towel, bathrobe, etc.
• Additional services: cleaning, internet, Netflix, etc.
• A welcome booklet: good deals, discounts, maps and city plans, activity ideas, good addresses, etc.
• A welcome gift: pack of local products, wellness pack, pack of spices and condiments, a bottle of wine, etc.
• Add some extras: whether you have a simple, minimalist bath or a luxurious one, your “extras” are essential in setting your price.

3. List all your expenses and annual costs

To find your floor price, that is, the price below which renting would not be profitable for you. To do this, you need to know the total amount of your annual costs.

Mortgages, utilities and taxes are easy to calculate, but don’t forget to add the services you offer: cleaning service, emergency repairs, major and intermittent maintenance costs and landscaping when compiling the costs.

Additionally, home furnishings can also be a significant part of the overhead costs: comfortable mattresses, linens, furniture, kitchenware and small appliances are the most basic requirements for any vacation home.

4. Calculate your price floor

Once you have the list of your annual costs and expenses, you will need to calculate your floor price: the minimum price you should charge to avoid being in a loss.

You simply need to add up all your annual expenses, whether it’s water, electricity, wifi connection, credit over the year, and many others. This allows you to know how much turnover you need to achieve over the year before you can self-finance. Once you have done this calculation, divide this amount by 365 (days of the year).

Example calculation of an Airbnb price floor

Expense category	Examples	Annual cost ($)
Fixed costs	Mortgage, property taxes, insurance	$12,000
Utilities	Water, electricity, heating, Wi-Fi	$2,400
Maintenance & repairs	Cleaning services, repairs, lawn care	$3,600
Furnishings & supplies	Bedding, toiletries, kitchen essentials	$1,200
Subscription services	Netflix, security system, property management software	$600
Marketing & listings	Airbnb fees, professional photos, ads	$1,500
Legal & administrative	Business permits, local taxes, accounting	$800
Other expenses	Emergency fund, seasonal upgrades	$900
Total annual cost	Sum of all expenses	$23,000
Daily price floor	$23,000 ÷ 365 days	$63/night

And there you have it, you have your floor price, so you know what your minimum rental price is to be able to be at least somewhat profitable. In this example, the minimum nightly rate to cover all expenses is $63. To make a profit, the host must set a price higher than this base rate while considering demand, competition, and seasonality. But that’s not all!

5. Scrutinize, analyze and compare your competitors’ rates

Once the characteristics of your property have been identified, you can scrutinize your competitors’ prices by looking for similar accommodations to yours in the same geographical area and with equivalent services.

Check rates on the Internet, competitors, newspapers and real estate listings to get a clear idea of ​​the rental market in your area. When looking at listings, don’t forget to note the amenities, location and other characteristics of each property.

• An extra bedroom or an ocean view can easily earn you several hundred dollars more per week.
• The more comparable properties you find, the better you will understand exactly where your vacation rental fits in the market.
• Compare their rates to yours, and if the vacation rentals have several positive reviews, their price probably works!

Filter all the common features well and you will be able to know the rates of your competitors and discover what justifies or not their prices. Do not hesitate to go to different ad sites like Airbnb, Booking.com, Vrbo, etc.

6. Make a reservation simulation of your competitors and refine your price

Once the competitors have been identified, make a reservation simulation. You will see their prices, calendars, and competitive advantages. Their rates could be justified by the dynamism of the environment of their rentals, their additional equipment, or their little “extras”.

In addition, be careful to check the reservation calendar of your competitors to analyze the prices over different periods and the frequency of their reservations, whether it is in high season, during the holidays, or even on weekends. If a competitor’s calendar is empty, it is probably not a good seasonal rental to compare your property with.

Finally, you will have to refine your prices to match those of nearby and similar properties in order to be as competitive as possible.

7. Have flexible prices: high season, promotions, weekday and weekend prices

It would be extremely wrong to set one price for the whole year, so you need to take this seriously if you are determined to make a profit and run a serious business.

Use rates according to seasonality

Renting a chalet in winter will not have the same price as in summer. The same goes for a seasonal rental at the beach, which will naturally rent more expensively. In addition, take into account the summer periods (Cannes, Christmas, July 14, …) which will also increase prices.

Never keep the same prices! Choose strategically and in a way to be as profitable as possible, especially in high season because the price can be 3 times higher than in low season.

Make offers and promotions

Offers and discounts have always been one of the best methods to encourage a person to take action and buy.

How many times have you found yourself in front of a product, undecided whether to buy it or not and when you were offered a discount or a coupon, you finally decided to buy it?

Anticipate promotional periods, summer periods and any other occasions that justify special offers on your vacation rental!

Use different prices on weekends and weekdays

One of the other pricing strategies that you can use on Airbnb is to set different prices for weekday and weekend nights.

We all know that the weekend is the best time to travel. After a hard week of work, who wouldn’t want to let off steam and enjoy a nice relaxing weekend by the sea, breathe the pure mountain air, or visit one of the most beautiful cities in the world?

You can consider increasing prices on Fridays, Saturdays and Sundays and keeping them slightly lower on the other days of the week in order to convince more guests to book your property.

8. Customer targeting: be responsive to their demand

By responding to their demand, you can innovate your hospitality service and thus justify your higher-than-average price.

Indeed, keep an eye on market trends, on niche customers, on the needs of your potential guests and always seek to innovate your hospitality service in order to always differentiate yourself from your competition and offer something better!

• This applies to your local competitors as well as to hotels. Offer what they cannot offer at an attractive price, for you as well as for your host!
• Once you know your floor price and the prices of your competitors, you will be able to set a first official rate.

When you establish your price, always think about making it as profitable as possible over the year and not per night. If you are new to the market, you can start by offering a cheaper rate than your competitors to attract more travelers. In order to make your pricing dynamic and boost your occupancy rate, you can use some smart tools.

9. Dynamic pricing tools to boost occupancy rate

Dynamic pricing in the vacation rental industry can be a game changer and improve the management of your property and bookings.

Software such as PriceLabs is a revenue management solution for vacation and short-term rentals. They help hosts set and adjust prices for their properties dynamically and intelligently. Using machine learning, these tools use a data-driven approach to analyze your website and other factors such as competition, location, or occupancy; to help you increase your revenue and save time when setting up your pricing.

This type of Airbnb pricing is one of the strategies that can help sell out available nights on the calendar, especially during the middle of the week, for example.

When you connect a dynamic pricing tool to your vacation rental software, you can set a simple rate for a night, a week, or a month, or offer dynamic rates based on length of stay, number of guests, day of the week, and other factors.

So, price your rental based on your searches, but don’t be afraid to change your rates to accommodate changing expenses or increased interest.

10. Set the rate and justify it with a memorable stay

And there you have it, the magic is done! It wasn’t as hard as we thought, after all.

All you have to do now is set your rates based on seasonality and summer periods and list them on your website. That way, your guests will already be informed of the prices and can easily book.

Make sure you have a certain reactivity regarding customer requests in order to adapt your offer to their expectations as quickly as possible. Finally, put yourself in the shoes of travelers, and ask yourself how to make their experience memorable, in order to obtain a maximum of positive opinions and thus stand out from competitors.

Dynamic Pricing as One of
the Airbnb Pricing Strategies

Price is one of the main decision factors that hosts consider when comparing accommodations. This is why it is important to set a competitive price on your market; dynamic pricing is one of the most effective strategies to achieve this!

What is dynamic pricing?

Dynamic pricing uses algorithms to calculate the price of your vacation rental and adjust them in real time. Thanks to this pricing strategy, you can optimize your rates to increase bookings and increase your profit margins.

This is one of the pricing strategies that the accommodation industry, namely Airbnb, has been using for a long period of time. It leverages technology to adjust your nightly rates based on supply and demand. Think of it as your assistant who is constantly working for you to increase your revenue at the right time with the right rates.

So, how do I set my vacation rental price? First, there are several aspects that you must first analyze to set your base price. Among them: your operational expenses, your competitors’ rates, or even the peak season dates in your area. It will be necessary to decide your pricing schedule, and once completed, it will allow you to apply the dynamic variations that you deem appropriate.

Differences between dynamic pricing and yield management

While dynamic pricing is one of the many revenue management strategies, this does not mean that you can easily use the two terms interchangeably.

Both concepts consider that your rates vary according to mixed predetermined rules and rely heavily on data and technology to make the most accurate predictions on the right price.

However, these terms should not be confused with discounting strategies, as both dynamic pricing and revenue management allow for price increases, especially in the event of an increase in demand.

How do they calculate dynamic rates?

These tools will use your average base rate as a starting point. If your average nightly rate is $300 in the peak season and $100 in the low season, your base rate will be $200. While each tool calculates prices differently, they mostly take into account the following factors:

• Seasonality. The tools adjust your base rate based on the season of the year. They do this by analyzing historical trends for vacation rentals and hotels in your area.
• Days of the week. They analyze the price of accommodations in your area based on the day of the week and apply any necessary increases or discounts.
• Lead time. This is the time between when users book your rental and their check-in date. Dynamic pricing tools use this data to offer discounts to last-minute bookings (to fill gaps in your calendar) or early bookings (to ensure maximum occupancy).
• Holidays and major events. These tools will determine the most popular dates after analyzing the occupancy of your local competitors. You can also add a list of major events in your area to reduce the margin of error.
• “Orphan” days. There’s nothing worse than having gaps in your busy calendar. That’s why these tools generate automatic discounts to incentivize bookings on these “orphan” days.
• Customization. Ultimately, it’s up to the owners and managers to decide what strategy they want to adopt. So you can set a minimum and maximum price range that the tools will respect no matter what.

Airbnb Pricing Tools for
Setting the Right Strategies

Pricing is a key element of success on Airbnb, playing a major role in attracting bookings and maximizing revenue. For short-term rental owners and managers, understanding and implementing effective pricing strategies is essential to standing out in a competitive Airbnb market. However, setting the perfect price for your property is no easy task. It involves navigating the challenges of competition, seasonal fluctuations, and guest expectations.

‘Smart pricing’ tool on Airbnb

Airbnb offers a dynamic pricing tool called “Smart Pricing.” When this feature is enabled, your nightly prices automatically adjust based on demand. This tool is especially useful if you want to optimize your pricing without having to monitor it constantly. However, you still have full control: you can set minimum and maximum price limits and customize specific prices for each night in your calendar at any time.

The platform takes into account more than 70 factors, such as the date of registration, market demand, seasonality, reviews of the listings or the services offered. Airbnb even evaluates the number of daily visits to your listing and the time users spend on your page. Airbnb also allows you to select a minimum and maximum price per night, so that hosts always have control over their business.

In addition to the tools offered by Airbnb, several third-party tools are available to help you optimize your pricing strategies. Some of the most popular include Transparent, Beyond Pricing, PriceLabs, and Wheelhouse.

Tips for setting up and using pricing tools

Remember, good pricing strategies are essential to attracting potential guests and maximizing your revenue. By using smart pricing tools and staying informed about market trends, you can effectively optimize your Airbnb property rates.

• Understand your costs. Before you set your prices, it’s important to understand your costs, including rent or mortgage, utilities, cleaning, and maintenance.
• Know your market. Research similar listings in your area to understand the going rate.
• Consider demand. Prices can vary based on the time of year, local events, and other factors.
• Set minimum and maximum prices. With Smart Pricing, you can set a minimum and maximum price to ensure you’re comfortable with the price range.
• Customize prices. You can customize specific rates for each night in your calendar at any time.
• Review regularly. Market conditions can change, so it’s a good idea to review your pricing strategy regularly.

Dynamic Pricing Strategies for Airbnb

Dynamic pricing refers to adjusting rental rates in real time based on various factors such as demand, seasonality, local events, and market conditions. This approach allows hosts to maximize their earnings by automatically increasing or decreasing prices to match fluctuations in supply and demand.

Adjusting rates based on demand and local events

A key strategy of dynamic pricing is to adjust your rates based on demand and local events. For example, you can increase your prices during high-demand periods, such as holidays, festivals, or other local events, and decrease them during low-demand periods. This strategy can help you maximize revenue during peak periods and ensure occupancy during off-peak periods.

Rates changes based on demand and local events

Factor	High-demand periods (peak season, events, holidays)	Low-demand periods (off-peak, low tourist season)
Pricing strategy	Increase rates to reflect higher demand.	Lower rates to attract more bookings.
Examples of events	Holidays (Christmas, New Year, Easter), music festivals, major sports events, conferences, local celebrations.	Rainy season, post-holiday months, weekdays in business districts.
Booking trends	Higher occupancy, more last-minute bookings.	Lower occupancy, longer booking lead times.
Competitor pricing	Competitors also raise prices; staying competitive is key.	Competitors may lower rates; strategic discounts can help stand out.
Minimum stay requirement	Increase minimum stay to optimize revenue per guest.	Reduce minimum stay to attract short-term visitors.
Discounts & offers	Fewer discounts needed; premium pricing applies.	Offer discounts like last-minute deals or extended stay promotions.
Cancellation policy	Stricter policies to prevent cancellations affecting revenue.	More flexible policies to encourage bookings.
Marketing strategy	Highlight exclusivity, special event proximity, and unique experiences.	Promote affordability, extended stays, and added-value perks (e.g., free parking or breakfast).
Revenue maximization	Maximize profit by leveraging demand spikes.	Maintain steady occupancy to avoid vacant nights.

‍Using dynamic pricing tools

Dynamic pricing tools like Beyond Pricing, PriceLabs, and Wheelhouse can help you find the best nightly rate for your vacation rentals at any given time. These tools analyze multiple data points to identify price points for your listings and automatically adjust your prices every 24 hours.

‍Success stories using dynamic pricing

Many hosts have found success using dynamic pricing strategies. For example, hosts using PriceLabs, a dynamic pricing tool for Airbnb, have been able to increase their revenue by up to 40%. Similarly, companies like Uber, Amazon, and Airbnb have leveraged dynamic pricing to build multi-billion-dollar businesses in record time.

‍In France, the 2024 Paris Olympics represented a remarkable opportunity for Airbnb hosts to capitalize on an increase in demand. By implementing dynamic pricing strategies, hosts maximized their revenue during this period of high demand.

‍Remember, dynamic pricing is a powerful strategy that, when implemented correctly, can significantly increase your rental income. By adjusting your prices based on market trends and local events, you can stay competitive while maximizing your profits on Airbnb.

‍Conclusions

Applying the proper pricing strategies is a key element to get maximum from your vacation rental. Location, seasonality, property features, and local events play a crucial role in determining prices. On such a platform as Airbnb, you have to use pricing strategies, too. For instance, use pricing tools, such as Smart Pricing, as well as third-party dynamic pricing tools, to change your rates in real time to meet market demand.

Stay flexible and experiment with different pricing strategies. Doing market analysis and understanding current trends are necessary to set competitive prices while maximizing your revenue. Managing prices based on seasonal variations and major events can also positively influence your pricing strategy.

Frequently Asked Questions About
Pricing Strategies for Airbnb

Updated on: 2025-03-07. Author: Karina

Tags: Airbnb Airbnb management