Although Airbnb has gone from a startup to a household name in only a few short years, the dynamics of the supply and demand for its units are constantly changing.
In our podcast below, our special guest Ian McHenry of Beyond Pricing explains how supply and demand works on Airbnb pricing and the three BIGGEST determinants of demand in your market.
Below is a quick summary of some key takeaways from our talk with Ian.
What is Dynamic Airbnb Pricing?
Dynamic Airbnb pricing is simply changing the price of your Airbnb unit as the supply AND demand for Airbnb units in your market changes. And boy do they change.
Demand changes for various reasons–seasonality, special events going on, etc…
Supply is changing mostly from having more Airbnb units being added to the markets, meaning greater competition and less pricing power over time. Within one year, San Francisco has nearly DOUBLED the amount of Airbnb units available to guests…that’s double the supply!
Seriously…If you do not have dynamic pricing, you’re leaving money on the table.
The Big Three Determinants of Local Demand
Demand by guests for Airbnb units in any particular city is sensitive to three major factors:
Seasonality
The demand for Airbnb units is not constant throughout the year and in almost all markets, there will be a high and low season.
In the example below with San Francisco Airbnb occupancy rates in 2014, you’ll see that demand is generally much higher in the summer months from July to September compared to the winter months from December to February.
The specific highs and lows for each market will be different. Touristy locations will have a greater disparity between the high and low tourism seasons where as more business districts will see flatter demand throughout the year. 
And even within the same city, different neighborhoods could have very different seasonalities (e.g. beaches will have higher demand during summers than downtown areas). Having an accurate assessment of the right seasonality of your peers in your area is a starting point for determining the right baseline prices throughout the year.
Day of the Week
Is your area attracting more business travelers or leisure travelers?
If it’s mostly business travelers, you may actually see higher demand for spaces during the week days instead of the weekends. But this demand is hyper-local, meaning it is very dependent on the specific reasons of why someone would want to stay in your neighborhood rather than the greater city. Just like seasonality, this will vary from city to city and even within cities.
Learn more about finding the target rental audience for your unit
Special Events
But also, you’ll notice that there are sharp jumps in demand throughout there year–these are typically special events like big conventions happening in town that push demand up for a short period of time.
However, these events will only affect the units within a certain radius since attendees will generally want to be as close to the events as possible. 
Notice above what the special events in San Francisco did to demand. Some of these events drew over 100,000 visitors. With only about 30,000 hotel units in the city, you can imagine what that did to demand for Airbnb units.
During some events, hosts were able to charge 2-3x their regular rates! But just knowing when an event will be in your area is not enough for you to determine HOW MUCH you should adjust your Airbnb pricing. Keep reading to see how to find that out.
Static (Flat) Pricing Leaves Money On the Table
Many Airbnb hosts, particularly new and less experienced ones, will set a baseline price for their unit and then just forget about it. This is a perfect way to miss out on bookings and leave profits on the table.
Let’s look the example below with three different hosts, each holding a flat pricing throughout the year.
Host #1 will have full occupancy throughout the year and will probably be booked out months in advance all year. An inexperienced host might think they’re doing great but in reality, they’re leaving a lot of money on the table because they could have charge much higher rates in the summer.
Host #3 will have a great summer, charging a premium rate and be fully booked during those high season months. However, he will be empty during the rest of the year because they’re over pricing the unit during those times, thus leading to very low occupancies during those off season times.
Host #2 will have moderate occupancy throughout the year, but again will be missing out on bookings during the down season but also leave money on the table during high season.
NONE of these hosts are going to get the most out of their Airbnb units. In order to do that, you’ll need to adapt your pricing dynamically throughout the year AND account for hyper-local impacts like specific day of the week and special events.
So…How Much Could You Gain By Using Dynamic Pricing?
The short answer is A LOT.
According to data from Beyond Pricing, someone with a FLAT pricing plan can stand to gain as much as 43% on revenues. Even very experienced hosts who keep diligent market data and track competitive pricing regularly can expect to gain at least 10% to their revenues.
It’s not easy to price your Airbnb unit on your own and it takes up quite a bit of time and effort that you might not have.
Having a partner like Beyond Pricing that can automatically track all the relevant data for you and adjust your pricing optimally to get you more profits is worth considering if you want more bookings during low season and higher booking rates during high season.
To learn more about these topics and what Beyond Pricing can do for your Airbnb unit, watch our talk:
✔ How to avoid the BIG mistakes that most hosts make
✔ The secret weapon of all Top 1% Hosts
✔ The pricing strategy used by professionals
✔ How to consistently get gleaming 5-Star reviews
✔ How to free up your time without becoming a "robotic host"
This free training is brought to you by James Svetec an Airbnb Expert who has managed over $1M in bookings & Symon He, the founder of LearnBNB, the #1 Airbnb hosting education blog.
Learn about all of the secrets that professional hosts don't want you to know
Great article. Finding the right pricing for your Airbnb is really difficult and, looking forward, can set the stage for your hosting career. If you stick to dynamic pricing, you can move with market trends and set yourself up to consistently succeed with your short-term rental business. Thanks for showing us how 🙂
Great post – we’re big fans of Ian McHenry and Beyond Pricing as well.
We found Beyond Pricing a very helpful tool for our Airbnb listing – nice to learn about the scope of the program
Sorry! It may sound great but it is stupid. I’ve been in sales for 30+ years and nothing irritates a customer, and puts off a sale, more than changed prices!
I have been looking for a room for 2 days, just reviewing all my options. Et voila! Bnb algorithims tell the host that there’s a lot of demand. But not. I have been given a wuote of almost double what was shown on the bnb website. I, of course, will not take that room nor will I take any other with a nge. i’ll go to a hotel.
I’d be very surprised if the changes are based on views that much, if at all. It has to do with the availability of bookable nights from comparable listings that are still available for those dates versus the velocity of bookings coming from the demand side.
The changes are absolutely based on views. My girlfriend and I have tested this repeatedly across different hosts and listings. I will view a listing and see it for a certain price, then my girlfriend will view the same listing for the same dates and the price goes up… sometimes substantially. This happens within a matter of minutes. The price never goes down. We will no longer book anything through AirBnB. Many of our friends have expressed the same feelings. The time is ripe for a competitive site to AirBnB that is based on flat rate pricing, and allows the host to lower or raise the flat rates MANUALLY if they choose to do so. But raising the price over short periods of time based on an algorithm just suggests that hosts are gouging potential guests to get the most they can. It might be profitable in the short term, but ultimately hosts will lose more money and bookings in the long term.
You annoying creeps. I want it to stop. I find a place. Price is good. I share it with my wife. She looks at it and the price is higher, triggered by a second person looking at it. This must stop.
Does dynamic pricing increase from clicks on the listing ?
I am searching with my wife and when she finds a place and I check it, the price goes up …
There are many factors but it’s all around the current supply and demand for those spaces–if more and more of the available dates for those listings are being booked around the dates you’re looking for and more and more people also start looking for those listings for the same dates, then prices will definitely go up quickly. This is what happens when 2-3 months out from a major convention.
Yes, I’ve seen it happen over and over again. This is guaranteed to put renters off booking with Airbnb. I think setting your algorithms to react to clicks, in my case discussing it with family members is totally unacceptable. This is not smart pricing: it completely undermines trust.
Why do downtown apartments in New York cost much more than apartments in the middle of farm town in middle America? It’s supply & demand. The entire rental market, no matter where you’re at, is demand based. Only difference for Airbnb is that the changes are over much shorter cycles. Hotel pricing, airline pricing, cruise line pricing, etc…are all demand-based as well. It’s smart business because it’s what works.
I agree with above comments. Very sneaky Airbnb
i agree with E. Paul- I looked at property last night- shared link with our extended family- they looked at it and price went up significantly today- that is unconscionable!
Agree that this is a very bad way to do business. We had a host ask for an extra 25% after we booked and paid and received confirmation for the booking. Another host changed the price by increasing by 25% after we asked him to please confirm that the listed price was correct. We no longer trust airbnb because of smart pricing.
Ah, so this is why these annoying pricing changes happen. When I am looking at possibly stays at an airbnb property, and look at it on my mobile, then my laptop, then send to my husband, the price skyrockets (30% or more). It always felt like something shady was going on. I will stop wasting my time on airbnb.
I completely agree with the others complaining about it, the dynamic pricing just changes with the amount of clicks on it, if you see a place you might be interested in, and refresh the screen it goes up from £33/night to £47, if you then share it with a friend and they also click on it, it is almost £60. That has nothing to do with markets, supply and demand or whatever, this all happened within minutes, in a non-touristic village with nothing special to do and many other options available as a direct consequence of me and my friend clicking on it. I think it is ridiculous and really annoying, for me this would be a good reason not to book at airbnb anymore, or at least refuse to book at those people who use dynamic pricing, it makes the airbnb host come across as unfair and not trustworthy.
Went to look at a place to rent in a city in Edmonton, Canada. Started of at $500-something a month, and by the time I messaged the owner to confirm something, and shared a link to the place with my mother, it had gone up to $805 a month. This is shady as fuck and needs to stop.
I used to love Airbnb . I could. Find a place within my budget in a local neighbourhood and really get to know the place. It was non corporate , friendly and personal. The perfect antidote to faceless hotels and package tours.
As time went on I noticed that some owners were actually businesses and the properties were not only higher priced but lacked character……
Now with dynamic pricing I feel that Airbnb has lost my trust and sadly my custom.
Yes I agree, this is shady and definitely changed my min don booking a place. The price went up after i clicked to book!!! SO messed up.
This is so sad to see guests unhappy. I have a static price and am very happy with it. Come and stay with me! No matter how many clicks, my price is the same. This is not a function a host has to use though, its a choice. I have read so many negative comments from potential guests, that this functionality will not be the right choice for me and my STR on Airbnb.
This is infuriating! I own 2 airbnb rentals and had no idea they were doing this until I wanted to book a place myself in Vancouver, BC. I looked at a bunch of great rentals, great prices, and then when I went back in to look later, all prices had doubled. WTF? This shouldn’t even be legal. I hate to say it, the airlines do the same thing. It’s sneaky and I don’t like it. The only way around it with airbnb, is that you can take it off automatic pricing and set your own prices, but they try every step of the way to talk you out of it and say your listing won’t come up as often. This business has gotten too big for its britches. They’re making millions, taking away housing for folks who need it in many cities across the world.