The Minimum Prices That Cost the Most Money Are the High Ones

One of the daily battles we have with our owners and property managers is setting the minimum nightly price.

The ones that have done the most damage are not the ones set too low. They are the ones set too high.

I know that sounds odd coming from us, since we spend the whole year asking everyone to hold their price and not get nervous the moment the calendar looks empty more than 10 days out (in high season). But these are two different things, and I think they are worth explaining separately.

Let me start with the distinction almost nobody makes.

There are two concepts of minimum price

The first is your minimum rate: the price below which selling a night takes away more than it brings in, once you count the cleaning, the commission, the wear and tear, and the time you put in. That number comes out of a calculator. The market does not decide it, you do, and it is usually quite a bit lower than people think.

The second is the minimum price you configure in the dynamic pricing tool.

They should be the same number. They almost never are.

Because... what do most people actually set? What they believe the property is worth: a minimum price they aspire to, which is a very different thing from what the minimum rate should be. And that figure often gets decided in a good month, with a full calendar and a good mood.

And it is a mistake.

An unsold night costs more than people think

Booking and Airbnb look at your listings every day. They count how many people see them, how many open them, and how many end up booking. That last proportion is conversion: of the people who come in to look at your listing, how many book. And that conversion figure decides where you show up tomorrow.

That is where a high minimum price does the damage. If you are expensive, you get fewer bookings. If you get fewer bookings, your conversion drops. And if your conversion drops, you show up lower, fewer people see you, and you get booked even less. A vicious circle.

That is why an unsold night does not end with that lost night. The part you can see is the empty night. The part you cannot see is the trail that badly set price leaves in your numbers week after week, because that trail decides where you will show up next month.

A note, for anyone who wants the platform detail: Booking says it openly in its help center, with conversion as the first of the five areas it recommends working on to improve your position. Airbnb never mentions conversion: it compares your total price with similar listings in your area for those dates, and it looks at what it calls popularity, which is bookings, wishlist saves, and messages to the host. So on Airbnb your conversion does not even have to drop. Being expensive next to your neighbors is enough. Different paths, same place.

The minimum price that is a wish

There is a line I have been repeating in meetings for years, and it never fails.

If you own a bar and price the beer at 30 euros, no dynamic pricing can save you. You can have the best system in the world behind it: the system can do nothing. Prices move with supply and demand, and if you have decided in advance where you will not go, you have also decided not to take part.

And how do you find out it is happening to you? You do not. No warning shows up, no alert goes off. You simply get seen by fewer people, then opened by fewer people, and next month the report says your property is underperforming.

Your minimum you can review and change as often as you like. The platforms’ measurement of your performance you cannot change, and it is not easy to see. That measurement changes every day, with whatever the two hundred listings around you do, and if your minimum price is still the one you typed months ago, and it is hurting you, you will find out late.

There is a second detail almost nobody checks. The Airbnb tool that shows you similar listings gives you the nightly rate, without the cleaning fee and without the service fee the guest pays. Search results, however, are ordered by total price. I covered it when writing about one-night stays. You can look comfortable in the comparison you watch, and be expensive in the one that decides.

The objections, which are reasonable

Every time this topic comes up, the same objections appear, and none of them is absurd:

• If I lower the minimum, I give the place away.
  I have heard it a thousand times and it is almost never true: the minimum is not the price you will sell at, it is the price below which you do not sell. Lowering it does not lower your prices, it gives the system more room to move.
• The owner will not accept it.
  This one is real, and it is not the manager’s fault. It is the hardest conversation we have, and the only way we know to win it is after the fact, when we show what the market average did and what their property did by staying out of the market. But by then the damage is done.
• I would rather have an empty month than sell cheap.
  Fine, if it is a decision. The problem is when it is not, and you discover in February that the decision was made by a wrong minimum price you set in October.
• Low prices bring worse guests.
  Sometimes. That is what booking conditions are for, not the price.

… and then there is the good objection, the one that does make me doubt: do not lower the minimum price, because that is not the problem.

Maybe your price is not the problem

An analysis of more than 10,000 listings in nine cities found something uncomfortable. Many of the worst sellers already had the right price. What separated the ones doing well from the rest was not the rate: it was the photos, the title and the description. Only one in eight had that work done properly!

So before touching anything, look at that. If a listing gets seen a lot and does not get booked, the price is one possible cause, not the cause. And it is very expensive to touch the price to fix something that was never about price.

What I would do with my listings

Look before you touch.

Airbnb gives you three very useful figures: how many people see you in the results, how many open the listing, and how many book. The differences between one and the next tell you a lot. Barely showing up? It is position. Showing up a lot, but few people open you? Look at the main photo and the price shown before opening. Opened a lot and not booked? Then the problem is inside the listing, and the price.

And only if after all that you still think it is the price, open your settings and check one thing: on how many dates over the next three months the price showing is exactly your minimum.

If it is four scattered dates, relax.

If it is thirty, your minimum price is no longer a limit. It is your pricing strategy, and you wrote it one bad afternoon eight months ago.

Doing that listing by listing takes time. With twenty, half your week is gone. We do it every day, with a person watching and not just a system, and if you want to see what comes up with yours, request a demo.

A minimum price set too high spares you one cheap night, but its impact on monthly revenue is far greater. To avoid a price 20€ below what we wished for, we lose hundreds or thousands of euros in the months ahead.