dynamic pricing vacation rentals

What is Dynamic Pricing for Short Term Rentals? Tools & Benefits

Price is one of the big decision factors that guests consider when comparing short term rental accommodations. For that reason, it’s important to set a competitive price within your market.

If your rates are too high, you risk getting fewer bookings and you’ll give your guests high expectations as to what amenities and services they expect. Failure to meet these can mean bad experiences and, therefore, negative reviews.

On the other hand, pricing your rentals too low isn’t the right way to go either. Although you will get more bookings in the short term, you will minimize your profits in the long term.

The key is to find the sweet spot: prices that will grab your potential guests’ attention and will cover your costs and make a profit. However, it is not an easy task. There are many things to consider: seasons, nearby events, competitors, length of stay, etc. Implementing dynamic pricing for short term rentals will help you stay competitive 365 days a year, while still making money.

What is dynamic pricing for vacation rentals?

Dynamic pricing utilizes algorithms to calculate and adjust prices in real-time. With this pricing strategy, you can optimize your rates to boost bookings and increase your profit margins.

It’s a strategy that the accommodation industry has used for decades. It leverages technology and machine learning to adjust your nightly rates based on supply and demand. Think of it as your wizard that’s constantly working to increase your revenue.

So how do you set your nightly rate? First of all, there are several aspects that you must previously analyze to establish your base price. Among them are your operational expenses, your competitors’ rates, or the high season dates in your region. This initial analysis phase will be essential to determine your pricing calendar and, once completed, will allow you to apply the dynamic variations you deem appropriate.

Increase bookings

Similarly, your flexibility in adapting to the current situation will also be decisive. Occasionally, events beyond our control can contribute to demand soaring or dropping as we witnessed during the COVID pandemic in 2020 when demand for vacation rentals in certain areas soared as vacationers stayed away from hotels in search of venues that offered more space and privacy.

The ability to change the rates of your short-term rental and adapt to the current situation will allow you to get the most out of your vacation rental business.

What is the difference between dynamic pricing and revenue management?

Although dynamic pricing is one of the many strategies of revenue management, this doesn’t mean that you may easily use the two words interchangeably. Both concepts consider that your rates vary based on a variety of predetermined rules and rely heavily on data and technology in order to make the most accurate predictions as to what the right price should be.

However, these terms shouldn’t be confused with discount strategies because dynamic pricing and revenue management increase prices, particularly if there’s increased demand.

Benefits of dynamic pricing for vacation rentals

Increase your overall revenue

With dynamic pricing, you are able to adjust your nightly rate to optimize your overall revenue in the long run, for example, if your calendar shows many 3-day weekend bookings, you could drop prices on Wednesday to encourage longer stays.

By fine-tuning your rates in this way, you will see a change in revenue in the long run as all these small price tweaks add up to a significant amount, which will likely boost your profits over time too.

Save time

Working out which rates to charge when can be a major headache, so by letting short term rental pricing tools optimize your rates, you take the guesswork out of pricing.

If your prices are too high, you risk losing out on bookings and if you undercharge you’ll leave money on the table. Through dynamic pricing, this problem will be solved and you’ll save hours of work.

Maximize occupancy and length of stay 

Smart pricing allows you to better fill the gaps between reservations, as well as achieve longer stays by using dynamic minimum stay techniques. Dynamic pricing for short term rentals helps you secure as many bookings as possible at the best rates possible.

Overall, occupancy figures become more consistent and vacation rental owners and property managers have more stable revenue streams when they use dynamic pricing. 

Outperform your competitors 

If your competitors are trying to work out their own prices through guessing, inflation and their own competitor analysis and not using dynamic pricing, you have a distinct advantage.

You will have a better idea about every aspect of your business through critical data, which will give your listing the edge over your competition.

What are the best vacation rental pricing tools?

You don’t necessarily have to set up your pricing rules manually. There is a much easier way. With the help of dynamic pricing software for vacation rentals, you can automate everything. These tools allow vacation rental professionals to set rules to manage pricing and night stay restrictions and save them hours in the process.

The following are some of the most important vacation rental pricing tools to choose from:

Beyond Pricing

Beyond offers a dynamic, demand-driven pricing tool with extensive market data that pairs with OTA distribution such as Airbnb, Vrbo, and their own booking engine.

They already offer 340,000 listings in more than 7.500 cities worldwide.

Beyond has also partnered with Lodgify to offer short-term rental owners and managers using this vacation rental software to get, grow, and keep revenue.

Automated dynamic pricing

Their data-driven tool automatically adjusts prices to maximize revenue and occupancy. The tool can also help you forecast revenue and maximize your earnings through their local market experts.


Pricelabs is another easy-to-use pricing platform to help increase revenues and occupancy for vacation rental owners and property managers.

Using predictive analytics and machine learning, PriceLabs’ data-driven approach helps increase vacation rental revenue and saves owners time when managing their pricing.  the tool is available globally with no geographical constraints.

Customization options layer on top of market data to give you ultimate control over your pricing strategy.

Pricelabs also integrates with Lodgify.

Airbnb Smart Pricing

Airbnb also has its own dynamic pricing automation system. It’s an integrated tool within the Airbnb calendar and allows you to automatically adapt the price of your property based on the demand of listings that are similar to yours.

The platform takes into account more than 70 factors, such as the check-in date, market demand, seasonality, listing reviews or the services offered. Airbnb even values the number of daily visits to your listing and the time that users spend on your page. Airbnb also allows you to select a minimum and maximum price per night, so hosts always have control over their business.  You have the choice of whether you want to turn Airbnb Smart Pricing on or off.  And even if you have this option selected, you can still set fluctuation limits and customize specific nightly prices in your calendar at any time.

Vacation rental stays

Dynamic pricing software connects directly to your Airbnb management software. After synchronizing your accounts, the tools will review your prices and issue the necessary adjustment recommendations. Once you approve them (or modify them), they will be reflected in your calendar.

How do STR pricing tools calculate dynamic rates?

Short term rental dynamic pricing tools will use your average base rate as a starting point. If your average nightly rate in high season is $300 and $100 in low season, then your base price will be $200. Although each tool calculates prices differently, essentially they consider the following factors:

  • Seasonality: The tools adjust your base price according to the season of the year. To do this, they analyze historical trends of vacation rentals and hotels in your region.
  • Days of the week: They analyze the price of accommodation in your area based on the day of the week and apply the necessary increases or discounts.
  • Lead-time: This refers to the time between the moment users book your rental and their check-in date. Dynamic pricing tools use this data to offer discounts to last-minute reservations (to fill in the gaps in your calendar) or to bookings made in advance (to guarantee the maximum possible occupancy).
  • Vacation days and important events: These tools will determine the most in-demand dates after analyzing the occupation of your local competitors. You can also add a list of the main events in your area to reduce the margin of error.
  • “Orphan” days: There’s nothing worse than having gaps in the middle of your busy calendar. For this reason, these tools will generate automatic discounts to incentivize booking these “orphan days”.
  • Personalization: Ultimately, it’s the owners and managers who decide which strategy they want to pursue. Therefore, you can establish a minimum and maximum price range that the tools will respect no matter what.

Should you start using dynamic pricing tools?

Fixed prices are becoming a thing of the past in the vacation rental industry thanks to short term rental pricing tools that use advanced algorithms to create a fluid pricing system matching market demand in real-time. Should you use dynamic pricing in your vacation rental business? Well, it depends.

Adapting your rates to supply and demand or seasonality will allow you to be much more competitive and increase your profits. However, make sure you keep an eye on the prices and see if it adapts to your managing style.

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