Are you worried about investing in an Airbnb property and leaving money on the table - Not maximizing your profits and barely covering your mortgage? Or are empty days in your calendar stressing you out?
We operate our portfolio of 14 Airbnb properties at 90% occupancy in high and low seasons - helping us generate 50% more cash flow than our competition.
In this episode you'll learn what Airbnb revenue management is and the three ways we can help you stress less and make more money!
Topics discussed in this episode:
- The art and science of revenue management
- How revenue management differs from co hosting
- Who benefits most from revenue management
- The 3 ways to get maximum cash flow from your Airbnb
Host Coach Airbnb Podcast Episode 109 Show Notes:
What is revenue management?
Airbnb revenue management is the art and science of extracting maximum cash flow from each listing. It's not just about setting up Price Labs and forgetting it. We hear that a lot. "You can't set it and forget it," but nobody ever finishes that paragraph.
Adjustments need to be made to base price for each listing due to seasonality, due to economic conditions, and you also need to make near term adjustments for vacancies. Pricing needs to be informed by search placement? Am I on page two or am I on page three?
So, after creating a system that keeps our Airbnb's generating 50% more revenue than our competition, and teaching hundreds of our coaching clients how to do it themselves, we had an "aha" moment and we were like, "We could help people who don't have the time or interest to deal with Airbnb revenue management on a daily basis."
How Airbnb Revenue Management is Different from Co-Hosting
Most people out there are familiar with the term co-hosting in relation to Airbnb. Let's explain how revenue management is different from co-hosting. Co-hosts take care of two primary buckets of tasks. The first is communication with guests and vendors, and the second is price adjustments. Revenue management focuses on extracting maximum cash flow from your listing through price and occupancy and listing optimization. Co-hosts typically charge 20% of gross proceeds, which usually is about 50% of the profit. In revenue management, it's a fixed monthly fee of about $300 per property. And here's the secret - smart property management companies and co-hosts are already outsourcing revenue management. So who needs a revenue management company and who would benefit from them the most?
Who Needs Revenue Management?
I see it as there are three main groups of people:
Group One: New hosts and investors. They're trying to figure everything out and do their very best and make sure that they're profitable, and then can be overwhelming and also intimidating to understand the complexity of pricing decisions. Some people love numbers, metrics measuring and constantly tracking and adjusting across different software to make sure they're getting the highest return on investment. That is 100% Culin.
Group Two: People more like me who love designing with guests in mind, adding thoughtful amenities and interacting with guests. Numbers just make me want to die inside. I can understand them. I can understand profits and losses and graphs and charts, but I would much rather have an expert deal with all that so I can focus on what I enjoy and what I do best as a host.
Group Three: Established investors who are looking to reduce their workload and free up some time. Got a client that has five listings and she does great at her pricing and even occupancy, but also works a full-time job and it's just become a little bit too much. Another client has just one property and with just one sort of forgets to go back in and make the changes. Time is your most valuable asset. If this is you - delegate revenue management so you can focus on other priorities like your family travel or scaling and upgrading your portfolio.
The “Double-Double Effect”
Have you heard about the double - double effect? Double occupancy equals double cash flow. You know the average occupancy for really any given market around the US is around 50%, and that's break even or just minimal cash flow. By increasing occupancy from 50% to 90% - that's where we'll really grow our profit. Our costs are fixed. So as we increase that occupancy, that's where we're really maximizing our profit.
There's three ways we achieve these double results for you. Number one is that we are high tech. We are hyper-focused on your success using third party dynamic pricing tools like Pricelabs and informing those price decisions by tracking your search placement and rank position to inform laser specific price changes to get you on page one of Airbnb search for your market.
If you don't know us, go back listen to other podcast episodes or watch other episodes on YouTube. This is Culin's happy place, the economics degree, the love of numbers, the love of just eking out the maximum revenue, which makes a huge difference for our family. This is what Culin does and loves to do. Listen to what he has to say.
High Touch = High Returns
Second thing, we're high touch. We understand that every property and market is unique, so we make expert hands-on modifications two times and three times a week to drive unparalleled profit for you. As we mentioned, we also price for search rank. You need to be on page one. If you're not on page one, no one sees your listing, no one clicks on it, and then no one books. So you have to lower your price. If we can price appropriately and you're number one, or at least on page one. Lots of people see you, lots of people heard you. Lots of people are booking. And it just feeds the algorithm so we can continue to crank your profits.
I like to think about it like no one would buy a one-size-fits-all bikini. And it's the same with revenue management. One-size-fits-all solutions are not a good idea and can lead to some really shocking results... and not in a good way. And we also do more than just price decreases to get you on page one or get you booked. We're focused on helping you as a host improve. We start with listing optimization, beginning with your photos, making sure your photos are high quality in the correct order. We look at policies like your cancellation policy, your minimum night stays. Seemlingly little things like you pet policy and making sure that your listing is fully dialed in to do the best job that it can for you.
Also, Airbnb is always making changes to things like instant booking and good track record. You could have had that set up one way and when they make a change to the platform, things just get turned on. With things like good track record, that seems like a no-brainer. Oh, of course I want guests with a good track record as my guests. If you leave that setting that Airbnb turn on for you on anyone who has never been on the platform or anyone who stayed multiple times and the host was just too lazy to leave them review will never see your listing, you're invisible! It's actually a terrible idea to have that turned on. If you're not an expert - if you're not dialed in on what these things do to affect your listing, you're in big trouble.
Another thing, smashing conversions is the photo tour that the Airbnb platform has imposed on your photos. But, we keep track of things like that. We'll get that photo tour turned off to get you back to a more photo journalistic walkthrough the property. Also, here's a big one: on October 27th, Airbnb made a change for any hosts using product management software, which includes hospitable so that the host is paying the full fee. Okay, and hospitable auto adjusted our prices up 18.34%, which was good to cover that fee. But it may be too high.
Number three, we're high profit benefit from our continuing monitoring of these policy changes and making adjustments, as we mentioned before, our clients typically double their occupancy and cashflow.
How Much does Airbnb Revenue Management Cost?
I'm sure you're wondering how much does this cost?
We charge $300 per month per property. That's it. So one empty night that we help you book will cover the cost of us taking over the reins - helping you stress less, AND make more money! It's quite possibly the best investment you will ever make, second to the Airbnb property that you purchased. Who doesn't want guaranteed results without the endless mental turmoil and back and forth of, do I have the right software? Did I plug it in and sync it with Airbnb correctly? Is my pricing right? What if I mess things up? What if somebody books New Year's Eve for $22. Legitimately, that has happened to some people before they started working with us. So consider if this is a benefit for you.
The Four-Step Revenue Management Method
This is the four step revenue management method that we use to maximize our client's cashflow:
Step One is the onboarding Airbnb listing optimization to review your policies and any changes that Airbnb has made recently that may be affecting your listing.
Step Two is design an amenity review. We'll go through your pictures, decide if something's truly amazing, that it should be slid up a little bit higher. There are certain amenities that you can put in for a low amount of money that are proven to boost bookings by guests. One of those is a hanging basket chair, and you can find them on Wayfair for $150. They legitimately create a 15% boost of people booking your property because they want that something different that they don't have in their own home. We want to make sure you know what you have and emphasize it and maybe add a few more things to stand out from the competition.
The next thing we do is we give you guidance to achieve guest favorite status. Most people are familiar with Superhosts. They're like, "oh, I want to be a Superhost on Airbnb." That is a super low bar. It really doesn't matter that much anymore. What you want to be focused on is attaining Guest Favorite status, and there's a few different things that you need to have in place - do and not do to make sure you get it. Once you get it, it plays heavily into the Airbnb algorithm. You're going to be shown higher up, you're going to be shown further away from where people are searching because you're a Guest Favorite, because Airbnb knows guests love your place. You book and you make money, which therefore means they make money.
As a bonus, you alsp get access to us as your coaches for design, for hosting skills, for crazy guest situations, all that good stuff. So in addition to just pricing management, you're getting host coaching. Great example of this was two evenings ago, one of our clients was asking us about Hostbuddy. They're like, "oh, we saw your episode about Hostbuddy. We really want to do it, but we're afraid we're gonna mess it all up." And Culi said, s"you're a revenue management client, of course, will help you set it up. It's easy and it's going to make a huge difference in how you perform as a host."
So there you have it. You now know what Airbnb revenue management is, how it differs from co-hosting, and how it can save a ton of stress while making sure you don't leave money on the table with unbooked nights and too low prices.
Guess what? We're on YouTube so you can stream this and other episodes on the hostcoach YouTube channel. And if you love us, give us a follow on the channel. It's brand new and we could use your help.
So if you're curious about Airbnb revenue management and how it could work for you, pop over to airbnb revenuemanagement.com and book a free 30 minute discovery call with us. Remember our joy is in your success.
