Stop Guessing, Start Pacing: Smarter Airbnb Pricing Strategies

Jasper Ribbers | Freewyld

Welcome back to Get Paid for Your Pad. This is an episode of RevUp where I share behind-the-scenes insights from working with the top hosts around the world who generate at least one million dollars in bookings. My name is Jasper Ribbers, Head of Revenue Management and co-founder of Freewyld Foundry.

In today’s episode I want to answer some of the most common questions we receive about revenue management, in particular around the concept of pacing. If you’ve been following these episodes, you know that pacing is one of the most important concepts in revenue management, but also one of the trickiest to understand.

The three main questions I will cover are: why do short-term rental hosts drop prices last minute much more than hotels and airlines, what are the best KPIs to measure pacing, and when should you pace behind, in line with, or ahead of the market.

First, why do short-term rental hosts drop prices last minute when hotels and airlines often raise theirs? I am currently in Ibiza, Spain, recording this on August 27th at the end of the high season. July and August are extremely busy here with visitors coming for the nightlife as well as the beaches. Flights and ferries to the island are very expensive and last-minute hotels are also charging high rates.

The difference comes down to inventory and risk. Airlines don’t need to sell every seat. If they sell ninety out of one hundred, that is still a success. Hotels have brand recognition that allows them to maintain higher prices. Short-term rental hosts can only sell each night once, so an empty weekend represents a major loss. Most prefer to secure a booking, even at a lower price, rather than risk no booking at all. For managers handling portfolios with different owners, the pressure to keep every unit occupied is even stronger, which leads to last-minute price drops.

Next, what are the best KPIs to measure pacing? The most useful is the Market Penetration Index, or MPI. This compares your future occupancy to the market’s occupancy. For example, if your portfolio is 30 percent booked for the next 90 days and the market is at 50 percent, your MPI is 60, which means you are pacing behind. Tools like PriceLabs help calculate this, but be aware that they sometimes count unavailable days, which can distort results. Pickup is also important, meaning the number of bookings you receive in a given period. If you are catching up faster than the market, you know your pricing is working.

When should you pace behind, with, or ahead of the market? You might pace behind when you know demand will exceed supply, such as a major event in a small town. In that case, it can be smart to hold back, let other hosts fill first, and then capture higher last-minute bookings. In high season, pacing with the market is usually best because demand is strong but not infinite. If the market is 60 percent booked and you are only 30 percent, you will be forced to discount later. In low season it often makes sense to pace ahead, being more aggressive early to secure scarce bookings and maintain momentum on the OTAs.

Pacing is the heartbeat of revenue management. By monitoring MPI and pickup closely, you can see whether you are behind, with, or ahead of the market, and adjust your pricing decisions with confidence.

If your portfolio generates over one million dollars in revenue, you can apply for a free revenue review at freewyldfoundry.com/get-started. Our team will analyze your portfolio, compare it to compsets, and give you direct recommendations on how to improve performance.

Thank you for listening and I’ll be back next Monday with another episode of RevUp.