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Airbnb unveiled a new tool intended to help property owners make more money (by making guests pay more, in some cases).

By Jonathan Vanian
November 12, 2015

Airbnb wants to make it easier for hosts to make as much money as possible.

The online home rental startup unveiled a new tool on Thursday that makes it easier for people to automatically set the highest possible price for their home listings without turning off potential customers.

The new tool, currently only available to a limited number of Airbnb users, is basically an upgrade to a pricing tool the company introduced in June. That tool suggested the price hosts should charge based on factors like daily demand, the location of their property, and season.

But hosts had to go into their listing to change the price, potentially on a daily basis. The updated version does the job automatically for the host, which Airbnb hopes will increase adoption.

That was “more work than our hosts wanted to take on,” said Airbnb product manager Carla Pellicano.

Hosts that use Smart Pricing, as the new tool is called, set a range of the lowest and highest prices they want to charge. They also must disclose if they rent frequently or infrequently, which impacts the price.

The technology would likely suggest higher prices, sometimes referred to as surge pricing, during peak periods like winter in Palm Springs, the upcoming Super Bowl near San Francisco, and ski season in the case of a mountain chalet. At the same time, it would recommend lower prices during slow periods outside the typical vacation season and when there are no big conventions in town.

The idea is to make the pricing system more personalized for Airbnb hosts, explained Pellicano. But hosts can decide against changing prices up and down if they prefer not to.

“There are some hosts who think, for me it is better to have a flat price, I don’t want to confuse guests,” said Pellicano.

Hotels typically use economists and data scientists to set the price on their rooms based on expected demand, explained Airbnb data scientist Bar Ifrach. But because Airbnb hosts don’t have those type of data crunching resources available to them, the company built a tool to help.

Airbnb, which takes a commission on each booking, stands to earn more money if hosts maximize their rent without causing high vacancies. The tool is designed to keep apartments and homes full by making pricing more flexible.

As of now, there are no plans to license the technology to other businesses, Pellicano said. However, Airbnb open-sourced the underlying technology that powers the data crunching system, so outside developers can download the software and build similar systems on top of it. Still, while the data analytic technology is powerful, it’s the data that makes things the system work.

“The most important component here is having Airbnb’s rich data into how our guests interact with their Airbnb listings and the overview of the markets, and that is something that is definitely internal,” said Ifrach.

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