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April 19, 2024
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Dynamic pricing for short term rentals

The short-term rental market is dynamic by nature. With fluctuating seasonal demands, location, and other factors continuously influencing the market, dynamic pricing is handy. Dynamic pricing takes the guesswork out of setting optimal nightly rates for your vacation rental properties.

As a busy host, high-quality dynamic pricing can be a game-changer for your business. If your rates are too high, you’ll get fewer bookings. If your rates are too low, you might be leaving money on the table.  But with a dynamic pricing tool, your rates will stay optimized and ensure you don’t miss out. We cover dynamic pricing, discuss platforms that offer this tool, and detail the benefits and how they maximize your short-term rental revenue.

How does dynamic pricing work for short-term rentals?

Dynamic pricing is calculating and adjusting the optional nightly rates of short-term rental properties. This strategy enables hosts to optimize their rates and boost their rankings. The result is higher booking rates and increased profits over time.

Dynamic pricing tools use an algorithm to identify pricing adjustment needs. This is based on several key factors. Below are some of the significant factors which these tools use to optimize pricing:

  • Seasonality.
  • Special events and local activities.
  • Availability and vacant dates.
  • Listing performance.
  • Competitor prices and occupancy rates.
  • Listing reviews.
  • Home amenities.

These algorithms leverage machine learning and data analytics to adjust your nightly rates. Using this advanced technology, dynamic pricing adapts to supply and demand. For example, popular events nearby mean higher demand which the tool will capitalize on by increasing nightly prices. Conversely, it’ll lower the prices during off-peak seasons.

A significant benefit for hosts is that dynamic pricing allows them to automate their pricing strategy. Using dynamic pricing, you’ll save time and effort. There’s no need to keep manually adjusting your nightly rates in response to changing marketing conditions. A high-quality dynamic pricing tool does the hard work for you and keeps your vacation rental prices  optimized.

Benefits of dynamic pricing for vacation rentals

We’ve already outlined some of the benefits you can expect from a dynamic pricing tool. But let’s dig deeper and find out just how much dynamic pricing can help your business.

Increase revenue

First and foremost, dynamic pricing can help you increase your revenue. A dynamic pricing tool automatically adjusts your nightly rate, optimizing your revenue in the long run.

One way is by noticing when other short-term rentals in the area are increasing their prices. This could be due to an upcoming event in the neighborhood, for example. When this happens, dynamic pricing will fine-tune your rates according to the current trend. This helps keep your property competitive, booked and earning income, even when local prices fluctuate.

Save time

Calculating your rates can take a lot of time and energy. Doing it well requires continuous research, analysis, and strategizing.

But a dynamic pricing tool eliminates the guesswork and takes care of all these aspects for you. Furthermore, a dynamic pricing tool can more quickly and accurately analyze more factors than any person can. Also, dynamic pricing software can instantly sync prices across all your connected channels.

Get ahead of the competition

Using dynamic pricing over those who aren’t will give you the edge. As we’ve outlined, dynamic pricing software intelligently works out the best prices, partially through competitor analysis.

You’ll more quickly and accurately optimize your nightly rates. Without dynamic pricing, the time it takes and the number of factors needed to properly optimize rates is much more difficult. Compared to your competitors not using dynamic pricing, you’ll be ahead of the curve.

Maximize occupancy rates

Dynamic pricing helps increase your bookings at the best possible rates. It does this with minimum stay techniques that help you fill in reservation gaps and achieve lengthier stays.

With dynamic pricing, your occupancy rates will be more consistent. In the long run, this results in a more stable revenue stream.

Does dynamic pricing work on Airbnb?

Airbnb is one of the world’s most popular vacation rental hosting platforms. As a leader in the market, Airbnb has its own dynamic pricing automation system. It’s called Smart Pricing.

Airbnb’s Smart Pricing tool is an optional dynamic pricing tool for hosts on Airbnb. When switched on, Airbnb will automatically adjust your nightly rates based on demand. It encompasses several factors which we listed in the previous section. This includes comparing similar properties in size and location.

However, Airbnb’s Smart Pricing is lacking when compared to some other dynamic pricing systems. For example, it doesn’t account for vacation rental property quality. This can result in nightly rate mismatches between your property and others.

By comparison, Keybee’s dynamic pricing tool uses several factors Airbnb’s Smart Pricing doesn’t. This includes vacation rental amenities and overall quality. More factors mean more accurate and optimized nightly pricing adjustments.

How to implement dynamic pricing into your short-term rental business

There are several main methods for implementing a dynamic pricing strategy into your business. The one that’s right for you will depend on your circumstances. Therefore, it’s important to carefully consider each of these options and your current business before choosing.

1. Use built-in rental pricing tools

As we mentioned, platforms such as Airbnb often have dynamic pricing tools built in. These tools use AI to automatically adjust your nightly rates. Using key factors, they can do a fantastic job at optimizing your rates and increasing your revenue.

However, built-in pricing tools have only basic functionality. Hosts looking to optimize their prices are recommended to use a third-party pricing tool with advanced functionality for better performance.

2. Hire a property manager

A property manager can take care of optimizing your nightly rates on your behalf. They may have an internal solution or use a dynamic pricing tool. Knowing that a person is dealing with a dynamic pricing strategy can provide extra confidence.


Fixed prices for vacation rentals are a thing of the past. Automated pricing tools leveraging advanced algorithms and machine learning are creating an increasingly fluid pricing system.

As we’ve outlined, dynamic pricing can be incredibly beneficial to your short-term rental business. With the right strategy, you’ll stay on top of the market and maximize your revenue over time. And an intelligent dynamic pricing tool is one of the best strategies available.

Keybee’s proprietary pricing algorithm dynamically calculates and sets the optimal prices for your vacation rental properties. It adjusts the price of your listings daily based on many key factors. These include location, amenities, quality, seasonality, local competition, and much more. Our advanced dynamic pricing tool ensures your property is always booked at the best prices.

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