If you’ve ever tried to book a flight during February’s school vacation weeks, or a hotel in Arizona in August, you’ve seen demand-based pricing in action. In some cities, even parking meters adjust their prices based on how many spots are left on a block.
Now a San Francisco startup, Beyond Pricing, is bringing demand-based pricing to people who rent out their homes — or just spare rooms — through Airbnb. The free service adjusts the price of a condo in the North End or a spare bedroom in Back Bay up or down, based on how much demand exists on each specific night of the year.
Already, some Airbnb hosts put a higher price on Friday and Saturday nights, or scan the calendar for major events coming to their cities and raise their nightly rates, says Andrew Kitchell, CEO and co-founder of Beyond Pricing. “Those are all fine strategies, and they almost certainly increase revenue, but they’re not as effective as data-driven pricing,” he says. So Kitchell’s company examines airfares (“they give us a general idea of the number of travelers coming to town”), hotel rates, and the prices of properties listed on Airbnb and HomeAway, another home rental site. Beyond Pricing also looks at factors like single nights available between bookings (“the value drops when you have an orphan night between two reservations”), and near-term vacancies versus vacancies several month away (“a vacancy tomorrow night is worth much less than a vacancy two months from now,” Kitchell says.) The service also factors in seasonal trends.
The idea behind the service, Kitchell explains, is that “we can make the individual as smart as a hotel, basically.” Kitchell is a former Airbnb host, and his company used to manage several dozen Airbnb properties in San Francisco before getting into the pricing business. The service automatically adjusts pricing on Airbnb, without requiring the homeowner to log in and do it. (Kitchell is on the right in the photo, with co-founder and director of sales Ian McHenry.)
Boston is Beyond’s first East Coast city; the startup says that about seven percent of Airbnb hosts in San Francisco are using the service since its launch late last year. September is a high demand month for Airbnbs in Boston, they tell me. Why? The start of the academic year, plus big events like the Boston Calling music festival. According to their analysis, the neighborhoods with the most Airbnb listings are Cambridge (around 540), Somerville (180), Back Bay (130), Jamaica Plain (130), and the South End (120).
Kitchell acknowledges that demand-based pricing can sometimes stir up controversy — as with Uber’s “surge pricing,” which raises prices when there are far more passengers who want rides than there are drivers. “I would be lying if I said I hadn’t [heard complaints about the concept],” he says. “But dynamic pricing does sometimes lower prices, and if you travel against the tide, at less popular times, it’s fantastic.”
He says that while the service is currently free, the company plans to start charging a monthly fee of about $20 at some point. In addition to San Francisco and Boston, the service is also active in Seattle, Austin, and Miami. Cities in the Boston area and elsewhere have been considering whether they should more rigorously enforce existing lodging regulations for local Airbnb hosts; Quincy recently fined a homeowner for running a “transient lodging facility.”