I talk a lot about dynamic pricing on this channel. It seems like every other episode, and I do that because it’s really, really important. So I hope you guys have been finding value in those episodes. Unfortunately, these dynamic pricing tools are not perfect, and our teams discovered five holes that they unfortunately are not going to be able to fix.

We’ve discovered this because we have access to lots and lots of data now that we’re managing properties in over 20 cities and a lot of different countries around the world. So I wanna share those with you today as well as a few tips to make sure that you’re always staying ahead. Welcome to Short-Term Rental Riches.

We’ll discuss investing in real estate, but with a specific focus on short-term rentals, quick actionable items to acquire, manage, and scale your portfolio. I’m your host, Tim Hubbard,

the first major hole with any automated pricing tool. I don’t care which one it is. They all function the same way. Is that their data is scraped. What do I mean by that? It’s actually not real reservation data. What they do is they have these tools that go online. They scrape all these different listings, so all these different Airbnb listings, and they pull up the calendar and they pull up the price, and if that calendar’s blocked.

They assume that there was a reservation for that date at that price, but we know the calendars get blocked for a whole bunch of different reasons, right? You could have maintenance going on at your property. You could be staying there on vacation. You could be considering selling your property. Maybe you blocked it for a month or two months, and you have people coming in and out of it.

Well, if all of those blocks on the calendar are getting counted as booked days, then that really throws off the revenue estimate for that property and for the pricing suggestions that these automated pricing tools are giving you for your property. I interviewed one of the founders of Price Labs recently, and they said it themselves.

They don’t have access to all the data that they need. Otherwise they’d really be able to figure out the algorithms for these individual listing sites like Airbnb or VRBO or booking.com. And we know who that. They don’t want us to know how their algorithms work. Otherwise, we would all game it right. We would all do whatever we can to stay at the top of the list.

Unfortunately, knowing that these automated pricing tools are never gonna have access to all the data that we need, which means that this is always going to be a weak spot with any dynamic pricing tool. The second reason why your automated pricing strategy is failing you is because it’s a one size fits all approach.

What do I mean by that? Well, let’s say you’re on your pricing tool and you plug in a hundred dollars a night. You want that a hundred dollars a night to go to all your different listing sites. So on Airbnb, it shows up as a hundred dollars on booking.com, it shows up as a a hundred dollars. On BRBO, it shows up as a hundred dollars and that’s how it works.

But we know that your performance on these different channels can vary greatly. So maybe you’re doing a really good job at Airbnb. Maybe you don’t have as many reviews on VRBO. You should be able to charge more on Airbnb because you have more listing visibility, right? Their platform is pushing you higher.

I know in my personal portfolio, I have quite a few properties that I’ve marked up a lot, like over 20% on booking.com to account for my performance on booking.com. And so my prices, or the amount that I’m charging on booking.com is way more than it is on Airbnb. But if I were to leave it up. To these pricing tools, it would be the same, and I believe in a lot of money on the table.

The third place that an automated pricing tool is failing you is when they just don’t have a lot of data. So maybe you’re in a rural area, maybe you’ve got a cabin way out in the woods, maybe you’ve got a nice luxury property on an island, and it’s far from a lot of other properties. Well, these pricing tools use data from other properties to help suggest.

Your prices. So if they don’t have a lot of data, then that means they can’t do a good job at suggesting your prices. And so what happens if they don’t have a lot of data? Well, the way they work is that they have this minimum amount of properties that they like to use or some sort of threshold. You could say.

On Price Labs it’s 250, which means that if there are no properties, immediately next year, they will continue to broaden their radius. Meaning that they’re going to be using data from properties that are further and further away from yours until they meet that minimum threshold. The other thing that they might do is broaden the type of property search.

So let’s say that luxury property on the island is eight bedrooms. Well, maybe there’s no other eight bedrooms. So they start looking for seven or six or five bedrooms. So you can see how this data will get less and less accurate, the fewer properties there are around you. I’ve got a couple tips, a couple suggestions that can help you overcome the lack of data.

But before we get into that, let’s jump to number four. And that is if you have a property that’s really operating at the. Upper end of your category or the upper end of your market. So let’s say you’ve got a property and you have 500, five star reviews. I’m just making an extreme example here, and there’s no other properties near you that have even 200 reviews.

Well, then you’re gonna get way more visibility on these platforms that you have really good reviews. Meaning that you can charge higher prices, or if you’re not charging higher prices, then you’re going to get booked sooner. Right? So it’s sort of similar to being in a rural area. There’s just not a lot of comparable data out there to compare your perfectly operating property to other ones.

And this is pretty much the same if you have a unique property. So let’s say you have a a tree house, or you have an airplane that you turned into an Airbnb, there’s not a lot of comparable data out there. So again, these pricing algorithms, these pricing tools aren’t going to be able to accurately suggest pricing for your property.

And lastly, the fifth place where your pricing is failing you is when it comes to fees or promotions or discounts. And so your pricing tool’s, not actually seeing the whole picture. You’re charging a price on this pricing tool, whether it’s Price labs, or. Beyond pricing or wheelhouse, and that goes out to many times your property management software, which then sends that out to these different channels like Airbnb and VRBO.

Yes, you can go to those channels directly if you’re not using a property management software, but the challenge is. Those prices that are going out don’t know that there could be a lot of fees that are gonna get tied into them, or there could be a big discount or some sort of promotion that’s getting tied into that pricing.

So if you’re adjusting your prices on one of these dynamic pricing tools, maybe it’s that a hundred dollars a night. When it winds up on Airbnb, it’s actually charging the guests $200 a night because it has a pet fee or it has a high cleaning fee, or the opposite, right? Maybe you have a weekly discount on there, and so you’ve got a hundred dollars a night, but all of a sudden you get a booking for seven days, and the average price comes down to $60 a night because you forgot that you had a weekly discount set up for that specific channel.

So unfortunately these pricing tools don’t know that information. They don’t know about all your fees, they don’t know about your discounts and promotions, and therefore they can’t accurately price your property across all these channels. It’s really just not seeing the full picture. And so yes, you have to make sure that you have a note of all these things on your end.

So, there we go. There are five reasons why your dynamic pricing tool is failing you and will for the rest of the foreseeable future. The first one was scraped data. They don’t have actual reservation data. The second one was if you happen to be in the area where there are no nearby properties, they’re gonna search further and further away.

And the more. The further they search, the less accurate that data will be. The third one is sort of related to number two, and that is if you have a really unique property or you have a property that’s just really crushing it, it’s got tons of good reviews and it has a lot of reviews, and again, because there’s not a lot of good comparable data.

A fourth one we talked about were channel markups, right? So these dynamic pricing tools have a one size fits all pricing, meaning they’re sending the same price to Airbnb as they are to booking.com when maybe they shouldn’t be. And then lastly, these dynamic pricing tools do not know your fees or if you have any discounts there.

So you can’t really see the full picture. And you could be charging way less than you think you are, or maybe way more than you think you are. So there are a couple tips here, a couple things that you’ll want to do to make sure you overcome this lack of data. And the first one is having your own comp set.

And I know that sounds like it might be difficult if there aren’t a lot of properties around. Usually there’s something there, right? And you handpicked comp set is going to be better than an algorithms comp set in most cases. If you don’t have the luxury of having other comparable data, though, you’re really just left to testing, right?

You’re going to have to set prices. If this is a brand new property, you’re going to have to set prices and monitor your bookings really, really closely. Hopefully, you have an idea of the booking window for your property. Remember, booking window is how far in advance people are making reservations at your property, and this changes throughout the year.

So in a really. High demand part of the year. In the high season, people are gonna book that property sooner. So hopefully you have some sort of idea around this and you can test your prices, monitor those booking windows, and if your booking window has passed and days are going by and you still haven’t gotten a reservation when you should have, well then you know your price is too high and you’re gonna have to knock it down a little bit.

Or the opposite, right? If you’re getting booked. Way ahead of your booking window, then your prices are too low. Of course, if you have historical data for your property, then this is always going to be helpful. Historic data is not a guarantee of future performance, but it is a good predictor. And so you can at least use that as a base place to start and really test your prices.

So I know you might be thinking, Tim, this is all great, but I don’t have the time to monitor this every day, or I don’t know how, or I, I just don’t want to do it. And if that’s the case. Our team would love to help you with this. We work with properties all over the place. As I mentioned. You can find out more information@strriches.com.

There’s a little property management button there and you can book a time to speak with our team. We also have all of our past episodes there, t riches.com, and we’ve talked about a lot of these things. So have you’ve been enjoying the content? I’d really appreciate it if you wouldn’t mind leaving us a like and subscribing to the channel.

I know that our content will help you across your journey, and so I hope that gave you some good insight. Remember, unfortunately, you cannot set it and forget it when it comes to these automated pricing tools. They just don’t work perfectly, and we gotta keep a close eye on these things to make sure we’re maximizing our revenue.

Until next time, I hope you have a fabulous week. If you’ve been listening to the podcast for a while, well then you know that I love technology and we can save a ton of time implementing ai artificial intelligence. In the right ways. My team and I have been playing around with this for months, and we’ve written the perfect prompts that you could just plug into your favorite AI tool, like chat PT, to help you uncover exactly who your guest avatar is, help you write your listing descriptions, help you write your photo captions, and so much more.

It’s a living, breathing document that we’re consistently working on, and I’d love to give it to you for free, for being one of our loyal listeners. You can head over to rest methods.com/ai and get your copy for free. I hope it helps you along your short-term rental journey.