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Should I Increase My Airbnb Rate Or Improve Occupancy?

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I want to share a review with you that we got from a happy Airbnb guest who often returns to one of our Mouille Point Airbnbs.

The aim of this article is discuss:

How to increase short term annual income by either increasing rates or by improved occupancy? Or both?

Most Airbnb management agencies and owners tend to focus on increasing rates.

I am not suggesting an increase in rates would not make you money.

The real strategic issue is when to increase rates?

As long as owners believe they can make money only by increasing rates, first, then they may fail miserably.

Today I will use this review as an example to share how you may rather optimize occupancy before you just push the easy “increase rates” option. Let me try and explain….

Today Airbnb has made most of our properties commodities – where we compete on rates. This is a downward spiral. For all purposes all Airbnb properties are boringly average when they are listed. There are just too many and too few prime “real estate” available to promote them effectively. 80% of all homes (based on Pareto’s 80:20) will never see the “Front Page”. They will stay boring.

And your intent as the owner to assist us moving your home into the 20% remarkable top.

If not we’ll drag along the 80% who occasionally make money. Let me qualify and give you a guideline; if you are not getting more than 50% occupancy your home is not where it should be. We have a serious job at hand to move towards the top.

Let’s try.

I believe we need to find away to create scarcity first.

Scarcity….

https://agency.capeholidays.info/wp-content/uploads/2018/03/arbnbratesoccupancy

Scarcity – Perceived scarcity will generate demand​. Robert Beno Cialdini (born April 27, 1945) is the Regents’ Professor Emeritus of Psychology and Marketing

By focusing on ways to to increase occupancy we can easily create scarcity by investing in remarkability.

Why?

Remarkability does not have a price. 

  1. When guests want something they will pay a premium to get it.
  2. When guests just need a roof over their heads they will stay anywhere.

And CapeHolidays is not in the anywhere-business.

Every day we are creating remarkable experiences for guests as can be seen from our reviews and with owners who support this philosophy.

Let’s share the example where an owner wants to increase rates, of his Mouille Point Airbnb, before he will invest in being more remarkable.

Here is what our returning guest had to say:

“As always a great stay and I will always return. Clean, safe and I’m a great location. The service is above and beyond and I cannot fault anything about this wonderful unit”

“Amazing as always! Thank you! I would say a nice touch with the milk… but maybe a pod coffee machine in future… 👌”

We then asked the owner:

We should consider a Nespresso as we market your property as Business Ready Accommodation.

​The reply from the owner:

Everything comes at a price. If you achieve a high rate it is possible.

Obviously we can understand why owners would want high rates.

And many owners would agree with him – thinking high rates make them more money.

High rates tend to be a bragging tool.

Do you think we should increase your home’s rate by 10%, 20%?

Before you answer, let me ask you if this increase will make you more money or less money giving how Airbnb has commoditized this business?

Wait!

Read this article on Airbnb commoditization before you answer.

Our experience, today after many years in the Airbnb short term rental business, indicates (first) that

…..high occupancy makes money.

And is that not what you want? More money?

Our philosophy on how to make you more money:

Our focus is long term.

We continuously improve a property with the aim of getting more 5 star reviews because we/your property must to be remarkable. We must reach for the stars and be way above the boring Tom’s and friends.

When we have 40, 5 star reviews your occupancy will have increased to 80% (read here) or more.

Then we build a business on popularity. Demand increases.

As you know this is when people want to stay in your place instead of having to stay.

Increasing rates before we have maximised occupancy may work.

But if we do it now, before we have established scarcity – through many reviews and adding a simple Nespresso (or whatever guests suggest), it is a risk to blindly increase rates of this Mouille Point Airbnb or any property at not optimal occupancy (I would suggest 70% occupancy and above before rates are increased).

Increasing rates, now (at 60% occupancy), tends to rebound resulting in lower occupancy – less income; we don’t have enough review-momentum yet.

The question should rather be:

How can we make this owner more money?

  1. Currently, at this Mouille Point Arbnb, we have a proven rate at nearly 60% occupancy- this helps us to maintain the boat.
  2. We can, at the current rate make this owner 20% more money by investing in features that will increase occupancy to 80%.
  3. We have guests returning

Why?

Because we offer a fair deal.

By adding features, and becoming more remarkable, we will get more people staying.

And more people talking.

Why would this guest and others give us such great reviews?

Do you think he is telling his friends? You bet.

BTW: While writing this article his friend just booked the Airbnb Mouille Point Apartment for 45 days on his recommendation.

What will this guest do when we email him to say we have bought a Nespresso?

We Believe………..

Do what you do so well that people can’t resist telling others about you. – Walt Disney

Let’s invest in occupancy and buy the Nespresso. We must get more people talking.

The bad news before we get to the solution:

The only judge is the guest. If your home is not achieving 50% occupancy then know your offer is beaten by many other comparative Airbnb listings in Cape Town.

Tip:

  1. Get at least 40 reviews,
  2. add features,
  3. Increase the setup fee to cover change over costs (cleaning fee, meet and greet etc).
  4. Reduce length of stay to the minimum
  5. have the most competitive rate possible.
  6. create scarcity (add remarkable features),
  7. focus on increase occupancy all the time,
  8. then start at the beginning.
  9. When you get close to 70% occupancy you can and should start tweaking your rates upwards.
  10. If you still believe rates will make you money then we have failed you.

Have fun

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