How to price your Property on AirBnB

A data based analysis using AirBnB data in Seattle during 2016.

There are a numerous AirBnB properties in Seattle. When listing a new property on the AirBnB market what will set your property out from the rest? Is it the size of the property, property features or location? Are there any variations in price over time? Is your property priced correctly given its features? It is important to ensure your property is priced correctly given its features.

Using daily data of 3818 AirBnB listings in Seattle during 2016 analysis was conducted to shed some light on price determinants.

Question 1: Are there any variations in price and occupancy rates over the year 2016?

The plot below shows the calendar price (blue line) and listing price (orange line) over time.

The calendar price exists for properties which are available (unoccupied). The average calendar (properties available for rent) price of the property is higher over the summer months, this indicates a potential increase in demand over this period.

The new plot below shows the occupancy rates over 2016.

There is high occupancy in January, which is when properties are priced at the lowest. There is increased occupancy during the summer months indicating that a higher demand results in higher prices for available properties. It appears that properties can be priced higher over the summer months (over 10% higher than listing price). It also appears that there is room to increase prices over the January period. This all been said occupancy rates don’t go over 50% indicating some properties are priced too high given its characteristics as well as potentially an over supply in the market.

Question 2: What are the main factors influencing price and occupancy?

We are going to focus on one main factor here — number of bedrooms. Further factors will be mentioned below.

The plot below shows how the price (red line) and occupancy (blue line) varies by the number of bedrooms the property has.

The graph shows price generally increasing with number of bedrooms. However, occupancy dramatically decreases with properties with more than 4 bedrooms. This indicates that for larger properties (more than 4 bedrooms), these properties are too big for the available demand — decreasing the price of these properties should help increase occupancy rates for these properties.

A factor analysis indicated that other important factors influencing the price are number of bathrooms, number of people the property accommodates and location.

Question 3: Can we build a model to predict prices and is there any difference in the model for available vs unavailable properties.

Looking at the unavailable properties first, only the listing price for these properties can be predicted. The plot below shows the predicted (orange line) vs actual average listing price (blue line) of the property over the 2016 period for occupied properties.

For occupied (unavailable) properties there appears to be steady decrease in the average price over the 2016 period. This decreasing price trend of occupied properties points to increased competition in the market.

We next move onto the analysis on the available properties — which poses another question.

Question 4: Are available properties overpriced?

The plot below shows average the calendar price predictions (green line) and actual calendar prices (blue line)over time — which the model predicts well. The model estimated on the occupied properties (which predicts listing price) was applied on the unoccupied population — shown by the red line below. Comparing this line to the orange line (the actual listing price), shows that the listing price of these unoccupied properties is potentially too high.

Dropping the prices of these available properties by around 4–5% should help increase the occupancy rate for these properties. There is also evidence that increasing prices over the summer months does not make the property attractive.

Conclusion: This was a very crude analysis into the price determinants of AirBnB properties in Seattle. A lot work more in depth analysis can be conducted. The analysis does point out that there is potentially an over supply of properties or the properties are priced too high. The main factor in influencing price is the size of the property.

Are you thinking of listing a property in Seattle on AirnBnB, how will you price your property to ensure there is sufficient demand for it?