The Foundation of Pricing: The Base Price

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We spend a lot of time advising hosts on how to run the best, most profitable Airbnb listing, but we realized the other day that we’ve never really gone into any great detail about Base Price!

We know we’ve mentioned Base Price as ‘the foundation of dynamic pricing’ but we’re willing to bet that you don’t fully understand what that means!

What is a ‘Base Price’?

Everything needs a base. Having a base allows you to build on something solid. Without it, you’ll have too many moving pieces and not enough stability. This is why this figure is so important. In the simplest terms, this number is the base price that you think your listing is worth. 

Your basic price does not mean that your prices will always be that exact figure. Rather, the Base Price acts as a median figure. This means that the pricing values go higher and lower and end up with the stipulated Base Price as a median.

How Do I Determine It?

If like many Airbnb hosts looking to boost their monthly earnings, you make use of a dynamic pricing engine like DPGO, these systems offer suggestions for your Base Price. 

DPGO uses local market data, including booking surges, historical patterns, and competitor analysis to determine the best price for your short-term rental property. Your pricing figure is critical to dynamic pricing accuracy and optimized revenue management, which are both so important when running a vacation rental business. 

In a recent update, we broadened our offerings to include various selection options. DPGO users can now choose from five options: aggressive, conservative, balanced, custom and fixed. Having a fixed Base Price is not advised as it means your pricing may because slightly stagnant and might interrupt the dynamic pricing.

How Should I Use It?

Without the use of a dynamic pricing engine, Base Price is more useful as a guide to how much you can vary your pricing. As we stated above, this price is the starting figure on which you base all of your price fluctuations. Without it, you can’t alter your prices efficiently.

You need a basic price to help you keep track of your median price for any given period, whether it be by month or by season. If you picture a graph with the highs and lows of your various prices, your Base Price needs to be like a line through the middle. It’s the value you should always average out to.

Think of your Base Price as a middle line. If during the summer season, you charge 1.5 times your normal prices, understand what in winter, you may have to charge 1.5 less than your normal prices. This will only be true if your chosen foundation price is a true representation of your market’s average price.

Should I Ever Adjust My Chosen Value?

Smart pricing engines like DPGO recommend a Base Price for your listing based on competitors, average market prices, and amenities. However, what we can’t analyze is the things we can’t see, like the floor your listing is on in an apartment block, or the views that your property boasts, or the price of your furniture and finishings. This is exactly why you should review the recommended Base Price and compare it to that of your competitors in order to ascertain if it is too high or too low. 

Remember, if you opt for a static pricing base, you’ll need to keep this in mind if something happens that makes the market change drastically, like another lockdown or a change in local vacation rental guidelines or laws. Hosts who choose the dynamic option won’t have to manage this process, as the pricing engine will automatically alter the Base Price according to the market health, booking pace, surges in bookings, and associated market fluctuations.

Dynamic Pricing Tool for Airbnb Hosts

How Can DPGO Help?

Smart pricing is a huge help when you want to run an optimized short-term rental business and DPGO is a great choice. Our pricing engine is the most advanced on the market, plus our pricing breakdown is more affordable too! 

We analyze everything from currency exchange rates and occupancy to global market health and weather when crafting our pricing recommendations. The DPGO pricing engine also offers our users the ability to optimize other aspects of their listing and revenue management. Start your free 30-day trial now!

Avatar for Charlotte Rogers

I love writing and I am seriously passionate about real estate and technology. I've been writing about both topics for nearly 10 years and there isn't a development in the world of tech without me reading about it!

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