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Pricing Pressures Intensify for Hotels in Airbnb's Flexible Market

Hotels that are ready to compete with and in Airbnb's platform should follow these four steps.

Airbnb has established a strong presence in the hospitality industry, surpassing a mere foothold. As of 2023, the disruptive company was estimated to own approximately 20% of the vacation rental marketplace — a significant share by any measure. This news is positive and challenging for hotels that list on Airbnb. On one hand, it provides hotels with greater selling reach and branding opportunities. On the other hand, Airbnb's dynamic pricing structure can be challenging to keep up with.

Airbnb has become a prime example of how real-time pricing works. Airbnb offers an internal Smart Pricing option that can be enabled or disabled. It adjusts a listing's nightly rate based on supply and demand when activated. Frequent adjustments enable Airbnb customers to access the best possible deals, considering various economic factors.

Hotels that use Smart Pricing essentially allow Airbnb's proprietary algorithms to set their room rates. The benefit is obvious: Hotels won't undercut themselves by pricing their rooms and suites too high. However, the downside is that this dynamic pricing technology can be challenging to keep up with. It also grants Airbnb significant power, which may be unappealing to many hotels and their marketing teams.

Of course, hotels are not obligated to use Smart Pricing. However, they risk losing bookings if they do not implement strategic revenue management solutions.

What is the answer? Hotels ready to compete with and within Airbnb can take a few steps to improve their position.

1. Find a third-party dynamic pricing system from a separate source.

Airbnb's smart pricing is not the only dynamic pricing system available. Similar tools are available, and many can be integrated into existing software, such as channel manager technologies. Accordingly, while hotels should not necessarily refrain from listing on Airbnb, they may want to consider using alternative pricing mechanisms instead of relying solely on the Airbnb platform.

A smart approach to assessing dynamic pricing products is to seek out those that provide high adaptability. They should focus specifically on hotels. Implementing a dynamic pricing system allows hotels to adjust and monitor their rates throughout the day, eliminating the need to depend on Airbnb.

[Life House Hotels won a 2022 Hotel Visionary Award for its creation of a revenue management and marketing system (RMMS). The RMMS helps independent hotels double direct bookings by using metadata to direct searchers away from OTAs and back to their own websites featuring lower prices.]

2. Launch an extensive differentiation campaign.

Many people assume that all hotel experiences will be the same. But hotels know that isn't true. With a significant marketing content push, hotels can showcase their unique offerings and potentially attract guests away from other Airbnb bookings.

With a hotel SEO company specializing in paid advertising and other earned and owned media, hotels can effectively promote what sets them apart. Local, national, and international SEO strategies and digital advertising can attract more visitors to a hotel's website. This draws customers away from the Airbnb platform and allows hotels to make an immediate sale.

3. Emphasize membership programs more.

Larger hotel chains offer membership programs to attract and retain customers. There's no reason that smaller hotels can't do the same. Boutique hotels can utilize membership plans to entice guests to return.

The key is offering members something they can't find elsewhere, such as special deals, flash sales, coupons, upgrades, or exclusive access to an attraction or event. Members are more likely to pay a little more for consistency. As a result, hotels may be able to set their rates slightly higher than their competitors without sacrificing profitability.

4. Improve customer support.

Hotels always have the ultimate authority in the assistance they provide to their guests. While some people will always seek the most affordable room rate, others prioritize receiving concierge-style service. With this in mind, hotels can provide this level of pampering to their guests on a large scale across all their properties.

The type of support a hotel provides can vary depending on the market. For example, a hotel may establish connections and partnerships with popular shops, venues, and eateries. For example, guests could book a meal at an exclusive restaurant when they book their room. The possibilities are endless.

While hotels are facing the challenge of keeping up with the pricing pressures of Airbnb, they have strategies to maintain a competitive edge. They can prevent Airbnb from gaining excessive traction by selecting the appropriate technological tools, collaborating with experts, incentivizing customers, and enhancing their support.



Greg Walthour is co-CEO of Intero Digital, a 350-person digital marketing agency that offers comprehensive, results-driven marketing solutions. Greg has more than 20 years of experience directing paid media strategies, optimizing SEO, and building solutions-oriented content and PR. He leads a team of experts in web design and development, Amazon marketing, social media, video, and graphic design, and Greg has helped hotel SEO company of all sizes succeed in the digital age.

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