Pricing Strategies of Porto’s Airbnb New Listings

Abstract

Airbnb hosts’ pricing decisions are the choices hosts make when setting the daily rate for their listing of properties. Some Airbnb hosts have a long run approach, charging lower prices to attract more customers and achieve higher occupancy rates, while others have a short-run approach, charging higher prices to maximize the short-run opportunities from the market. The pricing strategy of Airbnb hosts is the key to their eventual success and plays an important role, since it influences their relationship with customers. Airbnb listings can be hard to price. Therefore, each Airbnb host faces an important decision when entering the market: What is the perfect daily rate to charge such that to achieve their goal? Major aspects, such as property location, type (private room, entire home, etc.) and amenities, target customers, other Airbnb competitors, thinking like a guest, the safety and beauty of the neighborhood, seasonality, etc., must be considered. Considering Airbnb’s exponential growth since it started in 2007, it is obvious that establishing a suitable pricing strategy is vital for any new host. The present paper uses information from the new listings in 2020 to investigate different hypotheses that explore the pricing strategies of Airbnb hosts for their new listings on the market. This study highlights, on one hand, the great need for Airbnb to encourage dynamic pricing among its new hosts and, on the other hand, the challenges faced by these hosts when they establish the price. An important characteristic of this article is the set of theoretical and methodological implications for the pricing strategy for the new Airbnb new hosts. Furthermore, this document reinforces the idea that the pricing strategy differs between cities and countries, emphasizing the strategy in the case of the new Airbnb new hosts.