How to maximize profits on Airbnb? Data-based approach for hosts.
Probably everyone has heard of or used Airbnb — the online community marketplace that arrange homestays around the world. Airbnb connects hosts with tourists and takes care of the entire transaction process including the payment. Maybe you think of listing your apartment on Airbnb while being on vacation to earn extra money. Perhaps you already have listed your property on Airbnb, but your profits were limited and nobody contacted you. Was your price too high? Airbnb will not tell you this. How to make a next step towards earning extra money with your property? How to determines the best price for your Airbnb listing? Data can help you get insides into Airbnb market and what to consider before setting a price strategy for your Airbnb property.
We used open data from Airbnb in Seattle, which creates limitation to our analysis. This insides might only be valid in Seattle or any U.S. city on the West Coast of similar population (Seattle City 700,000; Urban Area of Seattle 3.000.000;). Our approach compares different Airbnb property attributes with a price per person per night.
What attributes increase my Airbnb listing price?
Like hotel industry, where five star facilities cost more but also offer higher comfort, quality and service, the price on Airbnb underlies similar phenomena. An elevator in the building (20%), a doorman at the front door (12%), a gym (12%), or a pool (8%) influence the price positively. Not surprisingly, the price is higher in popular districts such as Downtown (16%), Queen Anne (9%) or Capitol Hill (8%). Also a good location rating (12%) from guests effects the price, even more than a good cleanliness score (4%).
Unusual Airbnbs for an overnight stay like a boat impacts the price positively (8 %). This might be a recommendation for hosts to make theirs location looking special or unique.
But what if the host cannot move to a tourists’ favorite area, and also cannot change the attributes of the building she lives in? The data shows also that installing an AC (8%), real bed (6%), cable (11%) or just usual TV (7%), and a hot tube (6%) may pay off. Those little improvements have a positive impact and increase the standards and the price.
The overall price per person also depends on cleaning fee (35 %) and security deposit (20%). Charging guests extra for cleaning and security might be a good idea to increase the profits, however could deter guests from booking. Our data-approach leaves this question unanswered.
Hosts with more than one listings (8 %) seem to charge higher prices, which leads to the assumption, that more experienced hosts know the market better.
Strict cancellation policy (13%), requiring guest’s phone verification (8%) or guest’s profile picture (7 %) effects the price positively, which can be interpreted in two ways. First, popular hosts could charge higher prices but also want to secure their rental income, without frustrating last-minute cancellations from fickle guests. It is more likely, that popular hosts tighten up their booking policies. Second, owner of more expensive, luxurious places with higher standards might feel more comfortable letting verified and trustworthy strangers into their homes.
cleaning_fee 0.350421
security_deposit 0.203517
Elevator in Building 0.198643
neighbourhood_group_cleansed_Downtown 0.162595
cancellation_policy_strict 0.130720
Doorman 0.121563
review_scores_location 0.121196
Gym 0.120789
Cable TV 0.113371
neighbourhood_group_cleansed_Queen Anne 0.090053
calculated_host_listings_count 0.083392
Pool 0.083153
property_type_Boat 0.079727
neighbourhood_group_cleansed_Capitol Hill 0.078682
require_guest_profile_picture 0.077501
Air Conditioning 0.076503
TV 0.075863
Kitchen 0.071869
require_guest_phone_verification 0.069068
bathrooms 0.067893
bed_type_Real Bed 0.063524
Hot Tub 0.060124
review_scores_rating 0.057456
property_type_Condominium 0.051757
review_scores_cleanliness 0.047834
extra_people 0.043730
neighbourhood_group_cleansed_Cascade 0.042380
property_type_Bed & Breakfast 0.039962What attributes decrease my Airbnb listing price?
Some districts in Seattle are not very popular: Rainier Valley (-9%), Delridge (-8%), Northgate (-8%) Beacon Hill (-6%) Seward Park (-6%) or some other not prominent neighboorhoods (-7 %).
Type of the property private room (-17 %) or a house (-13 %) with a low number of allowed guests (-16 %), low number of beds (-9%) seems to be listed cheaper than spacious properties.
Pets living on the property (-8%) might also deter some guests. Some guests might be allergic to dogs or cats and sadly not everyone is a big fan of animals.
Surprisingly, the higher the price, the less reviews (-12 %) and reviews per months (-22 %) a host receives. The reason could be a lower booking rate per month of more expensive properties. The less booking a host becomes, the less reviews she receives. Since this analysis does not include the time component, we have to investigate further, what scenario is more promising: having more guests in month for a cheaper price or having less guests for a higher price.
neighbourhood_group_cleansed_Seward Park -0.057727
Shampoo -0.058516
neighbourhood_group_cleansed_Beacon Hill -0.059966
instant_bookable -0.063909
neighbourhood_group_cleansed_Other neighborhoods -0.070834
neighbourhood_group_cleansed_Northgate -0.075342
Pets live on this property -0.078505
neighbourhood_group_cleansed_Delridge -0.083484
beds -0.087425
neighbourhood_group_cleansed_Rainier Valley -0.088460
Free Parking on Premises -0.098190
number_of_reviews -0.121019
property_type_House -0.126896
accommodates -0.159946
room_type_Private room -0.168101
reviews_per_month -0.219961How to maximize my Airbnb profits?
After investigating correlations within the data, we create a model which generates the most influential attributes on the price per person. Here are the top 10.
- Review Score “Location”: The real estate slogan “Location, location, location!” seems also to be true in the Airbnb context. A well-located Airbnb gains more profits for hosts.
- Review Score “Rating”: Not surprisingly, good overall rating generates new bookings and maximizes profits.
- Elevator in Building: Guests do not like stairs and seem to pay more for the chance of using an elevator.
- Host is a Superhost: To maximize the profits, it is good to become a superhost. In an automatic manner, Airbnb assigns the superhost badge, if a host full-fills four criteria: A) Host a minimum of 10 stays in a year, B) respond to guests quickly, C) have a minimum 80% 5-star reviews, D) host should rarely cancel reservation. It is worthwhile to aim for the superhost award.
- Location “Downtown”: To maximize profits, it is better to list central located properties.
- Calculated Host Listing Count: More experienced hosts know the market better. Listing the location on Airbnb occasionally might not be a good idea to maximize the profits.
- Review Score “Cleanliness”: Guests expect a certain level of cleanliness and are ready to pay more for a flawless stay in high standards.
- Review Score “Accuracy”: Being honest with guests pays off. If the stay is beyond description and pictures or issues are not reflected in the listing, guests will not like it.
- Bathrooms: Not surprisingly, higher standards like more bathrooms generate more profits for hosts.
- Cancellation Policy Strict: It is more likely, that popular hosts tighten up their booking policies. Having steady bookings results in choosing who the host want to have in her property.
Our approach is limited to the time component. We only analyzed the data at a specific point of time, not on a long term.
This post was submitted as a part of completing Udacity’s Data Science Nanodegree. Please find the Github repository in this link: https://github.com/astraetluna/airbnb-blogpost
