The Airbnb occupancy rates in Chicago are among the highest in the country, and a San Francisco-based startup wants to make sure hosts are getting the most out of renting their homes.
Beyond Pricing, a two-month-old startup that launched in Chicago last week, works by giving Airbnb hosts access to data-driven pricing in order to maximize revenue for people renting out their homes. The company has developed a dynamic pricing model that it says has generated up to a 40 percent increase in monthly revenue for Airbnb hosts by examining four factors: how the home compares to similar properties nearby, the daily local demand for Airbnb, how many days there are until the listing date, and single listings that fall in between longer bookings.
Beyond Pricing found that Airbnb rates in Chicago were the third highest of major metropolitan areas they've studied. Occupancy were close to those at hotels, with 79 percent of Airbnb listings booked for August compared to 85 percent for hotels, the company found.
"It lends credence to Chicago's up and coming tech scene," Beyond Pricing CEO Andrew Kitchell said. "[Chicagoans] are early adopters who are looking for [technology] like this. It's obviously a great market to be in."
Beyond Pricing started as a full-service property management service for Airbnb properties, with pricing just one aspect of the business. They cleaned homes, changed sheets, made sure properties had WiFi, but soon realized they could develop a business solely around dynamic pricing. The company used the roughly 50 San Francisco properties it was managing to test the pricing strategy, and co-founder Ian McHenry, who has built pricing models for hotels and airlines, eventually developed the model Beyond Pricing uses today.
"Dynamic pricing proved to be really effective," Kitchell said. "We were increasing revenue by more than 50 percent at some of the homes we were managing. So we actually took a look at it and said, this is a piece that everyone loves, it's something we’re really good at. Why don’t we turn it into a service where any Aribnb host, no matter where they are, can use dynamic pricing to help them improve revenue. And so we shifted the whole focus of the company."
The company allows hosts to link their Airbnb accounts with Beyond Pricing and turn on "automated pricing," letting Beyond Pricing take care of the rental amounts. As of now, the service is free to Airbnb hosts, but the company will likely adopt a payment model around $19/month, Kitchell said. The company lets hosts set a minimum price so a listing won't drop below a certain amount.
Nearly 1,000 hosts have signed up for accounts, and the company is currently in San Francisco, Seattle, Austin, Boston, Miami and Chicago.
Beyond Pricing updates prices daily, factoring in major events like festivals and business conferences. Beyond Pricing recommends a 90 percent Airbnb price increase for an event like the Chicago Marathon, but even lesser-known events like International Manufacturing Technology Show in September and the Pack Expo in November should see a 45 percent and 71 percent increase respectively, the company said.
It also factors in proximity to events. For example, Bucktown Airbnb hosts should be pricing their listings 112 higher during next month's Riot Fest, while South Loop hosts should only expect a 46 percent increase.
As Airbnb acquires more and more users, Kitchell expects Chicago's occupancy rates to continue rising.
"Mature markets will eventually come to match the hotel rates nationally," he said. "I suspect Chicago's rate to climb another 10 to 15 percent."
Image via Beyond Pricing
