# Pricing Furnished Rentals for Maximum Profit
Pricing is the single most impactful lever for furnished rental profitability. A 10% improvement in average daily rate with maintained occupancy flows directly to your bottom line. Yet many operators leave money on the table with static pricing, emotional rate-setting, or over-reliance on platform suggestions.
This guide breaks down pricing furnished rentals for maximum profit, covering dynamic pricing fundamentals, rate-setting frameworks, and optimization strategies for both short-term and mid-term rentals.
Table of Contents
1. [Quick Summary](#quick-summary) 2. [Pricing Fundamentals for Furnished Rentals](#pricing-fundamentals-for-furnished-rentals) 3. [Building Your Base Rate](#building-your-base-rate) 4. [Dynamic Pricing Implementation](#dynamic-pricing-implementation) 5. [Discount Strategy Framework](#discount-strategy-framework) 6. [Pricing for Corporate and Mid-Term](#pricing-for-corporate-and-mid-term) 7. [How This Affects Investors](#how-this-affects-investors) 8. [How This Affects Operators and Sellers](#how-this-affects-operators-and-sellers) 9. [Pricing Optimization Checklist](#pricing-optimization-checklist) 10. [Worked Example: Rate Optimization](#worked-example-rate-optimization) 11. [Common Mistakes to Avoid](#common-mistakes-to-avoid) 12. [FAQ](#faq)
Quick Summary
- **Dynamic pricing increases revenue 10-40%** compared to static pricing—use a pricing tool, not guesswork
- **Base rate formula:** Calculate your break-even, add profit margin, then validate against competition
- **Occupancy signals:** Below 70% suggests overpricing; above 85% suggests underpricing
- **Monthly rates at 40-50% discount** from nightly still outperform due to reduced turnover costs
- **Review pricing weekly** and adjust for demand signals, competitor changes, and booking pace
Pricing Fundamentals for Furnished Rentals
The Revenue Maximization Framework
Optimal pricing balances three variables:
``` Revenue = Occupancy × Average Daily Rate × Available Nights ```
- Maximize revenue, not any single variable:
- 100% occupancy at $100/night = $3,000/month
- 80% occupancy at $140/night = $3,360/month
- 60% occupancy at $175/night = $3,150/month
The optimal point varies by property, market, and season.
Understanding Your Cost Structure
Before setting rates, know your costs:
- **Fixed Costs (incurred regardless of bookings):**
- Mortgage/rent payment
- Property taxes
- Insurance
- HOA fees
- Utilities baseline
- Property management base fee
- Platform subscriptions
- **Variable Costs (per booking):**
- Cleaning between guests
- Linens and consumables
- Utility usage above baseline
- Platform commissions (12-15%)
- Credit card processing (2-3%)
- Damage and repairs
- Guest amenities
**Per-Night Break-Even Calculation:**
``` Monthly Fixed Costs: $2,800 Variable Cost per Turnover: $180 Average Booking Length: 3 nights Platform Commission: 14%
Break-even per night (at 70% occupancy): Fixed: $2,800 ÷ 21 nights = $133.33 Variable: $180 ÷ 3 nights = $60 Subtotal: $193.33 Commission gross-up: $193.33 ÷ 0.86 = $224.80
Minimum rate to break even: ~$225/night ```
Market Rate Positioning
Where should you position relative to competition?
| Position | Rate vs. Market | Best For | |----------|----------------|----------| | Budget | 15-25% below | High turnover capacity, new listings, commodity properties | | Value | 5-15% below | Competitive markets, building reviews | | Market | Within 5% | Established listings with good reviews | | Premium | 5-15% above | Superior amenities, unique features, Superhost status | | Luxury | 15-30% above | Exceptional properties, destination experiences |
Building Your Base Rate
The Base Rate Framework
Your base rate is the starting point before adjustments. Calculate using multiple methods and triangulate:
**Method 1: Cost-Plus Pricing** ``` Break-even rate: $225 Target profit margin: 30% Base rate: $225 × 1.30 = $293/night ```
- **Method 2: Competition-Based** ``` Analyze 10 comparable listings:
- Similar size, location, amenities
- Active in last 30 days
- Similar review ratings
Competitor average: $275/night Your position (market rate): $275/night ```
**Method 3: Revenue Goal** ``` Annual revenue target: $50,000 Available nights: 330 (35 blocked) Target occupancy: 75% Required rate: $50,000 ÷ (330 × 0.75) = $202/night ```
- **Triangulated Base Rate:**
- Cost-plus: $293
- Competition: $275
- Revenue goal: $202
Starting base rate: $275 (competition-aligned, covers costs with margin)
Competitive Analysis Process
How to analyze competitor rates effectively:
1. **Identify True Competitors** - Same bedroom count (±1) - Same general location - Similar amenities - Active bookings in last 30 days
2. **Data Collection** - Current nightly rates - Weekly/monthly discounts - Cleaning fees - Occupancy indicators (calendar availability)
3. **Calculate All-In Rate** - Include cleaning fees in comparison - Account for different cancellation policies - Factor guest count limits
4. **Quality Adjustment** - Your listing superior? Add 10-15% - Your listing comparable? Match rates - Your listing inferior? Discount 10-15%
Dynamic Pricing Implementation
Why Dynamic Pricing Matters
- Static pricing leaves money on the table:
- Underprices high-demand periods (events, holidays, peak season)
- Overprices low-demand periods (weekdays, shoulder season)
- Creates orphan days with rigid minimums
- Fails to fill last-minute gaps
- Dynamic pricing tools adjust automatically based on:
- Demand indicators
- Competitor pricing
- Booking lead time
- Day of week
- Seasonality
- Local events
- Market conditions
Tool Comparison
| Tool | Cost | Best For | Key Features | |------|------|----------|--------------| | PriceLabs | $20-30/month | Multi-property, data focus | Customizable rules, market data | | Wheelhouse | $20-30/month | Single property, ease of use | User-friendly, good support | | Beyond Pricing | 1% revenue | Hands-off operators | Minimal configuration | | Airbnb Smart Pricing | Free | Beginners only | Often underprices |
Configuration Best Practices
- **Base Price Settings:**
- Set your calculated base rate as the minimum
- Allow upward adjustments of 50-200%
- Set absolute floor price (never go below)
- **Demand Adjustments:**
- Event pricing: +50-200% for major events
- Weekend premium: +10-25% Friday-Saturday
- Holiday premium: +25-75% for holidays
- **Booking Window:**
- Far out (60+ days): slight premium (+5-10%)
- Standard (14-60 days): base rate
- Last minute (0-7 days): graduated discounts
- **Orphan Day Handling:**
- Enable gap-filling discounts
- Reduce minimums for short gaps
- Discount 15-25% for orphan days
Discount Strategy Framework
Length-of-Stay Discounts
Longer stays reduce turnover costs and risk. Discount accordingly:
| Stay Length | Recommended Discount | Rationale | |-------------|---------------------|-----------| | Weekly (7+ nights) | 10-15% | 1 cleaning vs 2-3, lower risk | | Bi-weekly (14+ nights) | 15-20% | Significant turnover savings | | Monthly (28+ nights) | 30-50% | Corporate competition, guaranteed income |
**Monthly Rate Calculation Example:** ``` Nightly rate: $175 STR monthly (30 nights): $5,250 Monthly rate with 40% discount: $3,150
- Savings for guest: $2,100 Your benefit:
- 3 fewer cleanings saved: $450
- Guaranteed income: No vacancy risk
- Lower platform fees on longer stays
- Less management time Net: Still profitable at significant discount ```
Last-Minute Discounts
Close-in discounts fill otherwise empty nights:
| Days Out | Discount Level | Strategy | |----------|----------------|----------| | 14+ days | 0% | Standard pricing | | 7-14 days | 5-10% | Gentle encouragement | | 3-7 days | 10-20% | Active gap-filling | | 1-3 days | 20-30% | Aggressive recovery | | Same day | 30-40% | Last resort fill |
**Important:** Don't train guests to wait. Only deep discount very close-in.
Promotional Pricing
Strategic promotions can boost velocity:
- **New Listing Launch:**
- 20% discount first 3 bookings
- Goal: Build reviews quickly
- **Slow Period Activation:**
- 15% off shoulder season
- Target: Specific slow weeks
- **Returning Guest:**
- 10% direct booking discount
- Goal: Build direct channel
Pricing for Corporate and Mid-Term
Corporate Rate Structures
Corporate tenants expect different pricing:
- **Monthly All-Inclusive:**
- Simplifies budgeting for corporate bookers
- Include utilities, WiFi, cleaning
- Quote: $3,200/month all-inclusive
- **Daily GSA Rates:**
- Government travel requires GSA compliance
- Check local GSA per diem rates
- Structure: nightly rate within GSA limits
**Tiered Length Discounts:** ``` 30 days: $3,200/month ($107/night equivalent) 60 days: $3,000/month ($100/night) 90+ days: $2,800/month ($93/night) ```
Insurance/Displacement Rates
- Insurance companies pay per diem rates:
- Research local insurance per diem limits
- Typically $150-250/day depending on region
- Offer slight discount for direct booking
- Be flexible on lease terms
Travel Nurse Pricing
- Healthcare travelers have predictable patterns:
- Standard assignment: 13 weeks
- Budget-conscious but steady demand
- Price 40-50% below STR nightly
- Include utilities, WiFi, parking
How This Affects Investors
When evaluating furnished rentals for investment:
- **Pricing Due Diligence:**
- What pricing strategy is currently used?
- Is revenue optimized or leaving money on the table?
- Compare actual RevPAN to market potential
- Assess pricing tool implementation
- **Valuation Considerations:**
- Revenue achieved vs. revenue potential
- Current strategy: static or dynamic?
- Room for pricing optimization = value-add opportunity
- **Red Flags:**
- Static pricing in dynamic market
- No competitive analysis conducted
- Significantly below market rates
- Over-reliance on Airbnb Smart Pricing
Marketplaces connecting sellers with investors can help identify properties with pricing optimization potential.
How This Affects Operators and Sellers
- **Operational Impact:**
- Optimized pricing directly increases cash flow
- Dynamic pricing requires less manual intervention
- Better data informs strategic decisions
- **When Selling:**
- Documented pricing strategy increases buyer confidence
- Revenue optimization history demonstrates professionalism
- Transferable pricing tool access adds value
Pricing Optimization Checklist
``` PRICING OPTIMIZATION CHECKLIST
FOUNDATION [ ] Break-even rate calculated [ ] Fixed and variable costs documented [ ] Target profit margin defined [ ] Base rate established
COMPETITIVE ANALYSIS [ ] 10+ competitors identified [ ] Competitor rates documented [ ] All-in pricing compared (with fees) [ ] Quality differential assessed [ ] Market position determined
DYNAMIC PRICING [ ] Dynamic pricing tool selected [ ] Tool connected to all channels [ ] Base price configured [ ] Minimum rate set (floor) [ ] Maximum rate set (ceiling)
ADJUSTMENT RULES [ ] Weekend premium enabled [ ] Holiday pricing configured [ ] Event pricing set [ ] Last-minute discounts configured [ ] Orphan day rules active
LENGTH DISCOUNTS [ ] Weekly discount set (10-15%) [ ] Bi-weekly discount set (15-20%) [ ] Monthly discount set (30-50%) [ ] Corporate rates established
MONITORING [ ] Weekly rate review scheduled [ ] Occupancy tracking active [ ] RevPAN calculated monthly [ ] Competitor monitoring ongoing ```
Worked Example: Rate Optimization
Assumptions - 3BR house in Nashville, TN - Current static rate: $225/night - Current occupancy: 58% - Monthly cleaning: $150/turn - Fixed costs: $3,200/month
Current State
- **Monthly Revenue:**
- Booked nights: 17.4 (58% of 30)
- Revenue: $3,915
- Turnovers: 5.8/month
- Cleaning cost: $870
- Fixed costs: $3,200
- Platform commission: $548
- Net cash flow: -$703 (negative!)
Optimization Strategy
- **Step 1: Implement Dynamic Pricing**
- Tool: PriceLabs ($25/month)
- Set base rate: $225
- Set floor: $175
- Set ceiling: $400
- **Step 2: Configure Adjustments**
- Weekend premium: +20%
- Event days: +75% (CMA Fest, NFL games)
- Last-minute (7 days): -15%
- Orphan days: -20%
- **Step 3: Length Discounts**
- Weekly: 12%
- Monthly: 40%
Projected Results
- **After Optimization (3 months average):**
- Average rate: $248/night (+10%)
- Occupancy: 72% (+14 points)
- Booked nights: 21.6
- **Monthly Revenue:**
- Revenue: $5,357 (+37%)
- Turnovers: 4.2 (longer stays)
- Cleaning: $630 (-28%)
- Fixed costs: $3,200
- Platform + tool: $775
- Net cash flow: +$752
**Improvement: $1,455/month swing from negative to positive**
Common Mistakes to Avoid
1. **Using only Airbnb Smart Pricing:** It optimizes for Airbnb's interests (bookings), not yours (revenue). Use third-party tools.
2. **Setting and forgetting:** Markets change. Review pricing weekly and adjust strategy monthly.
3. **Racing to the bottom:** Competing purely on price attracts price-sensitive guests and erodes market rates for everyone.
4. **Ignoring all-in pricing:** Guests see total cost. A $150 rate with $150 cleaning fee loses to $200 with $75 fee.
5. **Emotional pricing:** "I wouldn't pay that" is irrelevant. Price to market, not to your personal perception.
6. **Forgetting platform commissions:** Your $200 night is $170-176 after commissions. Build this into calculations.
7. **No floor price:** Dynamic pricing can over-discount. Set a minimum rate you won't go below.
FAQ
What occupancy rate indicates optimal pricing?
Generally, 75-85% occupancy suggests good pricing balance. Below 70% indicates overpricing. Above 85% consistently suggests you could raise rates 10-15%.
How much should I charge for cleaning?
Cover your actual cleaning cost plus a small buffer. Market research matters—if competitors charge $75-125 and your cleaning costs $150, you may need to absorb some cost in your nightly rate.
Should I price higher on weekends?
Yes, typically 10-25% premium for Friday-Saturday in most markets. Business travel markets may see the opposite—premium on weekdays.
How do I price for events?
Research events in your area (sports, concerts, conferences). For major events, rates of 2-3x normal are common. Book direct around events to capture the premium without commission.
When should I offer monthly discounts?
Always have monthly rates available at 35-50% discount from nightly. Corporate travelers and extended stay guests expect this. The reduced turnover costs justify the discount.
How often should I adjust my base rate?
Review monthly at minimum. Adjust for seasonal shifts (every quarter), market changes, or if your occupancy significantly deviates from target.
What's the best dynamic pricing tool?
PriceLabs and Wheelhouse are leading options at $20-30/month. Both outperform Airbnb Smart Pricing. Choose based on your comfort with configuration—Wheelhouse is simpler, PriceLabs offers more control.
How do I compete with cheaper listings?
Don't race to the bottom. Differentiate on quality: better photos, more amenities, superior reviews, responsive communication. Price-sensitive guests are often higher-maintenance and leave worse reviews.
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*Looking for investment properties with optimized revenue potential? Browse listings or list your property on a marketplace connecting furnished rental sellers with serious investors.*
- **Internal Links:**
- [How to Reduce Vacancy in Furnished Rentals](/blog/reduce-vacancy-furnished-rentals)
- [How to Optimize Listings for More Leads](/blog/optimize-listings-more-leads)
- [Operating Costs: STR vs Mid-Term Rental](/blog/operating-costs-str-vs-midterm-rental)
- [Underwriting a Short-Term Rental Property](/blog/underwriting-short-term-rental-property)
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*Consult a professional for your specific situation.*
Danny Radoman
Published 12 months ago
