The Boost Hospitality Podcast is back for another season! We are now in Season 7, and we are currently on the sixth episode! In this episode, today we're talking about pricing. Today's guest is Anurag Verma of Pricelabs.
The reason why I've got Pricelabs on to this episode is that they offer a dynamic tool that will help you with is based on that AI and also then the feedback.
What is Pricelabs?
Price labs have five years into the business they got a lot of excellent feedback, and I've got excellent reviews. Danny recommended price labs to me, so I want to get on the podcast. We are fortunate to have him on today because they are super busy putting plans together for their future projects. I got the co-founder on around and he's based in Chicago, we had a great chat we talked about the most common pain points of Pricelab members, we look at some of the strategies that you could adopt and how you can bring it into your business and also as well as a free download for everybody that is listening or watching this podcast. All you need to do is go to Boostly.co.uk/pricelab
Go there, check out the blog that they did for the boostly website, in there is a link to the free download that will help you get started with your pricing strategy.
So without further ado, let's flip over to Anurag of Pricelabs. We're talking all about pricing.
Anurag Verma
And it was a natural fit to do revenue management and pricing for an airline which uses a lot of that stuff. But a couple of my co-founders figured out that at some point that they were hosting on Airbnb. It made sense if Airbnb also had something similar, and it didn't. That's how we started. Like, we were like, “Hey, maybe we should build something that will help short term rentals and Vacation Rentals to pricing as well as a large company like United Airlines, or any other big company can do.” Individuals can't hire a team of 15 experts of PhDs, but we want to provide that same level of service to everyone in some ways.
How many years ago did you say that Pricelabs was founded now?
It was 2014. So five years back, I think August was when we first launched and started taking users in Chicago. So Chicago was the first market that we launched in and a few months later, we pretty much launched worldwide. Wow.
What was the one bit of advice that you wish that you had before starting your company?
One, I think there'll be multiple pieces of advice. The biggest one is the value of user feedback in some ways. So when we started early on, from our background, from my experience, it was effortless to get user feedback in my previous role, because we were working with, for example, at United Airlines, we would build stuff, we would meet these people every day or every week, and get feedback from like, how things are going, what do they want built next and things like that?
Very early on. Some of our teammates were doing it, but not everyone. So we had a customer-facing people who were one of my co-founders who will talk to everybody. But I was one of the engineers, and the third co-founder was also an engineer. We weren't necessarily speaking to our customers directly all the time.
It took a few months, and then we realise that it's better If everybody speaks to customers once in a while. Now everybody on the team, regardless of whether they're engineers, data scientists, everybody talks and does customer-facing jobs as well.
What that has helped in is getting to know what everyone's pain points are. It's one thing if, if my co-founder speaks to someone, and tells us that this is an issue that people are dealing with. And we agree with that advice. But then when we see a user working through something and struggling with something, it kicks off a different level of creativity in figuring out how to solve this issue because we saw this customer struggling with it.
What is the most common pain point that you see that your customers are struggling with at the moment?
It's been changing over time, very early on, it was, we would provide a lot of our pricing recommendations, and people would always want to fight in them, based on things that they knew.
So they would spend a lot of time on Pricelabs. The last thing we want is people to be spending too much time on price. They should be able to set it up, automate stuff. And it's not just about market pricing. It's also you as a user, or anybody who's hosting has their views on what they are okay with what they are not.
You should be able to set up those rules. And let the automation take care of it, of course, manual reviews once in a while. But we saw a lot of people were doing way too much time on prices. So what we did, as a result, was we built in a lot of these automation controls so that people can tweak our algorithm to get what they want. Now, the struggle is the other way around in some ways.
It's also about education like we have these controls in place, but we need to make sure our users understand how to use them correctly.
In simplistic terms, what do you do and how do short-term accommodation owners benefit?
One of the things that we early on saw happening a lot was people would set the price to, for example, a hundred euros per night for every single night of the year.
And then during high season, they would get booked all the time and then during low season, they would pretty much not get any bookings. And that was fine, and it was acceptable because everybody understood that in high season there's demand.
The problem here though is if you're getting fully booked in high season that's telling you that you can probably raise your prices a little bit
And if you are not getting booked in low season unless the demand is absolutely zero and that could be happening in some very seasonal markets, but there are plenty of markets where even in low season the demand is not zero if you lower your price to a certain extent you will get some travellers who will look at your property and book.
So that was like we started there to say, at least everybody should be doing seasonal pricing. But then there's a lot more to it like weekends have usually had a lot more demand than weekdays. That might be a big holiday or an event coming up where you can increase prices or maybe if nobody is booking you should reduce your rates. So what we tend to say is, don't keep prices static. Even if you have seasonal prices, weekend prices go in often and change those and what dynamic pricing services do is do that on your behalf. You still get to set controls you always get to say in the high season don't drop my prices this even in low season.
People might say, I don't want the prices to ever go below 30 nights 30 euros a night. So you can still set those controls, but let some automation do the work for you. So for example, in April in your area, you might say 50 bucks, 50 euros per night is a fair price.
But if it is last minute if it's still not booked, are you okay dropping it to 40 euros and see if somebody books instead of letting it go and book now those kinds of things are more dynamic.
So pricing services can do pretty well. And also the flip side where there might be an event that that you don't know is happening in your area. It's a conference that occurs in a different city every year. And this year, it's in your town. You didn't know about this, and you might get booked for three months out. Dynamic pricing services can usually increase the prices proactively because they are tracking not just your list tracking everybody in the area. They are monitoring hotels and what they are doing
They're able to figure out a when there's a high demand period when there's a low demand period and adjust prices accordingly. While staying within thresholds
What is the one common mistake that you see owners make when it comes to pricing their property?
Having started prices is up there. People who change I like like changing it once a week is much better. And it gets you almost all the way there.
In terms of making sure you're always up to date. In some ways, there's, like you said, if you're doing it manually, you will still miss a few things. But at least you're going to do way better than if you said something at the beginning of the year, and then never touch it.
So when we're talking about pricing, but we tend to think of this as revenue management likes, which is a little more wholesome, and it includes other things as well. So, for example, minimum stays are a super important factor when it comes to increasing your revenue. So it's not just setting the right prices, but also making sure if you have a big event coming up, that's a week long. So for example, a conference is coming up or if you're in Milan and Milan, Fashion Week is coming up. You want to make sure your minimum stays at least five nights for that week. You don't want somebody to book one night or two nights. Stay in the middle of that event, because that will stop anyone else from being able to book the entire stay.
And there are going to be a lot of people who want to book the entire length. You want those guys and not the ones who booked one or two nights and then block everybody off.
So having the right minimum stay is, is equally important. As prices, they can have a tremendous impact that other things within minimum stay are also useful. I know some who might be in a restricted area where they can't drop below a certain point.
But for example, and this is a great example where we have some users with they are restricted that they can only do short term stays for up to say 30 nights in a year, because of city regulations of something like that.
What they can still do is take longer reservations for reservations for longer than one month for 11 months of the year. And then whatever is not booked with those large reservations try to fill those with the shot themselves.
So those kinds of Things can also be managed well. So you can say, for anything other than major events, I'm not going to open up my calendar for 30 days. And then the rest of the time have a minimum of 30 nights and try to get longer.
Where did the idea come from for this with Pricelabs?
It didn't come out of Airbnb. Smart pricing, which is what they call it. I think Airbnb started Smart pricing, I thought somewhere in 2016. We started Pricelabs a couple of years before that.
The thought that we had about why we want to do this is one of my co-founders, Richie; he was hosting. He was a student at that point in grad school, and his roommate had gone off for an internship, and he had this extra room. And he's like, let me put this on Airbnb and he noticed that one, Airbnb was suggesting a price, but it was the same price for every night.
And he knew that's not what it should be. Because, of course, I mean, he had a very technical background and he and I used to speak often when I was working at United, and he's like summer in Chicago is definitely like double the demand as winter. Nobody comes. Nobody wants. I mean, some people do come to Chicago and winter for business, but very few people arrive for travel in Chicago in February.
So we figured that there's some need for doing this in Airbnb as well. And that's where we started off thinking, Okay, how do we go about this? What data do we need? How do we get that data? How do we come up with a model that will come up with the right prices and stuff like that?
We pulled over, it was giving our users sort of a lot more control over prices, like the people who use us, we think of them as sort of savvy hosts and savvy managers who know a lot about what they are doing. An algorithm does well, but a human being when they work with the algorithm can do even more.
We want to give them automation and AI, but we also want to do for them to put in human intelligence in some ways.
What was your favourite failure in the last five years?
The three of us who started myself who are all engineers, and as engineers, I think one of the things we undervalue, what we tend to underestimate is how important marketing and sales is. I don't fully know if we have fully gotten around it yet, so I mean, we don't do as well on marketing and sales and stuff like that yet. It's something definitely that we are we've improved over over time.
But very early on, we paid very little attention to the marketing and sales we kept building a product and let it speak and hope that it's worked pretty well. Because word of mouth also is marketing some ways to provide the right customer service if you offered a product.
Five years in, we're still not known by everyone. And that I think is I would call it somewhat of a failure that we're still working on that they should be able to, everybody should by now at least know that they should do dynamic pricing, regardless of whether they know of us or not.
What is the plan for the next 4-6 years of Pricelabs? What have you got in store for your members in your community?
So the two or three things, essential things that we are always looking to work on. It might look from the outside that that, that, this, this product is complete. But for a lot of users, there is still a lot of functionality that they would like to see that would help them a lot.
So I think for the next couple of product roadmap is pretty full and what needs to be done from our perspective. And as time goes by, it's a never-ending process. It's always about improving on what you already have. So we are going to keep improving the algorithms the product itself and Things like that,
then there is the whole customer service part of it. So we do tremendously well on customer support right now. But it's something we want to keep improving on, especially as we grow and get more customers who have more questions. We want to be able to answer them as quickly as they come up with that question, right. So we do well on that today, but we need to figure out how do we keep up on that as we continue growing.
And then we also have to think about how the whole industry landscape is changing in some ways. So there's Airbnb, there's booking.com, some amount of Airbnb has smart pricing. I think booking.com used to have and I'm not sure if they still have or not.
There are so many property management systems around. We're integrated with about 30 of them. But there are more than 100 of them that I know of. So there's still room. If we are not integrated with somebody's property management system, they can't use us. So that's another thing that we need to be working on.
Could you explain and give a bit more information about your free download?
So the download consists of two parts. One is an Excel file, which has a tab that comes in pre-populated with sample data in there. But it's just five columns, you can paste in, and it's an Excel file, you're not giving this information, only the file stays with you. So you're not giving this away to anyone else. You can paste in your reservations for the last one year.
So listing ID, and you can leave that blank if you want. Start with each reservation and date of each reservation, and you can see the format in there.
And what it does is it plots out these five nice charts that show what kind of trends exist in your booking data. So it will show just by looking at the booklet it'll explain what's your high season, what's a low season what's your shoulder season, it will show what day of weeks get booked the most. When do most people check-in?
It will show how far out does an average person book so for example, it will show you that depending on your data as an example, I might see that most of my bookings tend to come between 14 and 30 days out. If I understand that, that half my reservations are coming this far out, then I know that if it is within the next two weeks, and I'm not booked on certain days, I should start lowering my prices because that pre-booking window the 14 day period is passed, and I'm still not scheduled.
So I need to start doing something to get those get some bookings, and then it shows you sort of trends about stay lengths and thus what it will show you what, how many reservations Have you gotten over the last year For a view to then be able to, again, make an adjustment.
I mean, if if you're getting a lot of long bookings, and one and two night bookings are a tiny fraction, maybe you can have your minimum stay set to three nights, you're not going to be rejecting too many of these short bookings.
But what you will get in return is sometimes it might be happening that those people book a one night stay. Three months out. And now the bulk of your bookings which will find nights are not able to schedule around that date anymore.
So you don't want to be taking those four-night bookings as far out. If anything, if you're going to make one-night bookings take them last minute because if it's unbooked, very few people will book a finite stay very last minute so you can reduce your price.
It will tell you charts where you can produce these kinds of observations to be able to figure out, and it has nothing to do with using Pricelabs or anything else. All it's doing is if you want to keep doing it manually, it will still tell you enough information to be able. To-Do it.
Know more about Pricelabs
Email: [email protected]
Twitter: @price_labs
Linkedin: www.linkedin.com/in/anuragxverma
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