How to avoid common pricing mistakes with Anurag of Pricelabs S7E6

Here's a question. When you have a guest come to stay at your property, do you know what recent studies have shown is one of the first things that they look for? Take a guess. Say out loud as you're listening to this with me, the WI fi code. That's crazy. But it's the time that we're in. Now tell me where do you keep your WI fi code? Let me know Ostleruk on Twitter, get in contact on Instagram, Facebook. You know how to find me. I bet it's in a little welcome guidebook that's nicely waiting on that kitchen table as the guest enters. That's where I have mine. For our family business, we took the time and effort to add in places to visit, eat and drink in that little welcome. But look. But you do know how many times over the years I've had to replace that thing because of things going out a day or people walking off of them. So at the start of this year I set out looking for something better. A good friend of mine, Danny from Optimize Airbnb, told me about a company called Hostfully. They designed and lovely little digital guidebooks that can be accessed on any device, tablet and are super simple to create. I've even recorded a video of how I created a stunning digital guidebook with Hostfully. If you want to watch that video little over the shoulder video, head over to boostly.co.uk hostfully h o s T F U L L Y the cool thing is that Hostfully lets you create one digital guidebook for absolutely free. So you can go over there right now hostfleet.com create a free one and then if you need more for different rooms or properties, then you can upgrade for a low cost. I loved it so much that I got in contact with David, Brad and the gang at Host Fleet to see what they could do for Boostly listeners and they've come back to me and I've got a little special treat lined up for you. So when you go to hostly.com you create a free one and if you wanted to upload, upgrade, all you need to do is put in the code boostly2M. So b o o s tly the number 2M and you will get two months free of their premium service. You can't say any further than that. If anything Desire deserved a little five star review for this podcast, then I think that should Paula Butler, Boostly Academy member, posted in our Facebook group that after creating her digital guidebook, her guests actually started to comment on how impressive they were. So that's not only improving her guest experience, but she's now generating talk triggers and this is all done for free. What I like as well is that you can also print off these guidebooks so you can still have them on the kitchen table when a guest enters your property. So that link again. Hostly.comBoostly2M is your coupon code for two months off a premium service. Right, let's get on with the show.

Hello, my name is Mark Simonson and welcome to the Boostly podcast. We are in season seven, episode six and today we're talking about pricing. Now, I don't know if you are like me, but for years I have manually updated the pricing for my family business, the Granary. I sit every Monday and I look at the prices and I adjust go up or go down accordingly. And there are times then I really make a mistake here and I either price is too low or I price is too high. I may be missing event that's coming up. Now the reason why I've got Price Labs onto this episode is because they offer a dynamic tool that will help you with this based on their AI and also their member feedback. Now you may be thinking, well I just use Airbnb for this. Well, Airbnb's model, I don't like it. Booking.com used to offer this. They've stopped doing it now. Price Labs have come in five years into the business. They got a lot of really good feedback and I've got a really, really good reviews. Danny, a good friend of mine from Optimize my B and B, he recommended Price Labs to me so I really wanted to get him on the podcast. We are very lucky to have them on today because they are super busy putting plans together for their future future projects. I got the co founder Anurag on and he's based in Chicago. We had a great chat. We talked about the most common pain points of Price Lab 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 forward/pricelab P R, I, C E L A B 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 Price Labs and we're talking all about pricing.

Hi everyone.

This is Anurag, one of the co founders at Price Labs. And right now in our Chicago office in a little phone booth, as you can see, a little bit of background. We started about five years back. Before that, I was doing the same dynamic pricing and revenue management stuff for United Airlines. So my background is in math and statistics, and it was sort of 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 and it made sense if Airbnb also had something similar, and it didn't. That's how we started off. Like, we were like, hey, maybe we should build something that will help short term rentals and vacation rentals do pricing as well as a large company like United Airlines or any other big company can do. Individuals can't really hire a team of 15 experts, PhDs, but we want to provide that, the same level of service to everyone in some ways.

Nice. And how many years ago did you say that Price Labs 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 our first market that.

We launched in and a few months.

Later we pretty much launched worldwide.

Wow.

So Price Labs have been going for five years. I guess it's always nice to kick off with this one. What was the one bit of advice that you wish that you had before starting Price Labs and starting up this huge business?

So, I mean, one, I think there'll be multiple pieces of advice. The biggest one is the value of user feedback in some ways. Right. So when we started early on, from our background, from my background, it was very easy to get user feedback in.

My previous role because we were working with the people.

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, we had customer facing people who were one of my co founders who would 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 realized that, hey, it's better if everybody speaks to customers once in a while. We actually now everybody on the team, regardless of whether they're engineers, data scientists, everybody speaks and does customer facing jobs as well. What that really has helped in is really getting to know what everyone's pain points are. It's one thing if my co founder speaks to someone and tells us that, hey, this is an issue that people are dealing with and we agree to that advice. But then when we see a user working through something and struggling with something, it really kicks off a different level of creativity in figuring out how to solve this issue because we saw this customer struggling with it.

So follow up question would be what is the most common pain point that you see that your customers are struggling with at the moment?

So 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 fine tune them based on things that they knew that our algorithm didn't. So they would spend a lot of time Price Labs. And the last thing we want is people to be spending too much time on Price Labs. They should be able to set it up, automate stuff. And then it's not just about market pricing, it's also you as a user or anybody who's hosting has their own views on what they are okay with, what they are not okay with.

You should be set up those rules and let the automation take care of it. Of course do manual reviews once in a while.

But we saw a lot of people.

Were doing way too much, spending way too much time on Price Labs.

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. In some ways right now, the struggle is the other way around in some.

Ways where 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.

So for those we very briefly mentioned Price Labs, but for those who have never heard of a pricing tool, because there are a couple of companies out there that do it. The reason why I reached out to you is that I believe that you are the best at it. If someone could, if you could just explain to someone, explain to me, I've never heard of it before. In very simplistic terms, what do you do and how do you benefit? Like short stay accommodation owner.

Absolutely, absolutely. So one of the things that we.

Early on saw happening a lot was people would set their price to, for an example, €100 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 is demand that books and in low season there isn't.

The problem here though is if you're.

Getting fully booked in high season, that's telling you that you, 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 travelers who will look at your property and book. So that was like we started off there to say, hey, at least everybody should be doing seasonal pricing. But then there's a lot more to it. Like weekends have usually have a lot more demand than weekdays. There might be a big holiday or.

An event coming up where you can.

Increase prices or maybe if nobody's booking, you should reduce your prices.

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 still get to say, in 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 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 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 and see if somebody books instead of letting it go unbooked. So those kinds of things are what dynamic pricing services can do pretty well. And also the flip side, where there might be an event that you just don't know is happening in your area. It's a conference that happens in a different city every year. And this year it's in your city. You didn't know about this and you might get booked for cheap three months out. Dynamic pricing services can usually increase the prices proactively because they are tracking not just your list, they're tracking everybody in the area. They're tracking hotels and what they are doing. They're able to figure out, hey, when there's a high demand period, when there's a low demand period, and adjust prices accordingly while staying within thresholds.

You said, I like the AI aspect of it, the automation aspect of it, because you're 100%. Right. I know. Speaking from personal experience, I used to be on our PMS every single Monday of every week and looking at what was coming up and I was always manually doing that. And sometimes you would just miss something. It's very easily done. Whether there was a big event coming up nearby or whether there was just a sudden spike in demand, it's quite easily missed. And for those that have never heard of this sort of software and specifically for those that say, have got guest houses or short term rentals in touristy areas, having a pricing tool to Adem is only going to benefit them in the long run. So if you're listening to this, I'd love for you to interact. Go onto Twitter, you can ostlyuk, you can Price Labs and you can just say what are you doing with your pricing? So let us know on the Twitter or on the Facebook or even on Instagram. Just get in touch and let us know if you're static. So if you're just keeping it at one price all year or if you're manually doing it, or if you have an automation system like Price Labs that is taking care of this and let us know the results. Now the next question I normally ask guests when they come onto the show is what is the one common mistake that you see owners make when it comes to pricing their property? But I believe that static is probably going to be the main answer. But is there anything else that you see mistakes that owners are making?

Right. So like you said, having static prices.

Is definitely up there. Actually people who change or like changing it once a week is actually 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'll still miss a few things, but at least you're going to do way better than if you set something in the beginning of the year and then just never.

Touch it the other.

So when we are talking about pricing, but we tend to think of this.

As revenue management, which is a little more wholesome and it includes other things as well. So for example, minimum stays is a super important factor when it comes to increasing your revenue. So it's not just setting the right prices but also making sure right minimum stays. 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 stay is at least five nights for that week. You don't want somebody to book a one night or a two night stay in the middle of that event because that will stop anyone else from being able to book the entire state. 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 book one or two nights and then block everybody off. So having the right minimum stay is equally important as prices. They can have a tremendous impact there. There are other things with minimum stay that are also useful. I know some 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 where they are restricted that they can only do short term stays for up to say, 30 nights in a year because of city regulations or something like that. What they can still do is take longer reservations for reservations longer than one month for 11 months of the year and then whatever is not booked with those long reservations, try to fill those with the short term stays. So those kinds of things can also be sort of managed really well. So you can, you can say, hey, for anything other than major events, I'm not going to open up my calendar for short stays and then rest of the time have a minimum stay of 30 nights and try to get along with me.

So I guess where I look at it now, you will know this and everybody knows this. Airbnb offers something similar where it's like dynamic pricing within their model. So I've always had a love hate relationship with it. And the reason why I look to Price Labs is because I believe that you just take that model and you just throw a bit of Popeye spinach on it and you make it amazing. So where did the idea come from for this with Price Labs? Was it born out of the frustration of models like that? And what, what did you try and do to make it better?

Basically.

Right.

So it actually didn't come out of Airbnb's smart pricing, which, which is what they call it, I think Airbnb launched smart pricing somewhere in 2016. We started price Labs a couple of years before that.

So they saw that you were doing really well and trying.

It's hard to say. They might have been independently working on it. To start off, right. The, 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, hey, let me put this on Airbnb. And he noticed that one Airbnb was.

Small, suggesting a price, but it was.

The same price for every night a year. And he knew that's just 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, hey, summer in Chicago is definitely like, double the. Double the demand. As winter, nobody comes, nobody want. I mean, some people do come to Chicago in winter for business, but very few people come for travel in Chicago in February. So we figured that definitely 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? And the spinach that you said we poured 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're doing. So they don't. An algorithm does really well, but a human being, when they work with the algorithm, can do even more, which has been our philosophy. So we want to give them automation and AI, but we also want to. For them to put in human intelligence. In some ways.

Yeah, I think you're 100% right there, that nobody knows their local area and the local price and better than the local person. And I guess by amalgamating the two, it comes up with a real nice recipe. So we're five years in Airbnb. Love what you do. They tried to model it, obviously not smashed it as well as what you guys have done.

I wouldn't want to say that they looked at what we did.

And this is my. This is my opinion, but I'm going to say this like, you've obviously done really well. You've come on my radar. Danny from Optimize My B and B was the one who really pushed me towards you guys. And so there's been a lot of things right, but not everything goes right in businesses. And this is a question I love to ask everybody. What was your favorite failure in the last five years for Price Labs? What was the biggest lesson that you've learned? And how have you been adopted it and added it to what you do?

Right. So the biggest. So the three of us who started Price Labs were All engineers. And as engineers, I think one of the things we undervalue or we tend to undervalue is how important marketing and sales is. And 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 have, we have improved over, over time, but very early on we paid very little attention to marketing and sales. We kept building the product and let it speak and hopefully that it's worked pretty well because word of mouth also is marketing in some ways provide the right customer service if you provide the right product. But, but we are still five years in, we are still not known by everyone. And that I think is, I would call it somewhat of a failure that we're still working on. We 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.

I think that just sorry to cut and I think dynamic pricing is going to be something that is widely sought after in 20, 20, 20. So I think that that is obviously going to help and I think just building a great product, listening to what your customers are saying and implementing that advice, that is going to be your best marketing. You know, we talked about Airbnb, we joked about Airbnb. But you know, if you listen to the owners and how they built this, then that is one of the models that they did. They went and visited their hosts in New York and they basically laid out the blueprint for the, for the, for the. Now it's one of the biggest brands in the world. So me personally, I think you are doing a fantastic job. And don't worry if you're not spending all the big bucks on marketing and sales and whatnot. I think it will just come nicely. So what is the plan for the next four years, five years, six years of price labs? What have you got in store for your members in your community?

Right, so there are two or three things, major things that we are always looking to work on. It might look from the outside that, that, that hey, 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 yeah, I, I think for the next couple of 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 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, there's HomeAway. They are all doing 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.

Right.

So Home Away I think has their own thing. There are so many property management systems around that we. So we integrate with about 30 of them, but there are more than a hundred of them that I know of, so there's still room. If we are not integrated with somebody's property management system, they come really use us. So that's another thing that we need to be working on. So yeah, there's work in front of us, if that makes sense.

Well, I know that you've recently just partnered up with xivu. I'm a massive fan of xivu, so that's good to see. And like you say, there's a ton of other PMSs for you to reach out to, so it's exciting to see what comes up in 2020. And Price Lab kindly put a blog together for Boostly if you want to go and check that out. It's boostly.co.uk forward/pricelab. P R I C E L A B. I've missed off the S on the end, so it's all easy to spell. But in that blog, and I'm gonna let yourself anurag just mention about this, there's a free download that people can go and get hold of right now that will help them with their pricing. Could you just explain and just give a bit more information about what that is, please?

Absolutely. 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. 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 date of each reservation, end date of each reservation and you can see the format in there. And what it does is it plots out these five really nice charts that show what kind of trends exist in your booking data. So it will show, just by looking at your booking data, it'll show what's your high season, what's your 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 when do, when does an average book, 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 see that, hey, half my, half my bookings 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 to 30 day period is passed and I'm still not booked. So I need to start doing something to get those, get some bookings in. Then it shows you sort of trends about stay length. So what, it will show you what, how many one night, two night, three night, five night bookings have you gotten over the last five years, sorry, over the last year to be, for you to then be able to again make a judgment. I mean if, if you're getting a lot of long bookings and one and two night bookings are a very small fraction, maybe you can just 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 were five nights, are not able to book around that date anymore. So you really don't want to be taking those one night bookings this far out. If anything, if you want to take one night bookings, take them last minute because if it's unbooked, very few people will book a five night stay very last minute. So you can reduce your See, it will tell you, it will show you charts where you can deduce these kinds of observations to be able to figure out. And, and it has nothing to do with using price labs 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 better.

Yeah. And I think this is the key thing here, is that you are in complete control of what the minimum price is and what the maximum price is. So you will never go below what you set the rate as. And it will just mean that there is something in the background that is automatically taking care of your pricing. So it can go higher or go lower, depending on what the local or the county level demand is. And I think that is, that is the key thing that we're getting across here is one of the big things that I noticed, the big pain points in the hospitality community Diversity academy is that still short Stay Academy owners try and do everything themselves. They try and juggle all of these spinning plates at once. And with pricing, this is where your profit and your loss margins will be won and lost because of how you price your property. You could be just being static the whole way through. You set it in January, you leave it till the end December, and you do nothing about it. You are leaving money on the table here. Or even worse, you're not going to be booking out your property because you're too high or you're just not being seen. So I do think that doesn't matter when you listen to this because podcasts are podcasts. They stay evergreen and people can find them at any time. Whether you listen to this in December 2019 or if you're listening to this in 2020 or 2021, it if you act now and if you act now on dynamic pricing and don't just go on Airbnb and tick that box, because that is not what we're saying. Look at somebody like Price Labs. There are a ton of other companies. It doesn't have to be Price Labs. This is the one that I recommend. I like them. I've got them on the blog. Like Danny, who I trust massively from Optimize. My B and B is recommended them. And I've looked at everything and I think it's a super simple setup. Start to look into it. So I. I'm going to be talking about this a lot more. Boostly Academy members, you're going to be hearing me talk about it a lot more. The podcast. We're going to be talking about pricing because I believe this is something that is going to be really important. But Anurag, I just want to say thank you so much for tuning in today. Now, I know you don't do much sales and marketing, but is there a social media of choice that you like to hang out? Is it Twitter? Is it LinkedIn Is it Facebook? Is it Instagram? If someone wants to reach out and ask any questions to you after this, where would be the place to come?

They can do Twitter, Facebook and LinkedIn, but the fastest answer will actually come if you email us at support Price Labs co. There you go. That's, that's what we monitor every minute and every hour. The Facebook link, yeah also work. But if you want a really quick, thorough answer, email is the best. But yeah, our Twitter is I think Price underscore Labs. Yeah, Facebook is Price Labs 1 and I don't know what LinkedIn's URL is but if you search for Price Labs you'll find it, don't worry.

In the show notes in the blog post that come with this interview, we'll have everything in there and we'll also include URLs on how you can go find the blog that you put together for the Boostly website. And also as well I'll put blogs and links in there on how you can find out more about the Boostly podcast. If this is the first first time that you have tuned in to the Boosted podcast, I just want to say thank you very much. You've got tons of episodes to catch up on. You can go and rate, review and subscribe whether it's itunes or Spotify or wherever you catch your podcast. So thank you very much for tuning in. This has been season seven, episode six. Coming back very soon with season seven episode seven. But in the meantime if you have enjoyed this, like I said, please go leave it a five star review. It just helps it climb up the ranking. I want to thank hostfully who are the Boostly Podcast sponsors and I thank you for tuning in and we'll speak very, very.