MEET the Founder of the Industry's Most Powerful Dynamic Pricing Tool!

Welcome back everyone to the Short Term Rental Riches podcast. I'm really excited for our guest today. He's one of the co founders of one of the companies that we talk about a lot on this channel because they handle dynamic pricing. So today we're with Anurag Verma. He's one of the co founders of Price Labs. How you doing, Anurag?

I'm good, Tim. Thank you so much for having me here again. Yep, yep.

Fantastic to see you. I was searching my email just to get a little bit more about your bio and I found an email between us from 2017 actually. So we've known each other for quite a while. I know we've seen each other and met up at a bunch of conferences and we've been users of Price Labs for a long time. Yeah. Tell us where is Price Labs today? I mean you guys are massive, you're worldwide. Just give us the background. Where are you guys at today?

I go there, but before that like 2017 was eight years back. It's been a ride for I think the entire industry. Right. Like a lot of the companies that are out there today barely existed since accident, including us. Right. And that's true. Things have changed so much.

Yeah, they have changed so much. Yeah. And I'm excited to dive in today to see where you think things are headed as well. But we'll get to that in a few minutes.

No, absolutely. So in terms of wealth, Price Labs, we started in 2014, I want to say. So like you were like one of the started in 2014, built out of beta, put it out in the world to see is anybody interested in pricing the short term rentals dynamically. Turned out they did. And when that happened we were like, oh, maybe you should like register a company and do this for real. So 2016 is when we actually started.

So paid product or paid version of the product. So like 2017 is when you showed up you pretty early. Yeah, pretty cool.

Now we manage or not we manage, but we price about 450,000 properties around the world or units around the world which if you had asked me or anybody else in our team back then.

The number just seems crazy now. But we integrate with like 150 different property management systems. I think back then I didn't even know that many property system property management systems exist.

There weren't that many. There weren't that many.

Now maybe there were that many that like we didn't know. Like you get to know about some of them. Of course a lot of new ones have also come up Right. So that's totally the case as well. Yeah. And our team is spread out around the world. So we started out in Chicago and we're like pretty vehemently, the entire product team needs to be in one place philosophy kind of folks till Covid hit. And then we're like, oh, now that we're doing remote, might as well like spread around everywhere. And so now we have presence in US a little bit in, I want to say a couple of folks in South America.

In Europe, a lot of folks in India, a lot of folks in Philippines. So like.

Spread all over the world. So.

Yeah. And started out just as a pricing system. And over time we've been adding more and more layers with the philosophy that our core expertise is in one, revenue management, and then two, the data that powers revenue management. So we scrape a lot of data, we collect a lot of data. So even if it is adjacent to revenue management, if the data is helpful, being able to say, okay, how can we make this, how can we solve a problem for a customer? Right. So started with dynamic pricing. One of our big push was dynamic pricing by itself is not enough. Like every. Everybody has preference of what they want out of pricing. So you should be able to make the algorithm work for you if you want to. So went through that, then rolled out like internal reporting, rolled out market dashboards, and then last year rolled out revenue estimators as a product. So like if you're looking to invest in or if you're a management company and owners are coming to you to say, how much can I make here? Like instead of that process taking four hours, can we make it take five minutes? Yeah.

So, well, okay. So yeah, way back in 2016 when you guys started. Fast forward to today. 450,000 properties using price labs around the world. A team spread around the world and a tool that does so much more than it did back then, including the revenue estimation which you just mentioned. And I know our teams used quite a lot.

How.

I'm just curious, how big is your guys's team now, Anurag? I mean, how many people are supporting Price Labs?

They have about 2. 250 folks. One of our biggest teams is customer support. I think we have about 50 people in that team. About 100 people between engineering, data science and product development. So like a pretty large team there as well, given how many moving parts there are to everything involved. So yeah, like a much larger team.

Than I. Yeah, yeah, yeah. And your background or before you, you started price Labs, you were working in the airline industry.

Yes.

Can you tell us. I mean, a lot of times, you know, founders, they start companies to solve problems where, where they see them, right? And so it sounds like you sort of were working in this area and you brought it into the short term rental space when it didn't exist.

So that I had the benefit of having co founders, I want to say. So my background was like, my background was strictly in statistical modeling, dynamic pricing, those kinds of things. I was doing it for United Airlines. One of my, I had no intention of starting anything. One of my close friends from undergrad was managing a short term rental in Chicago and him and I were talking and he's like, hey, Airbnb is going to get going to be a big thing. Right? But there's nothing doing pricing here. You know how to do pricing, like, should we figure out how this can be done for Airbnb? And we got talking and it's like, okay, like does look like something should exist here, so let's give it a step kind of a thing. And so from that sense, there was somebody who was in the industry as a vision for us who had the problem. My co founder. And then we found a third person who used to work at Orbitz, like had the travel technology experience at Orbitz.

Okay.

I had an engineering background to say, okay, how does distribution work, how to make the platform work so that it's connected to everything and all of that. So.

So yeah, so it was kind of a need from the industry and then some skills that were useful for the industry. Broader traffic industry, I want to say.

Well, yeah, it's definitely a useful tool and you know, that's evident in the 450,000 properties that are currently using it. And I know it's changed a lot, you know, since we first started. I mean, yes, you guys are just releasing new features all the time, but it's because things are getting more advanced, they're getting more detailed, the industry is getting more competitive. And so I know that, you know, someone, someone can turn on price labs and it can certainly help them in a lot of ways. And take away, you know, when we first got started, I mean dynamic pricing was amazing. You didn't have to adjust weekend prices every week, you know, and do all that. But now there's like so many settings that it's almost could be overwhelming sometimes. What would you say to people out there that are maybe just using it, like turning it on, but not really getting to the settings versus like the super users.

So I want to say there is probably a happy medium somewhere in between. So because we see both ends of the spectrum. Like, we have customers who set things up and then don't log in again for a couple of months.

And then we have folks who are in there every day and making small incremental changes, up or down, like I said, for every weekend. And our general thought process is, okay, you should not have to go in every day and do this tech. And again, it depends. We have customers who have 2,000 properties and three revenue managers, and they are in the system. That's their daily job, right? So we expect them to be in the tool all day, every day. But if you have one home, for example, the thought is you shouldn't have, like, you shouldn't be going in every day, but it should be more of once a week, once every couple of weeks kind of a thing. Of course, if you have 50 homes or 100 homes, you will be in there a little more. But there is a happy medium, like you can. The hard part of pricing is you never know what's the right answer. So if there is a date in future that let's say there is some event happening and you haven't gotten booked yet, you can start thinking, oh, the, maybe the price is too high. Like, let me see if I can lower it. And maybe you lower it by 50 bucks and you, and you get it booked three months out, then you'll start thinking, did I lower it too much? Did I get booked too quickly? Like, so you can very easily argue for both sides to say, hey, it's okay, or it. So.

The thing that we.

Want to do, we have put in a lot of, made a lot of data available in the platform to be able to say, to be able to be a better judge of, is this price too high or not, or should I change it right now? Most cases the answer is maybe not. But if you have compelling evidence, human beings have information that no computer might have or no algorithm might have. So there are going to be times where you know absolutely no, like, I know exactly what's going on and I need to change this price. But in most cases, when you look at this event and we're like, is this price too high? When that question comes up and some, like, folks email us to say, hey, like, why is the price here so much higher than every weekend around it?

We essentially go into your account and look at the same data that you have access to to say, hey, look, we are seeing this spike that is unnatural for this time of the year, this far out. These many bookings indicate something big is happening. Also.

For this time of the year, three months out, 80% of the demand is yet to come. So.

Being priced a little higher than the market is, is okay. Like if, if more than half the demand was already booked and you were priced quite high and worried, that's a different story. But when most of the demand is still yet to come and we are seeing a spike, maybe it's okay to hold. So what you have been doing, I want to say in the last three, four years, one, we have been improving the algorithm, but two, we have been making a lot of this data available to say how can you answer that question of like, should you worry right now or not? Essentially, if that makes sense.

Right, right, yeah, I know. Yeah, that definitely makes sense. We've seen that on our end. Like your market dashboards, for example, do a really good job of presenting data and in a really great way. You know, I think, you know, if you want to be like a super user, still have to know what data to look at, you know, and, and you have to understand it. And it seems to me, you know, correct me if I'm wrong but you know, Price Labs helps out tremendously. Like it's a tool, it's an essential tool in my opinion for any short term rental owner, vacation rental owner, boutique hotels.

But the job of a revenue manager is quite complicated. You know, I mean people dedicate their careers to it and it's, and it's one of the positions that a hotel will pay more for than almost every other position hotel.

And, and so yeah, like how much extra revenue would you say? I know it's a really hard question but like how much more do you think like a professional could squeeze out of this tool? Just really understanding the data behind it.

So we see two kinds of professionals. I want to say. Actually before I get to this question, I want to go back to the previous one where there are, so any pricing system, like it doesn't operate in vacuum, we know quite a bit about the market or each market and how they manufacture and things like that. But each property is unique, right? So there are going to be things that you know that you set up in Price Labs and give it as an input and then you fine tune those inputs over time. So like that's, that's also like, that is one of the things that like when you are starting off that is required that you do come in a little more frequently.

And if you have 50 homes then you're probably adding one and losing some or all of that stuff is happening. So you're probably in the system quite a bit. So, like, it is, like, it is totally okay to be in the system all the time if you have a larger portfolio. But in the beginning, when you're setting this up, when you're running it.

When it comes to professional managers, definitely, like, there are two ends of the spectrum where, one, we have some revenue management partners where they understand the system really well. Their first thought is not to say, how can I make the system do exactly what I want to do? Their first thought is like, okay, why is the system doing what it's doing?

Once they figure that out, then they go in and say, okay, the system is doing this because of that. But I know that that's not happening. Let me go. Let me bring in my own insights, opinions, and.

Sort of in the form of settings to make it work better.

In those cases, we see, like, revenue managers can bring in quite a lot of.

Value, like a good revenue manager might.

It's very hard to quantify. I don't know how to put a number on it. But a good revenue manager, I want to say, is as important as a good revenue management system.

Give us some numbers just for fun, you know, just a range.

So we did sort of a study.

Where we looked at new customers were joining Price Labs. And then we said, and we have all kinds of customers joining Price Labs in any given month. Larger ones, smaller ones.

Across the board. We saw something like by month three, on average, the RevPAR was up by somewhere between 20 to 25% for folks who were small hosts. On the larger hosts of larger PM side, I want to say the number was smaller. It was more in the 15%, 10 to 15 percentage. But you could also see that they were already doing some dynamic pricing in the sense that even before starting Price Labs, they were doing something in the. In the PMS or on Airbnb terrain. Right. So it depends, like, how do you then say. One thing you can say is like, okay, like, the reason why they didn't see the lift of 20 to 25% is because they were already getting some lift just because of any manager there. So you can kind of say maybe that's the value that they bring. Like 10 to 15% is automatically the value that auto any matter. I think so. But I also want to say a good revenue manager with a good tool is probably going to be doubly effective because especially as a portfolio grows, doing it manually is like the revenue manager spends more time keying numbers in than sort of using their smarts to get the most out. Right. So what should this 20% play as IV to. To some. Some.

Random guess like right, right.

There's no exact science for sure, but.

Yeah, yeah, but definitely there are a lot of very good revenue managers in the industry. I want to say if you went back 10 years, revenue management tools went to exist and revenue management as a discipline in short term rentals was kind of almost. It was there, there were people who were doing it, but even the distribution was so sort of difficult. In a lot of PMSs you would say here's my summer rate, here's my winter rate, here's my snowbird rate. And that was sort of the revenue management that was possible. If you go back 20 years, you had to send out like nobody was booking online. A lot of for larger PMs bookings would come from travel agents. You would print out your rates for each week and send it out to travel agents to say here my dates, what do you do in that case? The revenue manager gets to decide rates once in the beginning of the year and that's it.

Now, as technology is getting better.

Distribution is not even a question. They can change rates multiple times a day. They have all of the tools available to be able to see what's happening in the market, what's happening that will put forth here. So.

Just both the human part and the technology part have exploded in the last 10 years, I want to say.

Totally.

Yeah.

Well, we've been enjoying all of the new features that you guys bring on. Obviously you've brought them on for reasons and there's good use for them. I'm just curious, do you know just off the top of your head, I mean like how many features are in price labs if, if you had to guess? I mean settings, there's gotta be just.

Tons, tons, you know, not so settings. So features like is a checkbox to start showing some data or features.

I would say more of like setting configuration.

Yeah, I think we have somewhere between 20 and 30 what we call customizations. So for example, by default last minute you want to discount rates. Given the structure of the industry, discounting makes sense. We come up with what the right discount should be for your market. But you know, can say hey I, maybe you don't want last minute bookings for whatever reason or you don't want to discount as much last minute. That's a setting. What happens when there is a gap? Does a gap filler come in for minimum stays? That's a setting. Do you want far out prices to be slightly pumped up? Pumped up a lot, not bumped up at all that's the settings. These are price settings and there are cosmetic settings. There are folks who say, I don't want prices being all over. Just round them out to the nearest 10. It just makes my brain work a little better. That's the setting. So something like that. We have about between 20 to 30 settings, but we don't want you to be using every one of them. Right. Like it's, it's right. It should be like, I have this need and so I'm doing it. What we don't want is for you to go in and say, oh, there's a toggle. Let me turn it on.

In most cases I want to say those settings are not, you don't need to do anything with those settings. There are five or six that we highlight to say, hey, here are the basics. If you want to play around to see what exists, this is what you can play off with.

Yeah, you guys have done a really good job on the platform with education. You know, there's, I mean, if someone wants to, they can really, really dig into things and learn them really well. But those sort of essential settings, you guys have done a really good job at just laying those out and explaining why things are happening.

Their education piece, 100% right. Like if you think about revenue management systems or pricing systems, the other place that they exist in is hotels, airlines. And in both those cases it's somebody's full time job to be sitting on that revenue management system. Like they are trained for it. They get degrees in statistics or whatever else to be doing those roles. Whereas in this industry, in our industry, if you're a homeowner who's listening on Airbnb, you still want to use.

And so that somebody's job then to be able to give the right training. So I think that's where we said, okay, we have to do this because if we don't do the right kind of training, then remaining management systems can be complex or a little daunting. So as much as we do on the education side, we want to.

Yeah, yeah, you guys have done a really good job. Question for you, Anurag. I know you know, there's a wide range of people that tune into the show. You know, some people are just getting started, some people haven't gotten started. Some people have large portfolios or boutique hotels. What's like one feature or setting that you think more people should take advantage of that maybe they don't got it.

So the central, like if everybody who comes to price hubs, if I could tell them like One thing. And we try to tell them that one thing in many, many ways is of course, you know this, get the base price right, right? So, and to get the base price right, the base price, think of it as your average price per night across the year around which we'll say what to do when there's an event, what to do when there's a high season, when there's no season, last minute fallout, all of that, right? But now, like the question is like, how do you get. Every home is unique. Like, how do you get this right? There are multiple places where you can look at data. Like somebody comes and asks us, we say, okay.

How does the market price for homes that are similar to you? You can use that as a starting point. If you're an existing short term renter, we also pull in your reservation data and there is a screen, there's a tab in our next core calendar called neighborhood data where we show you with your current settings, what are your prices looking like in a chart? What are the market prices looking like? You can also add, show me how my last year's bookings look like on this chart, right? Then you can say, okay, like if this is the base price I go with, I would be like 40% higher than my last year's bookings. And at that point most people should say, okay, that either I was underselling, in which case I should have sold out everything.

But if I wasn't, if I wasn't selling out everything, then maybe this base price is too high.

So there's a lot of data available in neighborhood data and in base price for you to be able to say, okay, what's a good starting point? And then like you said, don't leave it as, don't set and forget it. Come in every week and say, am I getting enough bookings or not? So I'm not getting. There are indicators in the system to tell you that you have not been getting enough bookings, but you also know that you have not been getting bookings. You can say, okay, maybe I set the space price too high. When a new property comes in, we automatically try to include all of this information and come up with the right base price. But.

There is enough available that I would say if everybody could go look at that, they would perform really well.

Yeah.

Those are great features you guys added. Again, I mean, all this stuff you guys just been adding and adding and it's been really helpful. Okay, so making sure someone has the base price right is, is a massive first, first step there.

I think I said it more because you said there are folks who may not have their first short term rental yet. It's like the biggest lift you'll get is from getting the base price right and nobody gets it right in the first go. But knowing that, you fine tune it over the first few weeks to get to the sweet spot where you're getting.

Just the right number of awesome good stuff. On our well, what would you say to someone out there? You guys just have access to so much data, it'd be amazing to see the back end with you there sometime. But what would you say to someone that is out there? We work with a lot of different properties in a lot of different places and sometimes our partners that join us, they have their own opinions on their prices, what a minimum should be and things like that, which of course, you know, it's their property. At the end of the day we'll, we'll listen to what they say. But you know what we found is that the more variation you can have in your prices, the more flexibility generally the more money you're going to make. Would you agree with that and if not, what would you add to that?

Generally speaking? Very true. Like if you, if you try to set a minimum price that is too high.

Compared to the base price, for example, our system will give you sort of warning to say like hey, for last minute bookings for low season, like this doesn't give the algorithm the flexibility to go go around enough. Now people have an opinion on their prices because they, they know something, right? Like it's those opinions don't come from vacuum. They know something and it's okay to have those opinions.

What I would say is I can also look at sort of evidence in some case, right? So let's say you said I have a two bedroom in Chicago and I never want to sell below 400 bucks a night.

And maybe this is coming from some knowledge that I heard some friends say that they sell their two bedroom for 500 a night all the time, right? So I say they sell it for 500. Why should I sell for anything below 400 at all? It's okay like to start there. But if you're going through February, right, right now and your occupancy was 10% or 20%.

If at all. February is pretty lean in Chicago, let's say all the cold, then use that as evidence to say oh maybe this 400 number was too aggressive, right?

Let me see if I lower it, what happens? So go in there with your opinions, but also with an open mind to learn from experiences and you don't have to wait for time to pass, like for February to pass to realize that.

You can also look at your forward looking calendar like, hey, March is coming up. All my prices are sitting at the minimum price because I set the minimum quite high. I don't have too many bookings. The market seems to be at 30% occupancy.

Looks like I could be gaining something by lowering my minimum price. So it's okay to start with those opinions, but if there is, maybe you are that fantastic property that sits 400 and keeps getting booked across like February and March, in which case you say, I actually see what I said was true. Like I'm still getting bookings, I don't need to change a thing. And that's okay as long as you. I think when you said the revenue managers or professional revenue managers, I think the number one thing they do and know is they know something. But every day they are trying to gather more evidence to say, okay, if I change this rate, lower it by 5% across my portfolio, do I suddenly start seeing a lot more bookings or not? The booking page doesn't really change. They go back and understand, okay, by loading by 5%. It's not like I got new bookings. I got the same bookings, but not 5% lesser. This was not a good move. So yeah, those are the kind of things that many managers take a look at and sort of learn every day from, from what they're seeing in the system.

Yeah, that, that's a great point. Just using data to back up, you know, whether the decisions were good or not. You know, unfortunately we, we see sometimes when people are just getting into managing their prices, trying to hold out for like, you know, the best Thanksgiving price or the best Christmas price, for example, where they actually risk not getting booked at all. And if they don't get booked at all and they look at their overall profit like on a year over year basis, like maybe just not booking that New Year's Day could make you worse, you know, performing worse than the whole year before because you know, we were trying to hold on to Tiber.

So the other thing, like with new homes and I think there's like common knowledge in some ways with new homes that are coming on to not is you haven't built the reputation on the OTA yet. Like the home might be great, the property might be great, but the listing is still new. The listing doesn't have reviews. Right. So to recognize that there is in the guest's mind, there is a distinction between the Property, which maybe they fall in love with once they see it. But all they get to see is a listing. And the listing, if it has zero reviews, they can't tell if it's a luxury property that paying a lot more for. Right. So.

Understanding those pieces as well, to say, okay, like, you're selling nights on a physical home, but through a listing. So, like, what's happening on the listing is also important, essentially.

Right, That's a great point. And we see that, you know, that it's highly correlated between, you know, the performance of a property, the review performance, and how much money it can charge. And you guys have done great, you know, by adding the ability for us to make some of those filters and adjustments between properties so that we can compare properties that are a little more or more similar, much more similar versus just kind of against the general market.

Awesome.

Well, let's see here. Anurag, I could chat with you for hours. There's, you know, you don't know this, but we talk about price labs all the time on this channel. Or I do, you know, and pricing. Because it's just really important. You know, it's super, super important.

Yeah. It's a topic that ever been, I want to say, like, there is something always happening.

Yeah, yeah, yeah.

It's.

And it's always changing, and it's changed so much since you guys started. So I'm curious to know.

I. I.

Really want to ask you, like, where you see the industry in five years, but I feel like that's like too far from now because. So why don't we go with like three years, like, where do you see the dynamic pricing industry? What you guys are doing in three years from now?

So one, access to data has become a lot better, I think. I think over the last many years, just the kind of data that's available across the board in the industry is just a lot better. And that's kind of what's driving a lot more of the.

Improvements that we have been coming in with. Right. And with that improvement in sort of available data, just algorithms, our algorithms should keep getting better and better.

That's one piece, like for any management system, like, how good are the recommendations? The other is like, okay, how easily can somebody interact with the systems? Right. And on that front, I want to say there is always. In the last 10 years, we have revamped our UI twice. I think in the last six months, we rolled out a sort of new UI to improve speed and everything. But one of the things that we, as we are seeing a little bit is also with the old generative AI or chat based interface, there is potentially an opportunity where like a lot of interactions that somebody has with the system can be made easier by allowing them to be typed in to say increase my base price for all three bedroom norms by 10% so you don't have to go to each three bedroom property and do it by yourself. But potentially you could do that. So in three years maybe that becomes a thing. Maybe sooner. Like don't know the answer. So, and this is not necessarily about our industry and pricing.

Where is user interface going or UX going in the next three years? Broadly in the.

Web software is.

Tbd. I want to say based on what I'm saying.

The other things that we are beginning to look a little more closely at is not just looking at and I hinted on this a little bit, not just looking at prices in vacuum, but also saying what is like there are two parts to revenue management. Setting the right prices, setting the right restrictions, but then also making sure your distribution is fine. Like just if you're not showing up on the right channels, you're not showing up on the search. So we are not going to get into channel management, but can we help you sort of audit how good your channel management is right now or how good your listings are set up right now? Those are the kind of things that we are beginning to look at to say, okay, it is a part of the whole story and we have a lot of data to support.

What'S good, what's not good and help our customers figure out those kinds of things as well. That's awesome.

Well, we'll be excited to see those changes. We know that if you have 55 star reviews on Airbnb and you have 21 star reviews on Brbo that you should be pricing differently on those platforms. So.

Excited to see those changes.

And the sad part here is that the 21 star reviews on Verbo will mean that changing your perception of a book, it's so much harder because it's hard to get bookings, that all the bookings will come via Airbnb. I'm sure reviews at that.

Yeah, your Brbo will just completely fall off. Well an I can't believe we're almost up on time here. It's been awesome to see just everything you guys have done. So congrats to you and your team. You know, 450,000 properties under using your software is no small task and we've been happy users so we appreciate everything you've done. We're excited to see where, where it goes, you know, as your algorithms get better, we'll have better tools. So we're really excited for that one. One last quick question for you. The name of the show, Short Term Rental Riches. And so a lot of people naturally just think about the financial sense behind the word rich, but we know there's a lot more to life than that. So curious if you've changed something or, you know, a new habit or something's changed in your life recently that's enriched your life in a, in a non financial way.

Very, very recent. The one, the first thing that came to my mind was being paying more attention to exercising in the last week. I want to say.

It'S almost like you start seeing a benefit almost right away.

So that's one I've also, as a new year resolution, I been.

Said to myself, no more than one drink a week. So I didn't go completely zero. I said, okay, one a week is good. Don't know if that's having any effect just yet. I'm not missing it necessarily. But I'm not also like, you know, waking up with all of this.

Right.

Like, you know, energy that I've read sometimes people say that this is what happens. So TBD on that one, how that goes. But exercising is definitely helping. I will say. I have two young kids so I don't really have time for hobbies or anything.

So.

Got your hands full? You certainly got your hands full. Well, hey, thank you so much for coming on and yep, you know, would love to have you back on. Things are changing quickly.

So until then, take care. Anarak, on it.

Thank you so much.