The most common approach to competitive pricing in short-term rentals is deceptively simple: look at what nearby properties are charging and price accordingly. It is also deeply flawed. Rate observation tells you what competitors are asking. It says nothing about whether those rates are working — and working for your property specifically.

Genuine competitive pricing analysis requires understanding performance metrics, not just listed prices. Here is how to approach it correctly.

Why rate observation is not enough

A competitor's listed rate on Airbnb tells you the price they are attempting to charge. It does not tell you their occupancy at that rate, their RevPAR, their cancellation frequency, or whether they are actually filling those nights. A property listed at $250 per night with 20% occupancy is not a competitive pricing reference point — it is an example of what not to do.

Effective competitive pricing benchmarking uses performance data, not just rate data. The question is not "what are they charging?" but "what are they earning per available night relative to their occupancy?"

The metrics that actually matter

RevPAR Index
Your RevPAR ÷ Comp set average RevPAR × 100

A RevPAR Index above 100 means you are outperforming your comp set. Below 100 means you are leaving revenue on the table relative to comparable properties. This is the primary competitive performance metric.

Occupancy Index
Your occupancy ÷ Comp set average occupancy × 100

If your occupancy is running above the comp set average at similar rates, you may have room to raise ADR. If it is below average despite similar rates, a listing quality or positioning issue may be depressing demand.

ADR Index
Your ADR ÷ Comp set average ADR × 100

Combined with the Occupancy Index, this tells you whether your pricing is positioned correctly within your competitive tier.

A practical competitive pricing check

Run this analysis quarterly, or whenever you are considering a pricing change:

  1. Pull the RevPAR, ADR, and occupancy for your property and your comp set for the same 90-day period.
  2. Calculate your RevPAR Index: your RevPAR divided by the comp set average, multiplied by 100.
  3. If your RevPAR Index is below 95, investigate whether the shortfall is coming from lower ADR, lower occupancy, or both.
  4. If it is ADR-driven with normal occupancy, your pricing may be competitive but listing quality or marketing could be limiting your ability to charge more.
  5. If it is occupancy-driven with competitive ADR, your rates may be above market for your listing tier.

The most dangerous mispricing: being too cheap

Operators fear being priced out of the market. The data consistently shows that underpricing is at least as common a problem as overpricing — and often more damaging. A property priced below its market tier attracts guests whose expectations are mismatched with the product, generates lower reviews, and trains the OTA algorithm to position the listing in a lower demand bracket.

If your RevPAR Index is above 110 and your occupancy is strong, there is a reasonable argument that you are underpriced. Raise rates incrementally — 5% at a time — and monitor the occupancy response before concluding that the market cannot support higher rates.

See your RevPAR Index automatically

BNBinsights calculates your RevPAR, Occupancy, and ADR Indices against your comp set — updated automatically, no manual analysis required.

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