
AirBnB's Pricing Algorithm - taigeair
http://spectrum.ieee.org/computing/software/the-secret-of-airbnbs-pricing-algorithm
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JacobAldridge
Talk about burying the lede:

 _" That’s why we’ve released the machine-learning platform on which it’s
based, Aerosolve, as an open-source tool."_

And worth noting the link in the article doesn't work - it's meant (I believe)
to send you here: [http://airbnb.io/aerosolve/](http://airbnb.io/aerosolve/)

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visarga
> We selected a machine-learning model called a classifier.

Almost all machine learning tools are classifiers of some sort. It's like
saying: we selected a car technology called "wheel".

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joshu
I think you have an overly narrow view of machine learning or a very broad
view of what classifications are.

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lighthawk
Completely solving the problem of pricing in term of getting it right the
first time is more difficult than predicting the weather. At least with the
weather you can go outside and learn if it is raining. You can't just go
outside look at an item and give it an optimal price that maximizes the amount
and/or the amount of time you need to sell it within.

I work at a company that has pricing algorithms more complex than what retail
stores use. I don't think they are useless. But, we all know they aren't
"right", and they only got to be what they are through testing them out with
actual customers. And some customers work to determine your algorithm and then
use it to their advantage in a big way so you have to change it again, which
affects other customers negatively, and the cycle continues. You can't just
A/B test pricing and assume that will work in a hands-off fashion either,
because customers will take advantage of that.

The complexity of pricing is that the best pricing only partly has to do with
the thing being sold. You could argue it has nothing to do with the thing
being sold. It has everything to do with the buyer: their needs, their
resources, and their perception of the product, service, seller, the entire
sales experience, market, economy, weather, etc. You name it and it probably
has some affect on what the best price would be.

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visarga
It would be a shame if AirBnb would price gauge based on profiling customers.
I don't like, when I enter a shop, to be asked my nationality before they
quote me a price.

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antoinec
This is already happening (depending of the country, your skin color might
also make the price go higher), tourists typically pay more for a lot of stuff
than what a local would pay. Though, sellers are usually a bit more subtle
than "Hey, give me your passport, so I can tell you how much it costs". This
is how a lot of people make a living in a lot of places. In the tourism
industry, I think it's completely understandable and reasonable to base a
price based on what the buyer is willing to pay, more than what it really
costs.

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chvid
Would this not get AirBNB into trouble?

Price fixing in a cartel is illegal anywhere in the western world for good
reason.

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pki
This is not price fixing or anywhere even slightly related

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jsprogrammer
AirBNB is colluding with its contractors to influence and set similar prices
across competing room vendors.

How is that not _exactly_ price fixing?

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jlarocco
Price fixing is when competitors agree to set prices. If AirBnb and Hilton and
Marriott started agreeing on prices, then it would be price fixing.

This isn't price fixing because companies aren't considered their own
competitors.

It might be a little fuzzy if the people posting rooms on AirBnb are
considered competitors, but even then it's not price fixing because there's no
requirement to use the algorithm's suggested price, and no single owner can
influence the general price of rooms, because there's still hotels, motels,
non-AirBnb rooms, etc.

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nnd
I still don't understand how's staying at an airbnb rental is more compelling
than staying at a hotel. From my experience, Airbnb has only a single upside:
you get to stay at someone else's place, which has a quite different vibe from
a hotel. One the flip-side, compared to a hotel, the prices are considerably
higher, you have to negotiate with a host on checkin time (most of the times),
and overall you don't have any guarantees on the quality of your rental the
same way you have with a hotel chain. Correct me if I'm wrong, but Airbnb has
not loyalty/rewards program available either, which could be quite beneficial
for frequent travelers.

The whole "local experience" seems to be a mere marketing fluff. The Airbnb
experience doesn't seem to imply much interaction with the host, the same way
which it's predecessor Couchsurfing did. Once you checked into you Airbnb
rental, you are on your own, the same way as if you stayed at a hotel, but
with even less hand-holding. Hotels at least provide a (poor) local
recommendation service.

I'm wondering what a typical customer of Airbnb looks like.

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tinbad
I travel frequently and have tried replacing the usual hotel chain with an
airbnb. I totally agree, the hassle of dealing with hosts and being left
disappointed a few times, it's not worth it (for me).

Where I found airbnb more useful (and cheaper) is when my family is in town
and we're traveling somewhere and we usually book a whole apartment/house with
multiple bedrooms. That is usually cheaper than booking 2 or 3 hotel rooms.
However, in that space there are lots of alternatives (Homeaway, VRBO, local
bed & breakfasts with their owns websites).

My impression is that airbnb, in the end, is just like those other sites. More
recently, I've found that more often than not, the place you book (especially
in popular areas) is owned or sublet by someone who's making a business out of
short term renting and with that, the whole local/experience/sharing charm is
gone.

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nnd
Short term vacation rentals are definitely is where the money are at.

Also, for my experience, the niche if affordable mid/long-term rentals (1-2
months) appears to be underserved. Sure I can negotiate a monthly rate with a
hotel, but unless they are experiencing a lack of demand, it's not worth it
for them - they can make more money on short stays.

The cheapest alternative for finding a sublet appears to be local sources
(websites, asking around locals), but that could be too much hassle,
especially if you don't have time for it.

Airbnb listings sometimes provide a monthly rate, but again in my experience
it's not very competitive. Being not very price sensitive, I'd still go with a
previous option - it has it perks of local immersion.

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bkohlmann
We've been an airbnb host with multiple properties for a few years now in
Austin. We've done our own version of dynamic pricing (manually), and the
graph highlighting Austin in the article is spot on. The "Pricing Tips" tool
has a long way to go, but its relatively close (within 20-30 percent). It
still hasn't caught some of the big events, mostly because it only looks
forward 3 months, and for popular events like SXSW, we usually book 4-5 months
out at very high prices. That said, big props to ABNB for trying this and
putting it out there. Hopefully their algorithm takes into account what humans
are actually doing with their own pricing, and using that in it's
calculations.

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Lucadg
I found that the Airbnb Price Tips feature works pretty well in mature markets
but not in new locations. In some apartments we manage in Kenya for instance,
there are two apartments which are exactly the same. One has no reviews and
the suggested price is around 48 €. The other one has 3 reviews with 4.5/5
ratings and the suggestion is 30 €. So, it's good to look at but you always
need to see if it makes sense to you. Anyway, amazing job, they left the
competition 10 years behind.

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throw42
This is the difference between airbnb and google. Google would have Hal Varian
look at this. Airbnb has a music major re-invent the wheel (not sure if the
managed to re-invent the whole thing).

There is a whole field of study called pricing mechanisms. For example, second
price auctions work well because of a reason.

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lqdc13
Why attack Airbnb for trying out a new approach?

Also, Google is not that great at some things they do. For example, Google is
somehow much worse at navigation than Waze even though they were at it for
much longer and had tons of data. Now they even have Waze data and are still
worse at it than Waze.

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dajohnson89
Is it just me, or is google maps even worse than Apple maps at this point?

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nnd
I think Google maps has some top-notch turn-by-turn navigations. One thing I
particularly like is how detailed the voiceover is, i.e. recommends you a lane
to stay in, etc This is one thing i wish Waze would be better at, because
overall it seems like it's able to find faster routes than Google, although
sometimes I wonder if it's only perceived, due to the way they gasify it.

Apple maps are absolutely horrible in turn-by-turn. Either I'm driving too
fast, or the turn announcement is way too close.

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EC1
I can't stand AirBNB. Prices are ludicrously high. I feel like prices are
higher just because it's a nicer cuter interface than Craigslist. Obviously I
can't prove this. Also wish I could filter by monthly for everything not map a
certain daily range to a monthly range in my head.

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tdfw
I feel Airbnb offers a value-added service and, in my personal experience,
that has justified the extra price. Also keep in mind that the spirit of
Airbnb was short-term vacation rentals; not long-term tenancies.

With Airbnb I can evaluate the host's social "credit" to some degree (have
they connected with LinkedIn? What references have they provided?) and
transparent straight-up reviews from past guests. Having Airbnb act as an
arbitrator when things go wrong is priceless.

