How To Do Airbnb Market Research For Free

Today I want to walk through the process that Kate and I have been using to do Airbnb market research using only the internet and the Airbnb website.

We’ve been looking to buy another short term rental investment property outside of our home town, and we have a few cities that we’re looking at. This is the process I’ve been using to determine how many people are using Airbnb in each city, what the level of competition is, and how much I think we could make.

Let’s get started.

What is an Airbnb “Market”?

Most simply, an Airbnb market is a general location. The old real estate saying “location, location, location” is as true in short term rentals as it is in any other form of real estate investing.

When a person looks for accommodations online, what’s the first thing they type in?

The city.

So an Airbnb market is a city that someone types in as their primary search term.

New York, NY is a market. But Brooklyn, NY and Queens, NY are also markets, even though they overlap with New York, NY.

So when you think about market research you’ll have at least one city name in mind, possibly more than one. That’s what you’ll be using to conduct your research.

1. Assess Your Situation

Your first task is to reflect on your own situation. You must understand a few things before you can put any meaning to your market research.

For example, are you simply listing some space in your own home, or are you planning to buy an investment property to list full time?

If you’re just using your home, then you’re looking at a very low risk situation. If you put up your listing and you never get a single booking, you haven’t lost much.

But if you’re buying a home, then you need your listing to support all the expenses associated with running your Airbnb. This includes the mortgage, insurance, taxes, utilities, maintenance and plenty of others. This would obviously be a much higher risk situation, and you will need to put in the research and due diligence to make sure your investment is a profitable one.

Another question I like to ask myself is what our financing situation looks like. Have we already been in touch with lenders and gotten pre-approval? Or will we still need to do that at some point? When you’re looking to buy a house it’s important to understand how much you can afford.

Honestly, there are a hundred questions you could ask before doing your market research. Here are some that I’ve asked myself:

• Is my partner on board with this?
• Do I have any real world data to reference (my own or from friends/family that host)
• Is real estate in the market appropriately priced?
• How many (if any) hotels and motels are in the market?

In the end, you just want to give yourself a framework that allows your market research to have more meaning. When you calculate your numbers it’s important to be able to measure the calculated risk against your personal risk tolerance.

2. Determine the Demand

So let’s get to the meat of your market research.

At each step in your research you have the opportunity to determine that the market isn’t good enough for you. That’s why we start with demand. If no one is looking for short term rentals in your market, then you can immediately end your research because there’s no point opening an Airbnb.

Also, I feel I should mention that you don’t need to determine demand in very large markets. You already know that New York, NY has a huge demand. What you need to determine is how competitive a huge market is, not if there’s enough demand to support an Airbnb.

So if your market is a big city, then don’t even bother with determining demand, skip straight to assessing the competition.

But if your market is not a huge city, then keep reading.

The autofill test

You be doing a lot of research directly on Airbnb’s website. So the first thing to do is go to the home page and start typing the name of your market.

Type slow though. Let’s say our market is Nashua, New Hampshire.

When I type the letter “N” I see a list of cities:

• Nashville, TN
• New Orleans, LA
• New York, NY
• Naples, FL
• Nashville, Downtown, TN

These are the biggest markets that start with the letter “N”.

Once I get to “Nash” My market finally shows up in the autofill list. Here’s what the list looks like at that point:

• Nashville, TN
• Nashville, Downtown, TN
• Nashville, IN
• Nashua, NH
• Nashville, Indiana

And once I type “Nashu” my market is at the top of the list. The autofill shows the biggest markets that match the query, with a bit of a twist.

I believe the query is also filtered by your location. So if you’re searching from the U.S. you’ll have autofill results that are more U.S. based.

That’s OK though, at this point you’re just for a super general understanding of how big your market is. If it comes up pretty quick then it’s probably a big market, and if it takes a while to autofill then it’s probably a smaller market.

If it doesn’t autofill at all, then that’s a problem. You probably just misspelled your city or something, but if not then that would mean your market is likely not big enough to support an Airbnb.

Basic search analysis

Once you have your market typed into the search bar it’s time to run a search. It will prompt you to select dates and possibly a number of guests, just leave them both blank. Press the search button with only the city name filled in.

You should notice a number at the top of the search (highlighted in the picture above. The number never goes above 300. But right now we’re looking at demand, not competition. So we need to do a bit more to learn something about demand.

It’s time to select some dates.

We want to look at how the number of stays changes as we change different dates.

Here’s the key detail. A listing won’t show up in the search results if it already has a booking during the dates you select.

That means if I select my dates as March 1 to March 31 then every listing that shows up doesn’t have a single booking in the month of March.

Here’s what I like to do:

1. Pick a weekend (Friday to Sunday) and do a search
2. See how many stays are available
3. Add a day until you see less than 300 stays (Friday to Monday, then Friday to Tuesday, etc.)
4. Then start adding more days and see how many stays are available.

I ended up with something that looked like this for Nashua:

Ok so what the heck is going on here? The number of stays is going up when we increase the time frame.

So hosts can set a minimum number of nights that guests must stay in order to book. If your minimum number of nights is 7, then you won’t show up in a 2 night search.

These results from the Nashua, NH market do not look good. It looks like listings are not getting booked because the number of listings goes up as we increase the length of our stay.

We want to see the number of available listings go DOWN as we increase the number of nights. Ideally, we’d see that number drop down quickly. We want to see the number cutting in half eventually.

Note: Seasonality can affect the numbers you see here in a huge way. Look at the section below for more info about seasonality.

Looking at calendars

Of course looking at the number of available listings only gives you a blurry picture of what the demand may be. So how to we start to get a clearer picture of how many bookings are happening in your market?

I like to look at the calendars of individual listings.

You can do another generic search without dates and start clicking on the top results. Once you click into a listing, scroll down until you see a calendar.

You should (hopefully) see some dates crossed out. Dates that are crossed out are dates that have been booked, or it can also be that the host has made those dates unavailable for booking. It’s impossible to tell the difference, so for your market research you should assume crossed off dates have been booked.

If it is late in the month, you may also see a calendar that looks like this.

If it were August 30th, you would see every date up until August 30th crossed off because they can’t be booked. So don’t look at dates that have already passed.

I like to look at 10-25 calendars. Look at a few on the first page of listing results, and look at some that are a few pages in and a few that are several pages into the results.

You’ll start to get a feel for how many nights get booked at a great listing, and average listing and a bad listing.

Write these numbers down. It might look something like this:

• Top listings are booking 15-20 nights a month
• Average listings are booking 10-15 nights a month
• Bad listings are booking 0-10 nights a month

It’s also not a bad idea to write down the nightly price for listings. We’ll look at this again when we research the competition, but you can write it down now too.

What do calendars look like in a good market?

Again, this can vary widely depending on the season.

In good markets, you want your good listings to have 50% or more of their nights crossed off. But you need to also think about how big the city is.

Remember: The top listings in huge markets will have fully or mostly crossed out calendars. If the top listings have have mostly crossed out calendars, this is a sign that the demand is high.

You’d love to see your average listings getting close to 50% booked, but it’s OK if it’s closer to 30-40%.

And lastly, you’d like to see the bad listings getting some bookings. If you are able to find lots of listings with completely open calendars, this could be a sign that the demand is low.

But you have to be careful drawing too many conclusions without considering seasonality.

Consideration for seasonality

I’ve been hosting for almost 4 years now, and every single year we have certain months that book WAAAYYY better than other months. But it’s the same months every year.

For us, September and October are always our best months. We’ve had listings that had 100% occupancy in those months before, and we probably average 75-80% occupancy during those months.

But every year in December, January and February we don’t get booked nearly as much. In fact, I think our combined occupancy in December 2019, January 2020 and February 2020 was between 25-35%.

People just don’t travel to my market as much during those months.

So if you wanted to do a full and complete market research, you’d have to spend basically an entire year looking at hosts’ calendars and determining an average occupancy over the entire year.

Or you can do what I do and just use your intuition.

If your market is near a snow skiing resort then you can anticipate that your peak months will be when it’s cold and snowy.

If your market is near a lake, then your peak months will be the warmest months of the year.

Just think about why people travel to your market and use your own judgement.

In general, people tend to travel less during the cold months and travel more during the warm months, but that’s not true for all markets, so just think it through.

And when you determine your market’s peak and slow season, make sure to apply that knowledge to your research. In peak season you want your top listings to have more that 50% occupancy and in slow season it’s OK for top listings to have less than 50% occupancy.

3. Look at the Competition

If you determined that your market is healthy and there are plenty of travelers looking for short term stays, then it’s time to look at the competition.

Your primary goal during this phase of your Airbnb market research is to determine three things:

1. What does it take to be a top listing in this market?
2. How much can a top listing charge per night?
3. How can your listing stand out from others?

You need to know what it takes to compete with the best listings, and you need to know how much money you can make.

When we finish analyzing our competition we’ll know how important our lisitngs’ location is, and what types of features(also called amenities) we need, and we’ll know a range of nightly rates we could charge.

Local hotels and motels

Before I look at the Airbnb listings I like to do a quick check against the other local short term rental providers. That means hotels.

I wouldn’t do anything too extensive.

You’ll want to find as many as you can, and you’ll be looking for a few things.

• What are the nightly rates?
• What is the quality of the rooms?
• What additional features are included (continental breakfast, wifi, etc.)?

Again, this doesn’t need to be super detailed. You just want a feel for what the hotels are charging and what they’re providing.

One of the biggest reasons Airbnb got popular was that they were offering more for the money. While hotels were charging $100/night for a room with crappy wifi and a decent breakfast, Airbnb listings were charging $70/night for a private home with lots of amenities.

That’s not necessarily the case today. The prices for great Airbnbs have come up to around the same rate as hotels, but they still provide some things that hotels simply can’t.

Look at comparable Airbnb listings

Next it’s time to look at your direct competition. At this point you probably want to start filtering your searches by a number of things.

Think about how others would find your Airbnb.

If you’re opening an entire house then make sure that’s what you’re searching for. If you’re listing a room in your house then search for that.

Are you expecting to be able to host 10 or more people? Make sure you’re searching for listings that can do the same. Look at the list of amenities and see if there are any unique ones that your listing might have (hot tub, pool, or washer and dryer).

You want to find the best Airbnbs that are similar to your own.

Then it’s time to start clicking in to each one and looking at different features. As you look through each one start to write down specific information (numbers when possible) for all of these things:

• How attractive are the photos?
• What can you do better than the competition?
• What is the range of nightly rates?
• Can you provide any amenities or features that very few other listings can?
• How many great listings (direct competitors) are there?

It’s very important to gather nightly rates of your competitors here. And the other important thing to do is start to determine how your listing might be able to stand out from others.

Determine your “thing”

You don’t necessarily NEED to have a way to stand out from the other listings. Particularly in markets that aren’t huge, most of the hosts aren’t exactly business people.

I’m not exactly a business person either, but I have run a few businesses and I try to continue to learn every day. There’s an idea called “unique selling proposition.”

It’s the thing that convinces people to buy from you and not someone else.

For you that means that you want something that convinces guests to book your place. You’ll want to highlight that thing in your listing title and in your photos and all throughout your listing.

Here are some examples of a unique selling proposition for an Airbnb:

• You can host 10 or more guests
• You have a hot tub
• Sell your place as being “luxurious”
• Home cooked breakfast for every guest
• 3 blocks from a sports stadium
• Near downtown (or other location related things)
• Pool or park passes included

Your thing doesn’t have to change the world, it just has to be something that people with either be searching for or that will convince them to book with you.

4. Come up with your Numbers

An important part of the process of buying an Airbnb investment property is the due diligence process. During this process you need to come up with conservative numbers for your revenue and expenses.

We’re going to use the information we’ve gathered to come up with revenue estimates for your Airbnb using the numbers we’ve written down.

Related: A comprehensive list of the expenses associated with running an Airbnb.

Calculating expected revenue

Eventually we’ll want a single number that estimates the average monthly revenue from our listings, but we’ll start out with a range.

We need two things.

First, we need our number (or range) of the expected number of nights a good listing can book per month. And second, we need our range of nightly prices.

It’s literally as simple as multiplying these numbers together.

So let’s say these were the numbers we came up with:

• Great listings in Nashua, NH booked 8-10 nights in February (which I judged to be the slow season), so I’m guessing 12-18 nights would be the average month.
• Great listings in Nashua, NH similar to the one I’ll be opening charged between $60 and $100 per night.

So the very lowest end of the range is $720 per month ($60 x 12 nights) and the very highest end of the range is $1,800 ($100 x 18 nights).

Our range of expected revenue is $720 to $1,800.

And from this range we can narrow our expected monthly revenue down to a single number based on our risk tolerance.

If we want to be very conservative our number will be closer to $720 and if we don’t then we can move our number closer to $1,800.

When I’m going through my due diligence process I tend to choose a number a little below the midpoint of my range.

For this example I’d probably arrive at about $1,100 per month.

5. (Optional) Research Local Cleaners

Kate and I are looking out of town for our next Airbnb acquisition, and a huge part of running a short term rental is the process of cleaning and preparing the space between guests.

We won’t be able to do that part ourselves if we buy a property out of town, so we are also researching our options for a cleaning service.

If you will be doing the cleaning yourself, then you can skip this part.

The best method: call other hosts

When you start with a new thing, like opening your first listing in a new market, there are bound to be some bumps. The most important thing in a cleaner is reliability and quality cleaning.

We’ve had good luck finding cleaners for our Airbnbs, but it took us three tries to find the right babysitter for our daughter. Finding a good, reliable cleaner can also be a challenge and there are two ways to find one.

Trial and error is one, but you can avoid the trial and error if you can find another short term rental property manager that will share their cleaner with you. You may not always be able to find someone, but if you can this is the way to go.

Once you have the cleaners’ information then you can go about learning more about pricing and availability.

Backup plan: call the cleaning services

If you weren’t able to find another host to help you find a reliable cleaner, then you’ll probably have to go to the web.

Ideally, you’d like to find reviews, and it’s best if you can find reviews from other short term rental hosts.

Regardless of how you create your shortlist of potential cleaners (recommendations or web search) you’ll want to call the cleaners. You need to tell them exactly who you are and what you’re looking for.

“I’m an Airbnb host and I’ll be listing a property in your city. I don’t live there so I’m looking for a cleaner that can manage the cleaning in between guests. My guests check out by 11am and the following guest can check in at 3pm, can your company help me with this? How do you normally communicate and how much notice do you need?”

Write down and ask all your questions to each cleaning service. When you finally open your listing you’ll need to have an understanding with at least one cleaner.

Reach your Conclusions

You can only do so much market research and due diligence before you have to just make a decision. You know a range of expected monthly revenue for you new market, and you’ve read my article to help you list out your expected expenses as well.

These two numbers should help you gauge your return on investment from an Airbnb in the new market.

How I make my decisions

I always do my best to let the numbers make my decisions for me. I don’t want to make investing decisions with my “gut.” The due diligence process should make the decision for me.

I use my personal investment standards to decide whether the new market is a good one.

After conservatively estimating my monthly revenue and expenses, Kate will begin looking at homes for sale in the new market and bring them to me. I’ll look at the listing prices and the locations of those properties and start to run through the numbers.

Using the listing price I can calculate my down payment and use my revenue/expenses numbers to estimate the cash on cash return (my primary ROI measurement) of a potential investment.

If I am able to find a few houses that meet my ROI standards, then I will say yes to the new market and take the next steps (probably finding a realtor to show me some houses and reaching out to lenders to secure financing).

If I can’t find houses that meet my ROI standards then I’ll either have to find an amazing deal on a home to reach my desired ROI, or I’ll have to look into another market.

Conclusion

Before buying a house to list on Airbnb, it’s very important to ensure that your market (or city) has the demand to support your endeavor, and to determine how your listing can stand out among the others.

As we’ve seen, using only the internet and the Airbnb website, you can conduct reasonably thorough market research.

Happy investing.

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