Hosting in Buenos Aires: how should you set your price?

Introduction

Airbnb is an online platform that connects people who want to rent out their homes with people who are looking for accommodations in that locale.
Setting the right price can be challenging for new hosts, and it’s essential to find the sweet spot between occupancy and price, to maximize revenue.

Therefore, we will explore the following questions:

• Is it worth it to be a superhost and/or being verified?
• What are the prices in different neighbourhoods?
• What attributes of a listing correlate with the price?

The data contains 20226 listings with 37 attributes, and it was scraped on February 2021, so it contains information on all Buenos Aires Airbnb listings that were live on the site on that date.

To see the complete analysis process, see the link to my Github available here.

PART I: Is it worth it to be a superhost and/or being verified?

We will break this question in two:

• Is it related to price?

According to the data, being verified only is the most popular option with a 40.94%. Nevertheless, it doesn’t seem to have an impact in the median price of their listings which is roughly the same for all type of hosts, except for superhosts for which median price is a bit lower.

• Is it related to the likelihood of being booked?

Since we don’t have the number of bookings made for each listing, we will use an indirect measure which is the number of reviews. This is not ideal, since some properties might have been booked but no review was made. Let’s check the proportion of listings that have been reviewed for each type of host:

Interestingly, there’s no difference between the proportion of reviewed listings for hosts that are only superhost vs those that are both (superhosts and verified). This suggest that being verified does not add any value if you are already a superhost, at least regarding to the likelihood of having your properties booked.

It does seem better to be verified than not, in the case you are not a superhost, since verified hosts have almost 67% of their listings reviewed vs the almost 55% for those who are not.

But overall, being a superhost seems to be more important than having your identity verified, in relation to the likelihood of your properties for being booked.

PART II: What are the prices in different neighbourhoods?

Since each host is free to set the price they want, there are some extreme values that can distort our analysis. Some properties may be charged an amount of money no one ever paid, and we are interested in finding a realistic median price for each neighbourhood, a useful value that can inform the decision of a new host about the price they should set for their listing.

Therefore, we will only consider listings that have at least one review. Neighbourhoods that had less than 100 reviewed listings were included in a clustering analysis considering their locations and prices. They were grouped in three zones:

• Saavedra and surroundings (grouping Saavedra, Coghlan, Villa Ortuzar, Villa Devoto, Villa Pueyrredon, Parque Chas)
• Flores and surroundings (grouping, Flores, Villa Del Parque, Paternal, Floresta, Agronomía, Villa Gral. Mitre, Liniers, Velez Sarsfield, Villa Luro, Villa Santa Rita, Monte Castro, Mataderos, Parque Avellaneda, Versalles, Villa Real)
• Barracas and surroundings (grouping Barracas, San Cristobal, Boca, Boedo, Parque Patricios, Parque Chacabuco, Nueva Pompeya)

These are the results:

We performed a Kruskal-Wallis H-test to check for statistical significance in the differences between medians, and we got the following ranking:

• 1) Palermo is by far the most expensive neighbourhood.
• 2) Palermo is second, comfortably.
• 3) Recoleta owns the third place.
• 4) Belgrano, Nuñez, Retiro, San Telmo and Colegiales are together in the fourth place.
• 5) San Nicolas, Villa Urquiza, Chacarita, Monserrat, Saavedra and surroundings and Caballito are next.
• 6) Almagro, Villa Crespo, Constitucion, Flores and surroundings are sixth.
• 7) Balvanera, Barracas and surroundings are the least expensive ones.

We can see the results on the map. We excluded Puerto Madero to be able to see the differences between the other neighbourhoods:

Not including Puerto Madero — the most expensive one.

PART III: What attributes of a listing correlate with the price?

We built a Random Forest Model to find which were the most important attributes of a listing in order to predict its price.

These are the top 10 most important attributes:

• The number of people that can be accommodated in the property
• If it is a private room/property (as opposed to shared rooms and hotel rooms)
• The number of listings the host has on the platform
• How many years the host has been in the platform
• How long it was since the last review to the property was made
• The minimum amount of nights required
• The number of days available in the next 90 days
• The maximum amount of nights allowed
• The number of reviews
• If there is a gym included in the amenities.

Conclusions

In this article, we took a look at how to set the price of a property for rent in the Airbnb platform in Buenos Aires, according to data from February 2021.

1. We checked if it was worth it to become a superhost and/or get verified, and we found it had no impact in the median price of the listings. However, being a superhost had an impact in the proportion of reviewed listings, suggesting it makes your properties more likely to be booked. Being verified didn’t add any value if you were already a superhost, but it’s better than being a regular host.
2. We looked at the median price per neighbourhood, and we built a ranking where the top 3 were Puerto Madero (by far the most expensive one), Palermo and Recoleta.
3. Finally, we built a Random Forest model to figure out which were the most important attributes of a listing regarding their price.

The main question remains: Which will be your price?

To see more about this analysis, see the link to my Github available here.