How Airbnb used predictive pricing to improve user experience

Fast Company has an article out that takes a look at the problem Airbnb encountered when it realized its hosts were having a difficult time setting prices on their apartments. Airbnb could actually track how long it took its hosts to fill out every field on the interface. How many rooms? Easy. Amenities like wifi and air conditioning? No problem. How much to charge? Not so easy a decision.

This was a classic area of friction in the user experience, one that in aggregate could result in marginally fewer listings. Airbnb’s approach was to develop an algorithm that took in multiple variables like the city, the neighborhood, the size of the apartment, etc. It would then churn out a predictive price for Airbnb hosts setting up a listing.

Fast Company reports:

When Airbnb first did an experiment with the predictive pricing, users who chose to use the suggestion price got three times the number of bookings than the control group–making a site-wide rollout an easy call. The solution to the¬†what should I charge?!¬†problem, then, was to get nuanced with neighborly boundaries and build the processing muscle to allow for a smooth user experience.

This is yet another example of Airbnb’s healthy obsession with user experience, from the design of the site down to every step of using the site. Yes, Airbnb has had the capital to do things like acquire NabeWise, a company that gave Airbnb useful data on neighborhoods around the globe that it could feed into the algorithm. But at the same time it also had the instincts and culture to see the value in consistently improving every aspect of the product.