While there is no doubt that a short-term rental company can be lucrative, before you consider becoming a host, you should familiarise yourself with the fees charged by Airbnb. Hosts who rent out a private room earn between $800 and $1,200 a month on average. Whatever type of rental property you own, it’s critical to understand Airbnb’s costs to manage your revenues and expenses effectively.
How Much Do Airbnb Service Fees Cost?
Airbnb service fees are the charges that Airbnb makes to hosts for the products and services they provide continuously. Service fees, which include booking and experience fees, contribute to the seamless operation of all Airbnb operations.
How Much Does Airbnb Charge for Service?
Airbnb currently charges two different types of host service fees.
1. Splitting the fee
Guests booking rental units typically pay the majority of the guest service cost, with an additional fee of approximately 14% of the booking subtotal. At the moment, this type of service fee is provided only to certain hosts in location-dependent countries.
The split fee allocates the service charge equally between hosts and visitors. Airbnb charges hosts approximately 3% of the overall booking fee, however, hosts with tight cancellation rules may pay more.
2. Fee for hosting only
In contrast to the split cost structure, the host-only price structure eliminates guest payments and requires hosts to pay the full-service fee. The service fee charged to hosts is between 14% and 20% of the overall booking cost.
3. In comparison to hosts who have a moderate to flexible cancellation policy, hosts who have stringent cancellation policies are more likely to be charged a higher service fee. This pricing system is necessary for hotels, as well as the majority of hosts and property managers worldwide. From December 7, 2020, the host-only cost will grow to 15% or greater and will apply to the vast majority of hosts, with a few exceptions. Continue reading to learn more about the update that Airbnb is going to roll out to its hosts.
Fees for the Airbnb Experience
Additionally, Airbnb charges hosts for any experiences they provide to guests. A host pays a fee of approximately 20% of the total cost of the experience, which is deducted automatically by Airbnb. This fee assists Airbnb in covering the costs of the support and services it provides to hosts for experiences, such as 24/7 support and a dashboard of tools to assist hosts in measuring their success.
Even though a 20% deduction fee appears to be quite high, hosts are free to determine their rates for their services, which enables them to factor in the fee deduction and charge a fair price while still earning a profit.
Is the Fee for Host-Only Accommodations Required for All Airbnb Hosts?
As announced previously, Airbnb will begin charging a host-only charge to the majority of its hosts on December 7, 2020, including those who use third-party software to manage their properties. This means that the majority of hosts will be obliged to pay the service fee entirely out of their rental income. From December 7, hosts will be required to pay a 15% service fee to Airbnb.
The host-only price is already in effect for hosts registered on the platform in Europe, the Middle East, Africa, and the Asia Pacific area (except Japan) as of June 4, 2019. By default, they pay a 14% host-only cost. From September 1, 2020, the host-only charge model became mandatory in Croatia and Greece.
These changes will not affect hosts whose primary residences are in the United States, Canada, Mexico, the Bahamas, Argentina, Taiwan, or Uruguay. In these nations, hosts and rental managers have the option of maintaining the split-charge structure or switching to the newer host-only cost structure.
What prompted Airbnb to make this change?
By introducing the host-only fee, Airbnb guests will no longer be shocked at the checkout by an additional fee. Hosts have greater control over the pricing they can charge for guest bookings, and visitors can know these final fees upfront so they are not surprised when it comes time to pay.
How Does the Host-Only Service Fee Benefit You?
1. There are no surprise fees for guests, which encourages them to book.
All hosts who use the new service fee will have their listings display a 0% service fee. This results in a more transparent booking process and encourages potential visitors to complete their bookings, as they will not be surprised with a price increase immediately before they finish their checkout and payment.
2. Reduced guest fees can increase bookings.
As a result of the host-only price, your reservations are likely to grow. By boosting your prices, you can protect your net revenue, and guests will be eager to book because there will be no additional fee.
3. Adopting the new price may improve your Airbnb’s search engine optimization rating.
When listings provide greater value to guests, Airbnb tends to rank them higher. Not only will the host-only fee encourage more guests to book your property, but it will also create a simpler, more enjoyable guest experience. This can help your listings stand out and boost your rating on Airbnb’s search engine results pages (SERPs).
How Can I Boost My Airbnb Earnings?
• Modification of your cancellation policy
Airbnb imposes a higher host-only fee of 16% on hosts who have an extremely rigid cancellation policy, compared to hosts who have a moderate or flexible cancellation policy. By implementing a less stringent cancellation policy, you can significantly reduce your fee expenditures while increasing your overall Airbnb payout. As a result of the current COVID-19 pandemic, guests will also be more receptive to booking a rental with a flexible cancellation policy.
• Increase your rate of occupancy
Additionally, you can increase your compensation by boosting your occupancy rate. By implementing a flexible cancellation policy and foregoing the requirement for a security deposit, you can increase bookings. Additionally, consider offering a selection of discounts and special promotions to entice people to make a reservation with you. Each of these is easily configurable in your Airbnb listing’s settings.
1. Early-bird discounts: provide reduced pricing to guests who book several weeks or months in advance.
2. Last-minute discounts: visitors who book with you within 24 hours of check-in receive a small discount to entice them to pick your property over another.
3. Duration discounts: provide a discount for guests who stay with you for 28 days or more.
4. Off-season promotions: offer a discounted cost or a special promotion, such as complimentary airport pickup, to increase your occupancy rate during your off-season.
5. Repeat guest promotions: Inform your guests that they will enjoy a minor rate decrease if they book with you again in the future.
• Rethink your pricing strategy by implementing intelligent calculation algorithms
Even if the host-only price increases bookings for your business, you are still paying a larger fee than you were previously. To guarantee that the cost does not eat into your net earnings, calculate your optimal nightly rate while taking into account the increased price you will be paying under the new fee structure.
To maximize your profits, adjust your prices on a seasonal basis and in response to variations in market supply and demand. The best course of action is to utilize a dynamic pricing tool to assist you in defining and setting proper rates.
• Increase revenue by selling extra services
By selling additional Airbnb services, you may increase your holiday rental revenue. Services such as guided tours, washing and dry cleaning, bike rentals, and food preparation are all possible. By offering additional services for a fee, you may help increase your rental income and make your listing more appealing.
• Establish a cleaning fee for Airbnb
Charging a cleaning fee on Airbnb is another option to enhance rental income, as the majority of guests pay cleaning fees. Ascertain that the cleaning rate you choose is comparable to the average charged by your competition.
Not every host includes a cleaning fee in the price of their holiday rentals. Often, their selection is influenced by factors such as the size of their rental unit, its location, the amenities given, and if their competitors charge for cleaning.
Another option to reduce time and enhance money is to manage your vacation rental business operations with vacation rental software. Vacation rental software, such as Lodgable, automates common processes, allowing you to manage your short-term rental business on autopilot:
• Manage multiple listings and accounts on Airbnb, Booking.com, Vrbo, and other platforms via an advanced channel manager;
• Create automated messages and manage guest communications via a unified inbox;
• Coordinate cleanings and auto-assign tasks to team members;
• Create review templates and automate the process of leaving reviews for guests.