While there’s no doubt that a short-term rental business is a lucrative source of income, before you think about becoming a host, you should learn how much Airbnb charges. On average, hosts who rent out a private room earn $800 – $1,200 a month. No matter what kind of rental property you have, it’s essential to understand Airbnb’s fees to manage your earnings and expenses.
We’ve created this article to help hosts understand how Airbnb service fees are structured and what you can do to reduce the effect of fees on your revenue.
Airbnb service fees are the fees that Airbnb charges hosts for the ongoing products and services that they offer. Service fees include booking fees and experience fees, and help to keep all Airbnb operations running smoothly.
At the moment, Airbnb offers two types of service fees to their hosts.
The split fee divides the service fee between hosts and guests. Hosts typically pay around 3% of the total booking cost to Airbnb, but hosts who use stricter cancelation policies may pay more.
Guests booking rental properties usually pay the bulk of the guest service fee, paying about 14% of the booking subtotal as an additional fee. This type of service fee is currently only available to certain hosts in location-dependent countries.
Unlike the split fee, the host-only fee structure has eliminated guest fees, and instead, hosts pay the entire service fee. The service fee that hosts pay ranges from 14% upwards of the total booking cost.
Hosts who use strict cancelation policies are more likely to be charged a higher service fee compared to hosts with moderate to flexible cancelation policy. This fee structure is mandatory for hotels and most hosts around the world. From December 7, 2020, the host-only fee will increase to 15% and higher and apply to most hosts, with a handful of exceptions. Read on to learn more about this update Airbnb is planning to introduce for hosts.
Airbnb also charges hosts a service fee for any experiences they offer to guests. A host pays around 20% of the total cost of the experience as a fee, which is automatically deducted by Airbnb. This fee helps Airbnb cover the costs of the support and services they provide to hosts for experiences, such as 24/7 support and a dashboard of tools to help measure their success.
Despite a 20% deduction fee seeming fairly steep, hosts are free to set their own prices for their experiences, which allows them to factor in the fee deduction and set a fair price that will still allow them to generate a profit.
As mentioned above, from December 7, 2020, Airbnb will be rolling out the host-only fee for the majority of its hosts, including hosts who use third-party software to manage their listings. This means that most hosts will be required to pay the entire service fee from their own rental income. Hosts will pay a service fee of 15% to Airbnb from December 7 onwards.
The host-only fee already applies to hosts in Europe, the Middle East, Africa, and the Asia Pacific region (excluding Japan) who registered with the platform from June 4, 2019, onwards. They pay a host-only fee of 14% by default. In Croatia and Greece, the host-only fee model became mandatory from September 1, 2020.
These updates will not apply to hosts who have most of their properties in the United States, Canada, Mexico, Bahamas, Argentina, Taiwan, and Uruguay. Hosts and rental managers in these countries can opt to keep a split-fee structure or adopt the newer host-only fee setup.
By implementing the host-only fee, guests will no longer be surprised by an additional fee added to their final charge at checkout. Hosts have more control over the prices they can set for guest bookings, and guests can see these final prices upfront without getting a surprise when they need to pay.
Current, existing bookings will not be affected by this update, but any bookings made on or after December 7 will be subject to the host-only fee on Airbnb. Hosts who already use the host-only fee for their rental properties will be charged a 14% fee until January 2021, after which their service fee will increase to 15% and higher.
Make sure you update the information on your listings so that all information displayed is correct and up-to-date. If you are making changes to your rental price, also make sure your listings show the updated nightly rate.
All hosts who use the new service fee will have a 0% service fee displayed on their listings. This creates a more transparent booking process and will encourage guests to follow through with their bookings, as they won’t receive a sudden price hike right as they confirm their checkout and payment.
A consequent benefit of the host-only fee is that your bookings are likely to increase. By increasing your rates, you can safeguard your net revenue, and guests will be eager to book as no additional fee will be applied.
Airbnb tends to rank listings as being higher when they offer more value to guests. Implementing the host-only fee will not only encourage more guests to book your property but will also promote a simpler, better guest experience. This can help your listings to stand out and improve your ranking in Airbnb’s SERP pages.
Airbnb charges a higher host-only fee of 16% to hosts who use a super strict cancelation policy, whereas hosts who use a moderate or flexible policy are charged less. By opting for a less rigid cancelation policy, you can lower your fee costs and easily increase your overall Airbnb payout. Due to the ongoing COVID-19 pandemic, guests will also be more likely to book a rental that offers a flexible cancelation policy.
Another way to boost your payout is by increasing your occupancy rate. To do this, consider offering a variety of discounts and special promotions to encourage guests to book with you. All of them can be easily set in your Airbnb listing settings.
Even though the host-only fee can bring in more bookings for your business, you are still paying a higher fee than before. To ensure the fee doesn’t cut into your net earnings, be sure to calculate your ideal nightly rate, considering the higher fee you will be paying given a new fee structure.
Increase your vacation rental revenue by selling additional Airbnb services. Services you can offer include guided tours, laundry and dry cleaning services, bike rentals, and meal preparation. By providing extra services that you can charge for, you can help boost your rental income and make your listing more appealing.
Not all hosts charge a cleaning fee for their vacation rentals. Often their decision is based on things like their rental size, location, amenities offered, and whether their competitors are charging for cleaning. Charging an Airbnb cleaning fee is another way to increase rental income, as most guests accept cleaning charges. Make sure the cleaning fee you decide on is in line with the average amount your competitors are charging.
Another way to save time and increase revenue is to use vacation rental software to manage your business operations. Vacation rental software, like iGMS, allows you to run your short-term rental business on autopilot by automating routine tasks: