Airbnb started life in 2007 on the living room floor of a San Francisco apartment. Fast-forward nearly fifteen years, and it has revolutionized the travel industry.
“Let’s Airbnb it” has become a common phrase for travelers and holidaymakers looking for unique accommodation experiences and, let’s be honest, a cheaper and more interesting alternative to a regular hotel stay.
This meteoric rise in popularity has arguably made Airbnb one of the forefathers of the sharing economy and has helped its value grow to an estimated $35bn.
However, if you’re looking at starting up your own accommodation offering and want to use Airbnb as a way to find as many guests as possible, you’ve probably got one overriding question.
How much does it cost, and what are the alternatives?
How much does Airbnb charge hosts?
The average nightly rent for Airbnb properties in the US is $185, and it’s thought that a guest checks into an Airbnb listing every single second of the day.
This sounds like rich pickings for hosts, but it of course comes at a cost. It’s all based around the service fee, and this is a charge which hits both the guest and the host. The service fee isn’t hidden on search results, but it does take second fiddle to the per night fee, which is displayed in larger typeface during the booking process.
This undoubtedly catches a few people out when they decide to proceed and book, but Airbnb has tweaked the user interface to make the pricing more transparent.
The service fee is designed to cover the cost of Airbnb’s advertising service and their 24/7 customer support. Here’s how it breaks down:
- the host pays between 2-5%; and
- the guest pays between 5-18%.
These numbers vary wildly for a few reasons. For instance, the fee paid by the host depends on whether they’re on the Airbnb Plus program and if there’s a strict cancellation policy in place. There are also different fees depending on where you are in the world.
Guests pay different fees depending on where they’re located, but the typical charge is 14.2%.
There’s also a cleaning fee that can be charged by the host, which is added to the total during the booking process.
The two types of Airbnb fee
Following some changes in 2020, there are now two types of Airbnb fee to consider.
Host-only fee. This relatively new fee is now the default whenever a new host creates an account. It results in the fee being paid solely by the host and means the guest doesn’t have to pay anything extra when placing a booking. The minimum host-only fee starts at 14% but can increase to 20%.
Shared guest and host fee. This is essentially the old Airbnb model explained above, where the host pays a small percentage deducted from the total booking amount, and the guest pays a larger service fee.
The right one for you will depend largely on your audience, business model and how you’d like the guest booking process to look.
How does the Airbnb pricing algorithm work?
Airbnb offers a feature called ‘Smart Pricing’ which is designed to help guests settle on fair and profitable prices for their accommodation.
It also enables hosts to compare their pricing against others and therefore create a competitive pricing structure. The ultimate goal of Smart Pricing is to bring more bookings the way of the host and raise their profitability.
With smart pricing turned on, the pricing for your accommodation will automatically fluctuate depending on a number of factors. These are typically based on:
- the season, and whether it is high or low;
- the volume of searches for a place to stay in your area;
- the number of views and bookings you’re receiving;
- the amenities you add or take away; and
- your review performance.
Just like every algorithm, Airbnb won’t reveal all of its secrets, but it’s safe to assume that it bases pricing suggestions on the factors above, therefore this gives hosts plenty of strategic points to focus on.
The good news is that you can set minimum and maximum pricing thresholds for ultimate peace of mind, and the fees remain the same, regardless of changes to your pricing.
What alternatives are there to Airbnb?
There are some alternatives to Airbnb which are absolutely worth checking out. Beyond the obvious (Booking.com), we’d recommend checking out these five.
- Flipkey. Ideal for hosts who accept smaller group bookings.
- VRBO. More refined than Airbnb, Vrbo features polished listings and hosts who usually do this for a living.
- Outdoorsy. Offering mobile rental accommodation? This is ideal for you and built specifically for this growing sector.
- Homestay. This site is aimed at travellers who don’t mind living under the same roof as the host, so if that’s your business model, it’s worth a try.
- Sonder. Sonder compares its selection of rentals to luxury hotel experiences and might suit your accommodation perfectly.
The best thing to do is to spread your wings and try out more than one online source of bookings. Airbnb is just the start, and you could find a far more relevant audience on one of these niche websites.
How to avoid Airbnb charges for repeat bookings
As noted above, using as many different channels as possible for your rental accommodation is vital if you’re to attract plenty of guests.
It’s also a great way to avoid saddling yourself solely with Airbnb’s fees. But another great way to ensure you don’t pay more than you should for bookings from Airbnb is to focus on repeat bookings.
Think about it: why would you want to pay a second round of commission for a repeat booking? Airbnb helped you find the guest originally, but you put the hard work in and made their stay so great they decided to return.
This one should be all yours, which is why it’s vital you collect guest email addresses and build a database of existing customers. You can do this ethically and with their interests in mind if you use a WiFi system to capture their email address upon login. Providing you explain that, in doing so, you’ll have the ability to send them exclusive offers in the future, you should get plenty of sign-ups.
By building your own database of guests, you can send personalised offers for return bookings and avoid the commission associated with services like Airbnb.
As with everything in hospitality, it’s a balancing act, so make sure you divide your online booking strategy equally between the likes of Airbnb and your own direct booking methods.