Before renting your home to Airbnb or thinking of becoming a host, think about how much the platform is really charging you or how is it calculated? There is no doubt, vacation rentals are a good source of income but it is important for you to understand how Airbnb’s fees are structured in order to minimize expenses while managing your net income.
Without further ado, let’s get to the gist on:
What are Airbnb Service Fees?
What is Airbnb’s new fee structure and why is it changing?
Who is eligible and is it mandatory?
What are the benefits and downfalls of the new fee structure?
How do I get ready for this?
When a booking is confirmed, Airbnb charged a service fee covering the cost of services such as 24/7 customer support and for Airbnb operations to sail smoothly. With that said, there are 2 fee structures for stays mentioned below:
The most common and for the longest time, Airbnb had been operating with the split-fee model. However, it has been slowly deteriorating among hosts and guests. The split-fee model deducts a service fee of 3% from the host’s overhead while same time charging it to the guests. Keep in mind, there are some exceptions like if say using Super Strict cancellation policies may raise the percentage a bit.
Take note, guests have to pay a service fee of an overall 14.2% of the booking subtotal which could also vary according to the number of factors and is shown during the checkout before booking so guests know what to expect.
How it is calculated?
It is calculated by the overall booking including the nightly rate, the cleaning fee, and the additional guest fee though excluding Airbnb fees and taxes.
The host-only fee model eliminates guest fees, making it transparent and simple for guests. Instead, hosts need to pay the whole service fee typically ranging from 14%-16% of the total booking cost.
Again, this depends on factors like if the host uses Super Strict cancellation policies or which countries listings are more common the host has, like for example in Mainland China, it is calculated as 10% while in some European countries, it is actually 14%.
Based on the feedback given by many professional hosts, Airbnb launched a new fee structure of 15% host-only service fee deducted from each payout which is also known as “Airbnb Simplified Pricing”. This model structure is for hosts who are connected through third-party software made available from December 7, 2020, allowing them to have more control over their rates while removing the option between the host-only and split fee.
But take note, countries that have a majority of their listings in the US, Canada, Mexico, Uruguay, The Bahamas, Argentina, and Taiwan are excluded from this option and will still have the choice between the two Airbnb model fee structures: host-only and split-fee.
Furthermore, existing bookings will not be affected by this change and will only affect after December 7th, 2020. With that said, Airbnb Simplified Pricing offers hosts an opportunity to set a more accurate pricing strategy which allows listings to be more attractive to guests hence more bookings. Airbnb states that hosts that have switched to Airbnb’s new fee structure have seen an overall increase in bookings of an average of 17%. The reason for this is the visibility in pricing to guests, with the impression of saving money due to no added fees when booking.
In fact, if you are worried that with this new fee structure that you might be losing revenue. Think again! By adjusting the prices of your nightly rate by 14% to counterbalance the increase in Airbnb host fee, the guest will simply be paying the equal amount as before and still have the same revenue or maybe a bit more.
The fee structure is currently open only to professional hosts excluding the US, Canada, Mexico, Uruguay, The Bahamas, Argentina, and Taiwan, who are connected to third-party software providers such as Hostaway, Guesty, iGMS, etc. making it compulsory as of December 7, 2020. Take note from September 1, 2020, the host-only fee became mandatory to countries like Croatia and Greece. With that said, you can also be eligible if your account is connected with third-party apps such as Pricelabs, WheelHouse, or website/app connected via API integration.
To simplify, this means that listings that are qualified for this new fee structure a.k.a ‘Airbnb Simplified Pricing’ introduced are forced to do the changes by required to pay the entire service fee of 15% to Airbnb from December 7 onwards from the host’s rental income.
To all hosts using the new service fee structure, take note, there will be a 0% service fee added to your rates, creating more transparency to guests which will attract potential guests to eagerly book as there are no unexpected fees when confirming with their payments.
With the lower guest fees and no additional fees displayed on listings, more guests will be enthusiastic to book which means that your bookings are more likely to increase as well as safeguard your net income with the increased rates.
Do you know? Apart from more potential guests booking your property, you also endorse a simple and better guest experience, making you unique from other listings.
Therefore, improve your Airbnb SEO ranking by just adopting the new structure fee by offering more value to guests.
In some countries, hosts are not required to switch to Airbnb’s new structure fee which therefore prices of their listing will appear cheaper at the first glance which is considered a major downfall to other hosts.
Host fees will go up in price and may see switching to Airbnb’s new fee structure as a way to force hosts to list exclusively with Airbnb.
Take note, Airbnb will not withhold any VAT on host fees if you ensure to add your VAT information to Airbnb.
By switching now, the host will adopt an early host service fee of 14% till December 6th, 2021. However, after the 7th December 2021, the host service fee will switch to 15%. More of, early switching will give you access to benefits such as improved guest visibility and competitive pricing.
It is important to adjust your fees through your Software Provider as a large sum of the service fee will be deducted from your payouts. Doing so will ensure your profits are not affected but do keep in mind that before adjusting your price to stay competitive.
What is the easy way to update your rates?
Adjusting pricing to each and every available date to any number of listings may seem daunting especially when increasing the rates by 15.53%. However, if you are already using a channel manager, get in touch with them with regards to adding a price increase for your Airbnb by simply updating the prices and if not, do recommend getting one like Hostaway!
Just having a channel manager will save you the amount of time spent on business operations and help you focus more on other aspects of the business such as ensuring an exceptional guest experience.