A Breakdown of Short Term Rental Management Fees

For most hosts, the best part of running a short-term rental is the money made out of it. Therefore every decision that you make around the finances of your listing needs to be well informed. These range from property management costs, to routine maintenance fees, and local taxes. In this article, we take a look at a breakdown of the short-term rental management fees.

Service fees:

While most OTAs like Airbnb and Booking.com allow property owners to list their properties for free, though, a small service fee is charged every time a booking is done. In most cases, hosts can choose to bear the whole cost or split it with the guests.

Airbnb:

Airbnb gives hosts 2 options when it comes to charging their service fees.

Split fees

The service fee will be split between the host and the guest where the host covers 3% while the guest pays 14.2%.

Host-only fees

Here the host takes up the complete service fee on themselves. This percentage can range from 14% to 20% with an additional 2% if the listing has a super strict cancellation policy.

Booking.com:

Booking.com uses a commission-based model where the OTA charges hosts 10% - 20% of the nightly fee depending on the location of your listing. The hotel base fee also stands at 15%, and this can also rise to an 18% commission charge if the host prefers to use the member service that Booking.com recommends. Booking.com fees can vary a lot depending on how you set up your account. To make sure you’re charged the right amount of commission, you need to mark no-shows, modify dates and update prices yourself from their ‘Reservations’ tab. If you need to make any changes you’ve got a limited window in which to do this, and it has to be done through the extranet otherwise you might find you get slapped with a higher commission than you were expecting.

VRBO:

VRBOs listing models include pay-per-booking and subscription. Pay per booking: This is a commission-based model where a 5% service fee is charged on the nightly rate and any additional fees (such as pet-friendly fees). Furthermore, a 3% credit card processing fee is also charged. Subscription: The subscription costs a one-time flat fee of $499 paid in advance. This model is ideal for properties that earn more than $10,000 a year through the platform as hosts can keep the rest of the earnings to themselves and therefore make more than if they were using the commission model.

Cleaning fees:

Maintaining a hygienic environment is important to keep the guests coming as one bad review could cost your property quite a bit. The Airbnb cleaning fee is a good way to keep your property spotless and pristine. It is, however, not mandatory to set a cleaning fee and there is no rule governing cleaning fees, though the fees will not only be shown to guests, it is also subject to fees that are taken at the end of the reservation.

When setting a cleaning fee consider:

• The type of property, its size, and its amenities - You will be able to charge a higher cleaning fee for a large property with 5-star amenities than you would for a single room.
• Your competition - if similar properties in your vicinity charge low or zero cleaning fees then you may want to do the same to keep with the competition.
• Your cleaning service: do you plan to hire a cleaning service or do it yourself? While a cleaning service will charge you quite a bit for their service doing it by yourself still requires cleaning products

Pro-tip: If you’re new to hosting, consider waiting to add a cleaning fee until you have a few great reviews to attract bookings

General Maintenance:

Your listing will be prone to wear and tear due to the high frequency of usage and the number of people who will be checking in and out of it. When allocating a maintenance cost note that this will have to be added to the overall nightly charge and not as an extra fee.

When allocating an amount for maintenance in your nightly charge consider:

• Size of the property
• Age of the property: is it a fairly old house that will require more frequent maintenance?
• Frequency of maintenance
• Maintenance issues that will need professionals (such as if you have an in-house jacuzzi)
• Cost of local handymen.
• Cost of replacing appliances around the house.

Property management

In order to run a successful short-term rental business, you need to connect your listings with a property management software company such as Hostaway. A property management software can be used to take over the day-to-day running of your property, ultimately freeing up your time and reducing stress. It can transform your vacation rental business into truly passive income. It, however, comes at a cost: management fees.

There are three kinds of payment structures: guaranteed income, fixed-rate, and commissions. Let’s take a look at each one so you can decide what works for you.

Guaranteed income:

In this fees structure, the property owner is guaranteed a fixed monthly income despite how often the listing gets booked. The property management company gets any money that goes beyond the homeowner’s guaranteed income. This payment structure is ideal for property owners looking to get a stable income. You will earn the same stable income throughout the year whether you are going through a high season or low season. However, if your property is in a tourist hotspot you will actually be making less than if you were following either of the other models.

Fixed-rate

As the name goes this model requires homeowners to pay a flat fee for a predetermined set of services. This fee does not change depending on the number of bookings you have. So in a high season month, you get to pocket all the profits. Though on the months that you don't make much you still have to pocket out for your property management software.

Commissions

Here a percentage of your profits is taken by the property management software provider. This fee structure is more popular as the expense incurred is directly related to the income generated. Meaning you’ll pay a little more in high-income months and less in low-income months.

In conclusion:

Having a breakdown of all the expenses around running your short term rental business is key not only when setting a nightly rate for your Airbnb it is also important when keeping a tab of expenses and crunching numbers and staying on top of the finances. If you need help with any aspect of running your holiday rental business head on to Hostaway and request a free demo to find out how we help hosts all over the world run their businesses