Having a vacation rental business on Airbnb definitely brings up the question about Airbnb service fees and Airbnb cleaning fee. In this blog, I will help you understand the former to assist you in making more informed decisions about setting the nightly prices of your vacation rental.
What is Airbnb service fees?
Airbnb service fee is the charge that Airbnb levies on hosts and guests for providing its services, including marketing, administration, and support. Airbnb service fee is a percentage of the subtotal amount charged for each booking.
The fee is charged automatically after each booking. The cost is deducted from the hosts’ total payout and can be seen in their transaction history on Airbnb. For guests, Airbnb applies this fee on the booking amount and can be seen at checkout when completing their reservation.
Why does Airbnb charge service fees?
Airbnb service fees cover the administration costs of the platform. According to Airbnb, their service fees cover:
- Provisioning 24/7 customer support
- Attracting more guests by marketing various accommodations and experiences using Google, social media, Airbnb blogs, etc.
- Protecting hosts and their property
- Educational resources for Hosts
The fee provides funds to ensure the quality of their service is maintained, and both the hosts and the guests have a smooth experience with Airbnb. It also ensures that the platform is continuously updated and provides relevant services according to the changing trends.
Airbnb boasts of focusing on technology so that the hosts can focus on providing their guests with a great experience and the guests can enjoy a hassle-free stay.
What is Airbnb host fee?
The average Airbnb host fees vary. It primarily depends on the host and the type of Airbnb. For instance, Airbnb Luxe and Airbnb Plus are charged a slightly higher service fee.
These factors play an important role in determining how much Airbnb is going to charge the hosts:
1. The type of rental
Airbnb service fees may vary for different rental categories, such as Airbnb Plus, Airbnb Luxe, etc. These hosts pay a slightly higher service fee for using Airbnb services.
2. If you are using a Property Management Software (PMS) or not
If you are using a PMS then you might also be expected to pay more since the option to split the fee between the host and the guest is not available in every PMS.
3. The location where your rental unit is present
Host fee is also influenced by the location of the listing. For example, exceptions are sometimes made for properties in the U.S., Canada, Bahamas, Mexico, Argentina, Taiwan, and Uruguay. Even when connected to software, some properties in these locations may still be allowed to use the split fee.
4. Your cancellation policy
Airbnb also considers your cancellation policy when calculating the host service fee amount. You can expect a strict cancellation policy to be around two percent higher than more flexible policies if you have a strict cancellation policy. This strict policy requires more administrative support, hence, Airbnb charges a premium.
Hosts can choose to pay their Airbnb charges using two fee payment structures.
1. The host-only fees
The host-only fee structure makes the host responsible for covering the service fee. It allows you more control over your nightly rates, and it keeps travelers happier without being bombarded by an unexpected guest service fee at checkout.
2. The split fee.
Split-fee structure divides the service charge between the host and the guest. This structure relieves the host from paying the entire service fee and can share the expenses with his guest. The guests also know the exact amount they are paying as a service fee.
What percentage does Airbnb charge hosts?
Airbnb mandates the payment of service fee for hotels and software-connected hosts. They make an exception for hosts’ listings that are located in the United States, Canada, the Bahamas, Mexico, Argentina, Taiwan, or Uruguay.
If the host choose the host-only fee payment option then they will pay 14-16% of the booking subtotal. Booking subtotal is the sum of listing’s nightly rate, cleaning fee and additional guest fee exclusive of Airbnb fee and taxes. They may recover a part of this amount by increasing their nightly charges.
Some hosts prefer host-only fee so that their guests don’t have to pay an extra amount and they book their listing for the price that they first see.
Airbnb’s Service Fees page mentions that the minimum host-only fee is14% and which can go up to 20%. In addition, a 2% fee may be added if the host has a strict cancellation policy.
If your property already has a high VAT, tax, or cleaning fee, it might be helpful to opt for the host-only fee option to not scare off guests due to excessive additional expenses.
In case of the split fee structure, hosts pay 3% of the booking subtotal. Airbnb recovers the rest of the fee from the guests.
What is Airbnb guest fees?
Airbnb guest fees is the amount paid by guests when the host chooses the split fee structure. The split fee structure divides the Airbnb service fee between the host and the guest. In this case, the guest pays a higher percentage of the service fee in this case.
The drawback of choosing this fee structure is that guests may feel discouraged from making the booking when they see this added fee which only appears at the time of checkout. However, hosts can make up for it by setting the nightly rates lower than they usually would charge. In addition, this will help increase the visibility of their rentals as it might appear in more filters.
Most guest service fees are under 14.2% of the booking subtotal.
Airbnb ensures that the guests are aware of these fees so that they don’t feel duped after the payment or stay, negatively affecting the property’s ratings. Services fees and cleaning fees are calculated and shown to guests during checkout when completing their reservations.
Can you avoid the Airbnb service fees?
You need to pay its service fees if you want to use Airbnb as a host. But, a little planning can help you minimize its effect on your bottom line. You should have a net target rate if you treat your Airbnb operations like a business. Accounting for the service fee, how much do you want to earn each night?
Say you don’t charge a cleaning fee and want to put $50 in your pocket every night. A little math will tell you what to set to gain a net $50/night.
With a 3% fee deducted, what listed rate will total $50?
Divide $50 by 97% (100% – 3%), and you get roughly $51.55/night.
This system effectively avoids Airbnb services, as you factor them into your listed rate. Of course, now you’ll need to account for market rates in your area with this approach. But, with some research and planning, you can net your nightly target rate.
Can I list my property for free on Airbnb?
Yes, listing a property on Airbnb is entirely free for hosts. In addition, listing on the high-traffic website gives your property free advertisement as guests frequently visit the website to book properties, and Airbnb exhibits your property to them for free.
Airbnb accounts for upwards of 20% of the entire rental market. With the whole market valued at roughly $87 Billion in 2020, Airbnb’s total revenue sits at $ 20 billion.
In 2021, 300 million bookings were made on the platform. This was a 55% increase from 2020. There are over seven million listings on Airbnb, run by four million hosts. It is evident that Airbnb’s growth is only increasing and understanding its various fee structures will assist you in leveraging the platform for your business’s growth as well.
You can also use a dynamic pricing solution like PriceLabs to optimally price your rental to ensure the growth of your revenue.